GUARANTY AGREEMENT

         WHEREAS,  PRIME  REFRACTIVE  MANAGEMENT,  L.L.C.,  a  Delaware  limited
liability company  ("Borrower"),  has entered into a Loan Agreement of even date
herewith with certain banks and other lending institutions which are or may from
time to time become signatories  thereto,  BANKBOSTON,  N.A., a national banking
association,  as documentation  agent for itself and the other Lenders,  BANK OF
AMERICA,  N.A. ("B of A"), a national  banking  association,  as  administrative
agent for itself and the other  Lenders  (in such  capacity,  together  with its
successors in such capacity, the "Administrative Agent"),  pursuant to which the
Lenders have agreed to make an advancing term loan to the Borrower with advances
thereunder not to exceed an aggregate  principal  amount of Fourteen Million and
00/100 Dollars at any time outstanding ($14,000,000.00) (such Loan Agreement, as
may be amended, extended, restated,  supplemented or modified from time to time,
the "Loan  Agreement");  terms  defined in the Loan  Agreement and not otherwise
defined herein are used herein as defined therein; and

         WHEREAS,  the Agents and the Lenders have conditioned their obligations
under  the  Loan  Agreement  upon  the  execution  and  delivery  by  Guarantors
(hereinafter defined) of this Guaranty Agreement (this "Guaranty");

         NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which  are  hereby  acknowledged,  each  of  the  undersigned  (individually,  a
"Guarantor" and collectively,  the "Guarantors"),  hereby jointly and severally,
irrevocably and  unconditionally  guarantees to the Agents,  and to the Lenders,
the full and prompt  payment  and  performance  of the  Guaranteed  Indebtedness
(hereinafter defined), this Guaranty being upon the following terms:

         1 . The term "Guaranteed Indebtedness", as used herein means all of the
Obligations  and shall include any and all  post-petition  interest and expenses
(including  attorneys'  fees)  whether  or not  allowed  under  any  bankruptcy,
insolvency, or other similar law.

         2. This Guaranty  shall be an absolute,  continuing,  irrevocable,  and
unconditional  guaranty  of  payment  and  performance,  and not a  guaranty  of
collection,  and each Guarantor shall remain liable on its obligations hereunder
until the payment and  performance  in full of the Guaranteed  Indebtedness  and
termination of the Commitments. No set-off, counterclaim, recoupment, reduction,
or  diminution  of any  obligation,  or any defense of any kind or nature  which
Borrower may have against any Agent, any Lender or any other party, or which any
Guarantor may have against Borrower or any other party (other than the Agents or
any  Lender),  shall be  available  to, or shall be asserted  by, any  Guarantor
against  any  Agent,  any  Lender or any  subsequent  holder  of the  Guaranteed
Indebtedness   or  any  part  thereof  or  against  payment  of  the  Guaranteed
Indebtedness or any part thereof.


<PAGE>







                                        7



         3. Notwithstanding any contrary provision,  it is the intention of each
Guarantor,  Lenders,  and Agents that the amount of the Guaranteed  Indebtedness
guaranteed by each  Guarantor by this  Guaranty  shall be, but not in excess of,
the maximum amount permitted by fraudulent  conveyance,  fraudulent transfer, or
similar Laws applicable to such Guarantor. Accordingly, notwithstanding anything
to the contrary  contained in this Guaranty or any other agreement or instrument
executed in connection  with the payment of any of the Guaranteed  Indebtedness,
the amount of the  Guaranteed  Indebtedness  guaranteed by any Guarantor by this
Guaranty  shall be limited to an aggregate  amount  equal to the largest  amount
that  would  not  render  such  Guarantor's  obligations  hereunder  subject  to
avoidance  under  Section  548 of  the  United  States  Bankruptcy  Code  or any
comparable provision of any applicable state law.


<PAGE>


         4. If any  Guarantor  becomes  liable  for any  indebtedness  owing  by
Borrower  to any Agent or any Lender by  endorsement  or  otherwise,  other than
under this  Guaranty,  such  liability  shall not be in any manner  impaired  or
affected hereby, and the rights of the Agents and the Lenders hereunder shall be
cumulative  of any and all other rights that the Agents and the Lenders may ever
have  against  such  Guarantor.  The exercise by the Agents or any Lender of any
right or remedy hereunder or under any other instrument, or at law or in equity,
shall not preclude the  concurrent or subsequent  exercise of any other right or
remedy.

         5. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness,  or any part thereof, when such Guaranteed Indebtedness
becomes due,  whether by its terms, by  acceleration,  or otherwise,  Guarantors
shall promptly pay the amount due thereon to the  Administrative  Agent, for the
benefit of the Lenders,  upon demand in lawful  currency of the United States of
America and it shall not be necessary for the Administrative  Agent, in order to
enforce  such  payment by  Guarantors,  first to  institute  suit or exhaust its
remedies against Borrower or others liable on such Guaranteed  Indebtedness,  or
to enforce any rights against any collateral which shall ever have been given to
secure such Guaranteed Indebtedness.

         6. If  acceleration  of the time for  payment of any amount  payable by
Borrower  under  the  Guaranteed  Indebtedness  is stayed  upon the  insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantors hereunder forthwith on demand by the Administrative Agent.


<PAGE>


         7.  Each  Guarantor  hereby  agrees  that its  obligations  under  this
Guaranty shall not be released,  discharged,  diminished,  impaired, reduced, or
affected for any reason or by the  occurrence of any event,  including,  without
limitation,  one or more of the following events,  whether or not with notice to
or the consent of such  Guarantor:  (a) the taking or accepting of collateral as
security for any or all of the  Guaranteed  Indebtedness  or the sale,  release,
surrender,  exchange,  or  subordination  of any  collateral  now  or  hereafter
securing any or all of the Guaranteed  Indebtedness;  (b) any partial release of
the  liability of any  Guarantor  hereunder,  or the full or partial  release of
Borrower or any other  guarantor from liability for any or all of the Guaranteed
Indebtedness;  (c) the dissolution,  insolvency,  or bankruptcy of Borrower, any
Guarantor,  or any other  party at any time liable for the payment of any or all
of the  Guaranteed  Indebtedness;  (d)  any  renewal,  extension,  modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed Indebtedness
or any instrument,  document,  or agreement  evidencing,  securing, or otherwise
relating  to any or all of the  Guaranteed  Indebtedness;  (e)  any  adjustment,
indulgence,  forbearance,  waiver, settlement, or compromise that may be granted
or given by any Agent or any Lender to  Borrower,  any  Guarantor,  or any other
party  ever  liable  for  any or all of the  Guaranteed  Indebtedness;  (f)  the
subordination  of the payment of all or any part of the Guaranteed  Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be due
or become  due to any of the  Agents,  any of the  Lenders  or  others;  (g) the
application of any deposit balance,  fund, payment,  collections through process
of law or otherwise,  or other  collateral of Borrower to the  satisfaction  and
liquidation of the  indebtedness  or obligations of Borrower to Agents or any of
the Lenders, if any, not guaranteed under this Guaranty;  (h) the application of
any sums paid to any of the Agents or any of the Lenders by any  Guarantor,  any
other guarantor of all or any part of the Guaranteed  Indebtedness,  Borrower or
others to the Guaranteed  Indebtedness in such order and manner as any Agent may
determine  in  accordance  with  the Loan  Agreement;  (i) any  neglect,  delay,
omission,  failure,  or refusal of any Agent or any Lender to take or  prosecute
any  action  for the  collection  of any of the  Guaranteed  Indebtedness  or to
foreclose or take or prosecute  any action in  connection  with any  instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (j) the unenforceability or invalidity of any or
all of the Guaranteed Indebtedness or of any instrument,  document, or agreement
evidencing,  securing,  or  otherwise  relating to any or all of the  Guaranteed
Indebtedness; (k) any payment by Borrower or any other party to any Agent or any
Lender  is held to  constitute  a  preference  under  applicable  bankruptcy  or
insolvency law or if for any other reason any Agent or any Lender is required to
refund any payment or pay the amount thereof to someone else; (l) the settlement
or compromise of any of the Guaranteed  Indebtedness;  (m) the non-perfection of
any  security   interest  or  lien  securing  any  or  all  of  the   Guaranteed
Indebtedness;  (n) any impairment of any  collateral  securing any or all of the
Guaranteed Indebtedness;  (o) the failure of any Agent or any Lender to sell any
collateral securing any or all of the Guaranteed  Indebtedness in a commercially
reasonable  manner  or as  otherwise  required  by law;  (p) any  change  in the
corporate  existence,  structure,  or  ownership  of  Borrower;  (q)  any  other
circumstance  which  might  otherwise  constitute  a  defense  available  to, or
discharge  of,  Borrower;  (r) the  unenforceability  of all or any  part of the
Guaranteed  Indebtedness  against  Borrower  by  reason  of the  fact  that  the
Guaranteed  Indebtedness  exceeds the amount  permitted  by law;  (s) the act of
creating all or any part of the Guaranteed  Indebtedness  is ultra vires; or (t)
the officers  creating all or any part of the Guaranteed  Indebtedness  acted in
excess of their authority.

     8. Each  Guarantor  hereby  represents  and  warrants to the Agents and the
Lenders the following:

               (a) This Guaranty may reasonably be expected to benefit, directly
          or indirectly,  each  Guarantor.

               (b)  Each  Guarantor  is  familiar  with,  and has  independently
          reviewed the books and records regarding,  the financial  condition of
          Borrower  and is  familiar  with the  value of any and all  collateral
          intended  to be  security  for the  payment  of all or any part of the
          Guaranteed  Indebtedness.  However,  no  Guarantor  is relying on such
          financial  condition or collateral as an inducement to enter into this
          Guaranty.

                  (c) Each  Guarantor has adequate means to obtain from Borrower
         on a continuing basis information concerning the financial condition of
         Borrower,  and no  Guarantor is relying on the Agents or the Lenders to
         provide such information to any Guarantor either now or in the future.

                  (d) Each  Guarantor  has the power and  authority  to execute,
         deliver, and perform this Guaranty and any other agreements executed by
         such Guarantor contemporaneously herewith, and the execution, delivery,
         and performance of this Guaranty and any other  agreements  executed by
         each Guarantor  contemporaneously  herewith do not and will not violate
         (i) any agreement or  instrument to which any Guarantor is a party,  or
         (ii) any law, rule, regulation,  or order of any Governmental Authority
         to which any Guarantor is subject.

                  (e) Neither the Agents,  the Lenders,  nor any other party has
         made any  representation,  warranty,  or statement to any  Guarantor in
         order to induce any Guarantor to execute this Guaranty.

                  (f) The financial  statements and other financial  information
         regarding Guarantors heretofore and hereafter delivered to any Agent or
         any Lender are and shall be true and correct in all  material  respects
         and fairly present the financial position of Guarantors as of the dates
         thereof,  and no material  adverse change has occurred in the financial
         condition of any Guarantor as reflected in those financial disclosures.

                  (g) As of the date  hereof,  and after  giving  effect to this
         Guaranty and the obligations  evidenced  hereby,  (i) each Guarantor is
         and will be Solvent (to the extent  necessary,  taking into account any
         rights of contribution,  reimbursement and subrogation),  (ii) the fair
         saleable value of each Guarantor's  assets exceeds and will continue to
         exceed  its  liabilities  (both  fixed  and  contingent),   (iii)  each
         Guarantor  is and  will  continue  to be able to pay its  debts as they
         mature,  and  (iv)  each  Guarantor  has  and  will  continue  to  have
         sufficient capital to carry on its business and all businesses in which
         it is about to engage.


<PAGE>


               (h) All  representations and warranties about each Guarantor made
          in the Loan Agreement are true and correct.

         9. Each Guarantor  covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Lender has any Commitment
under the Loan Agreement:

                  (a) No Guarantor shall, so long as its obligations  under this
         Guaranty  continue,  transfer  or pledge  any  material  portion of its
         assets for less than full and adequate consideration.

                  (b)   Each   Guarantor   shall   promptly   furnish   to   the
         Administrative  Agent at any time and from time to time such  financial
         statements and other financial  information as the Administrative Agent
         may require,  in form and substance  satisfactory to the Administrative
         Agent.

                  (c) Each Guarantor  shall comply with all terms and provisions
         of the Loan Documents that apply to such Guarantor.

                  (d) Each Guarantor  shall promptly  inform the  Administrative
         Agent of (i) any litigation or governmental  investigation against such
         Guarantor  or  affecting  any  security  for  all  or any  part  of the
         Guaranteed   Indebtedness   or  this  Guaranty   which,  if  determined
         adversely,  might have a material  adverse  effect  upon the  financial
         condition  of such  Guarantor  or upon such  security  or might cause a
         default under any of the Loan Documents,  (ii) any claim or controversy
         which  might  become the  subject of such  litigation  or  governmental
         investigation,  and (iii) any material  adverse change in the financial
         condition of Guarantor.

         10. (a) Each Guarantor hereby agrees that the Subordinated Indebtedness
(hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness,  and each Guarantor hereby
assigns the  Subordinated  Indebtedness  to the  Administrative  Agent,  for the
benefit of the Lenders, as security for the Guaranteed Indebtedness. If any sums
shall be paid to any  Guarantor  by  Borrower  or any other  person or entity on
account of the  Subordinated  Indebtedness,  such sums shall be held in trust by
such Guarantor for the benefit of the  Administrative  Agent and shall forthwith
be paid to the  Administrative  Agent  without  affecting  the  liability of any
Guarantor under this Guaranty and may be applied by the Administrative Agent and
the Lenders against the Guaranteed  Indebtedness in such order and manner as the
Administrative  Agent and the Lenders may  determine  in their sole  discretion.
Upon the request of the  Administrative  Agent,  each  Guarantor  shall execute,
deliver,  and endorse to the Administrative Agent such documents and instruments
as the Administrative  Agent may request to perfect,  preserve,  and enforce its
rights  hereunder.  For  purposes  of  this  Guaranty,  the  term  "Subordinated
Indebtedness" means all indebtedness,  liabilities,  and obligations of Borrower
to any Guarantor,  whether such indebtedness,  liabilities,  and obligations now
exist or are hereafter incurred or arise, or whether the obligations of Borrower
thereon are direct, indirect, contingent, primary, secondary, several, joint and
several,   or  otherwise,   and  irrespective  of  whether  such   indebtedness,
liabilities,  or obligations are evidenced by a note, contract, open account, or
otherwise,  and  irrespective  of the  person or  persons  in whose  favor  such
indebtedness, obligations, or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor.


<PAGE>


                  (b) Each  Guarantor  agrees  that any and all liens,  security
interests, judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of any Subordinated  Indebtedness  shall be and remain inferior
and  subordinate  to any and all  liens,  security  interests,  judgment  liens,
charges,  or other  encumbrances  upon Borrower's assets securing payment of the
Guaranteed  Indebtedness  or  any  part  thereof,  regardless  of  whether  such
encumbrances  in favor of any Guarantor or the  Administrative  Agent  presently
exist or are hereafter created or attached. Without the prior written consent of
the Lenders,  no Guarantor  shall (i) file suit against  Borrower or exercise or
enforce  any  other  creditor's  right it may  have  against  Borrower,  or (ii)
foreclose, repossess, sequester, or otherwise take steps or institute any action
or  proceedings   judicial  or  otherwise,   including  without  limitation  the
commencement  of, or joinder  in, any  liquidation,  bankruptcy,  rearrangement,
debtor's  relief or  insolvency  proceeding)  to  enforce  any  liens,  security
interests,  collateral  rights,  judgments  or  other  encumbrances  held by any
Guarantor on assets of Borrower.

                  (c)   In  the   event   of   any   receivership,   bankruptcy,
reorganization,  rearrangement,  debtor's relief, or other insolvency proceeding
involving Borrower as debtor,  the Administrative  Agent shall have the right to
prove and vote any claim  under the  Subordinated  Indebtedness  and to  receive
directly from the  receiver,  trustee or other court  custodian  all  dividends,
distributions,  and payments made in respect of the  Subordinated  Indebtedness.
The  Administrative  Agent  and  the  Lenders  may  apply  any  such  dividends,
distributions,  and payments  against the Guaranteed  Indebtedness in such order
and manner as the  Administrative  Agent and the Lenders may  determine in their
sole discretion.

                  (d) Each Guarantor agrees that all promissory notes,  accounts
receivable, ledgers, records, or any other evidence of Subordinated Indebtedness
shall contain a specific written notice thereon that the indebtedness  evidenced
thereby is subordinated under the terms of this Guaranty.

         11. Each  Guarantor  waives (a)  promptness,  diligence,  and notice of
acceptance  of this  Guaranty  and notice of the  incurring  of any  obligation,
indebtedness,  or  liability  to which  this  Guaranty  applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice of
protest,  notice of  intent to  accelerate,  notice of  acceleration,  notice of
dishonor,  diligence in enforcement,  and indulgences of every kind, and (b) the
taking  of any other  action  by the  Administrative  Agent,  including  without
limitation,  giving any notice of default or any other  notice to, or making any
demand on,  Borrower,  any other  guarantor of all or any part of the Guaranteed
Indebtedness  or any other party.  To the maximum extent lawful,  each Guarantor
waives all rights by which it might be  entitled  to require  suit on an accrued
right of action in  respect  of any  Guaranteed  Indebtedness  or  require  suit
against  Borrower  or  others,  whether  arising  under  ss.  34.02 of the Texas
Business  and  Commerce  Code,  as  amended  (regarding  its  right  to  require
Administrative  Agent or Lenders  to sue  Borrower  on  accrued  right of action
following its written notice to Administrative Agent or Lenders),  ss. 17.001 of
the Texas Civil Practice and Remedies Code, as amended (allowing suit against it
without suit  against  Borrower,  but  precluding  entry of judgment  against it
before entry of judgment against Borrower),  Rule 31 of the Texas Rules of Civil
Procedure,  as  amended  (requiring  Administrative  Agent  or  Lenders  to join
Borrower in any suit  against it unless  judgment  has been  previously  entered
against Borrower), or otherwise.

         12. In addition  to any other  waivers,  agreements  and  covenants  of
Guarantors set forth herein,  each Guarantor  hereby further waives and releases
all claims,  causes of action,  defenses  and offsets for any act or omission of
the Administrative Agent, its directors, officers, employees, representatives or
agents in  connection  with the  Administrative  Agent's  administration  of the
Guaranteed   Indebtedness,   except  for  the  Administrative   Agent's  willful
misconduct and gross negligence.

         13. This Guaranty shall  continue to be effective or be reinstated,  as
the case may be, if at any time any payment of all or any part of the Guaranteed
Indebtedness  is  rescinded  or must  otherwise  be returned by any Agent or any
Lender upon the  insolvency,  bankruptcy,  or  reorganization  of Borrower,  any
Guarantor,   any  other   guarantor  of  all  or  any  part  of  the  Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.


<PAGE>


         14. Any acknowledgment or new promise,  whether by payment of principal
or  interest  or  otherwise  and  whether  by  Borrower  or  others   (including
Guarantors),  with respect to any of the Guaranteed  Indebtedness  shall, if the
statute of  limitations  in favor of any  Guarantor  against the  Administrative
Agent or any  Lender  shall  have  commenced  to run,  toll the  running of such
statute of limitations  and, if the period of such statute of limitations  shall
have expired, prevent the operation of such statute of limitations.

         15. This  Guaranty is for the benefit of the Agents and the Lenders and
their  respective  successors and assigns,  and in the event of an assignment of
the  Guaranteed  Indebtedness,  or any part  thereof,  the rights  and  benefits
hereunder,  to the extent  applicable to the  indebtedness  so assigned,  may be
transferred  with  such  indebtedness.  This  Guaranty  is  binding  not only on
Guarantors, but on each Guarantor's successors and assigns.

         16.  Each  Guarantor  recognizes  that the Agents and the  Lenders  are
relying upon this Guaranty and the  undertakings of each Guarantor  hereunder in
making  extensions  of credit to Borrower  under the Loan  Agreement and further
recognizes  that the  execution  and  delivery  of this  Guaranty  is a material
inducement  to the Agents and the Lenders in entering  into the Loan  Agreement.
Each  Guarantor  hereby  acknowledges  that there are no  conditions to the full
effectiveness of this Guaranty.

         17. This Guaranty is a Loan Document and,  therefore,  this Guaranty is
subject  to the  applicable  provisions  of the  Loan  Agreement,  all of  which
applicable  provisions are  incorporated  herein by reference the same as if set
forth herein  verbatim.  Moreover,  each Guarantor  acknowledges and agrees that
this Guaranty is subject to the offset provisions in favor of the Lenders in the
Loan Agreement.

         18. Each Guarantor  expressly  assumes all  responsibilities  to remain
informed of the financial condition of Borrower and any circumstances  affecting
(a)  Borrower's  ability to perform under the Loan  Agreement and the other Loan
Documents to which it is a party or (b) any collateral  securing all or any part
of the Guaranteed Indebtedness.

         19. In the event that any  Guarantor  is entitled to receive any notice
under the Uniform  Commercial Code, as it exists in the state governing any such
notice, of the sale or other  disposition of any collateral  securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be
deemed given when such notice is deposited  in the United  States mail,  postage
prepaid,  at the address for Guarantor  set forth on the signature  page of this
Guaranty,  five  days  prior to the date any  public  sale,  or after  which any
private sale,  of any such  collateral is to be held;  provided,  however,  that
notice  given in any other  reasonable  manner or at any other  reasonable  time
shall be sufficient.

         20. No delay on the part of the Administrative  Agent in exercising any
right  hereunder  or failure to exercise  the same shall  operate as a waiver of
such right.  In no event shall any waiver of the  provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties in
accordance with the Loan Agreement,  and then only in the specific  instance and
for the purpose given.

     21.  Nothing  contained  herein shall be construed as an  obligation on the
part of the Agents or the  Lenders  to extend or  continue  to extend  credit to
Borrower.



<PAGE>


         22.  Notwithstanding  any other  provision  of this  Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of the
Guaranteed  Indebtedness,  each  Guarantor and the  Administrative  Agent by its
acceptance hereof agree that no Guarantor shall ever be required or obligated to
pay  interest  in  excess of the  maximum  nonusurious  interest  rate as may be
authorized by applicable  law for the written  contracts  which  constitute  the
Guaranteed Indebtedness.  It is the intention of Guarantors, the Agents, and the
Lenders to conform  strictly to the applicable  laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantors,  shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.

         23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING
TRANSACTION  CONSUMMATED AND PERFORMABLE IN TRAVIS COUNTY,  TEXAS,  AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

         24. Each Guarantor  shall pay on demand all reasonable  attorneys' fees
and all other  costs  and  expenses  incurred  by the  Agents  or any  Lender in
connection with the enforcement or collection of this Guaranty.

         25. THIS GUARANTY  EMBODIES THE FINAL,  ENTIRE AGREEMENT OF GUARANTORS,
THE  AGENTS  AND  THE  LENDERS  WITH  RESPECT  TO  GUARANTORS'  GUARANTY  OF THE
GUARANTEED INDEBTEDNESS AND RESTATES ANY AND ALL PRIOR COMMITMENTS,  AGREEMENTS,
REPRESENTATIONS,  AND  UNDERSTANDINGS,  WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF.  THIS GUARANTY IS INTENDED BY GUARANTORS,  THE AGENTS AND
THE LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND
NO COURSE OF DEALING BETWEEN ANY GUARANTOR, THE AGENTS OR THE LENDERS, NO COURSE
OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT  ORAL  AGREEMENTS OR DISCUSSIONS OR OTHER  EXTRINSIC  EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT,  VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY.  THERE ARE NO ORAL  AGREEMENTS  AMONG  GUARANTORS,  THE AGENTS AND THE
LENDERS.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK.

                            SIGNATURE PAGES FOLLOW.]


<PAGE>








         EXECUTED as of the 31st day of January, 2000.

                                                     GUARANTORS:
                                                     ----------

                                         PROSTATHERAPIES, INC.,
                                         a Delaware corporation
                                         LITHOTRIPTORS, INC.,
                                         a North Carolina corporation
                                         FASTSTART, INC.,
                                         a North Carolina corporation
                                         NATIONAL LITHOTRIPTORS ASSOCIATION,
                                         a North Carolina corporation
                                         R.R. LITHO, INC.,
                                         a Delaware corporation
                                         OHIO LITHO, INC.,
                                         a Delaware corporation
                                         MEDTECH INVESTMENT, INC.,
                                         a North Carolina corporation
                                         PRIME MEDICAL OPERATING, INC.,
                                         a Delaware corporation
                                         PRIME MANAGEMENT, INC.,
                                         a Nevada corporation
                                         PRIME LITHOTRIPTER OPERATIONS, INC.,
                                         a New York corporation
                                         PRIME DIAGNOSTIC SERVICES, INC.,
                                         a Delaware corporation
                                         PRIME LITHOTRIPSY SERVICES, INC.,
                                         a New York corporation
                                         PRIME DIAGNOSTIC CORP. OF FLORIDA,
                                         a Delaware corporation
                                         SUN MEDICAL TECHNOLOGIES, INC.,
                                         a California corporation
                                         PRIME PRACTICE MANAGEMENT, INC.,
                                         a New York corporation
                                         PRIME CARDIAC REHABILITATION SERVICES,
                                         INC., a Delaware corporation
                                         ALABAMA RENAL STONE INSTITUTE, INC.,
                                         an Alabama corporation
                                         PRIME KIDNEY STONE TREATMENT, INC.,
                                         a New Jersey corporation
                                         SUN ACQUISITION, INC.,
                                         a California corporation
                                         EXECUTIVE MEDICAL ENTERPRISES, INC.,
                                         a Delaware corporation


<PAGE>








                        PRIME RVC, INC.,
                        a Delaware corporation

                           By: /s/ Teena E. Belcik
                                 Teena E. Belcik
                                 Treasurer

                         PRIME MEDICAL MANAGEMENT, L.P.,
                         a Delaware limited partnership

                           By:   Prime Medical Operating, Inc.,
                                 a Delaware corporation, its
                                 General Partner

                           By: /s/ Teena E. Belcik
                                 Teena E. Belcik
                                 Treasurer

                         PRIME REFRACTIVE, L.L.C.


                           By: /s/ Teena E. Belcik
                                 Teena E. Belcik
                                 Treasurer

                           Address for Notices:
                           1301 Capital of Texas Highway
                           Suite C-300
                           Austin, Texas 78746
                           Attn: President
                           Fax Number:  (512) 328-8510
                           Telephone Number:  (512) 328-2892


<PAGE>



                               GUARANTY AGREEMENT

         WHEREAS,  PRIME  REFRACTIVE  MANAGEMENT,  L.L.C.,  a  Delaware  limited
liability company  ("Borrower"),  has entered into a Loan Agreement of even date
herewith with certain banks and other lending institutions which are or may from
time to time become signatories  thereto,  BANKBOSTON,  N.A., a national banking
association,  as documentation  agent for itself and the other Lenders,  BANK OF
AMERICA,  N.A. ("B of A"), a national  banking  association,  as  administrative
agent for itself and the other  Lenders  (in such  capacity,  together  with its
successors in such capacity, the "Administrative Agent"),  pursuant to which the
Lenders have agreed to make an advancing term loan to the Borrower with advances
thereunder not to exceed an aggregate  principal  amount of Fourteen Million and
00/100  Dollars  ($14,000,000.00)  (such  Loan  Agreement,  as may  be  amended,
extended,  restated,  supplemented  or  modified  from  time to time,  the "Loan
Agreement");  terms  defined in the Loan  Agreement  and not  otherwise  defined
herein are used herein as defined therein; and

         WHEREAS,  the Agents and the Lenders have conditioned their obligations
under  the  Loan   Agreement  upon  the  execution  and  delivery  by  Guarantor
(hereinafter defined) of this Guaranty Agreement (this "Guaranty");

         NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned ("Guarantor"), hereby irrevocably
and unconditionally  guarantees to the Agents, and to the Lenders,  the full and
prompt  payment and  performance  of the  Guaranteed  Indebtedness  (hereinafter
defined), this Guaranty being upon the following terms:

         1 . The term "Guaranteed Indebtedness", as used herein means all of the
Obligations  and shall include any and all  post-petition  interest and expenses
(including  attorneys'  fees)  whether  or not  allowed  under  any  bankruptcy,
insolvency, or other similar law.

         2. This Guaranty  shall be an absolute,  continuing,  irrevocable,  and
unconditional  guaranty  of  payment  and  performance,  and not a  guaranty  of
collection, and Guarantor shall remain liable on its obligations hereunder until
the  payment  and  performance  in  full  of  the  Guaranteed  Indebtedness  and
termination of the Commitments. No set-off, counterclaim, recoupment, reduction,
or  diminution  of any  obligation,  or any defense of any kind or nature  which
Borrower  may have against any Agent,  any Lender or any other  party,  or which
Guarantor may have against Borrower or any other party (other than the Agents or
any Lender),  shall be available to, or shall be asserted by, Guarantor  against
any Agent, any Lender or any subsequent holder of the Guaranteed Indebtedness or
any part thereof or against  payment of the Guaranteed  Indebtedness or any part
thereof.

         3.  Notwithstanding  any  contrary  provision,  it is the  intention of
Guarantor,  Lenders,  and Agents that the amount of the Guaranteed  Indebtedness
guaranteed  by  Guarantor by this  Guaranty  shall be, but not in excess of, the
maximum  amount  permitted by fraudulent  conveyance,  fraudulent  transfer,  or
similar Laws applicable to Guarantor.  Accordingly,  notwithstanding anything to
the contrary  contained in this  Guaranty or any other  agreement or  instrument
executed in connection  with the payment of any of the Guaranteed  Indebtedness,
the  amount of the  Guaranteed  Indebtedness  guaranteed  by  Guarantor  by this
Guaranty  shall be limited to an aggregate  amount  equal to the largest  amount
that would not render  Guarantor's  obligations  hereunder  subject to avoidance
under  Section  548 of the  United  States  Bankruptcy  Code  or any  comparable
provision of any applicable state law.


<PAGE>





                                       12



<PAGE>


         4. If Guarantor  becomes liable for any indebtedness  owing by Borrower
to any Agent or any Lender by  endorsement  or otherwise,  other than under this
Guaranty, such liability shall not be in any manner impaired or affected hereby,
and the rights of the Agents and the Lenders  hereunder  shall be  cumulative of
any and all other  rights that the Agents and the Lenders may ever have  against
Guarantor.  The  exercise  by the  Agents  or any  Lender of any right or remedy
hereunder  or under  any other  instrument,  or at law or in  equity,  shall not
preclude the concurrent or subsequent exercise of any other right or remedy.

         5. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness,  or any part thereof, when such Guaranteed Indebtedness
becomes due,  whether by its terms,  by  acceleration,  or otherwise,  Guarantor
shall promptly pay the amount due thereon to the  Administrative  Agent, for the
benefit of the Lenders,  upon demand in lawful  currency of the United States of
America and it shall not be necessary for the Administrative  Agent, in order to
enforce  such  payment by  Guarantor,  first to  institute  suit or exhaust  its
remedies against Borrower or others liable on such Guaranteed  Indebtedness,  or
to enforce any rights against any collateral which shall ever have been given to
secure such Guaranteed Indebtedness.

         6. If  acceleration  of the time for  payment of any amount  payable by
Borrower  under  the  Guaranteed  Indebtedness  is stayed  upon the  insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantor hereunder forthwith on demand by the Administrative Agent.


<PAGE>


         7.  Guarantor  hereby agrees that its  obligations  under this Guaranty
shall not be released,  discharged,  diminished,  impaired, reduced, or affected
for any reason or by the occurrence of any event, including, without limitation,
one or more of the  following  events,  whether  or not  with  notice  to or the
consent of Guarantor:  (a) the taking or accepting of collateral as security for
any or all of the  Guaranteed  Indebtedness  or the  sale,  release,  surrender,
exchange,  or subordination  of any collateral now or hereafter  securing any or
all of the Guaranteed Indebtedness;  (b) any partial release of the liability of
Guarantor  hereunder,  or the full or partial  release of  Borrower or any other
guarantor from liability for any or all of the Guaranteed Indebtedness;  (c) the
dissolution,  insolvency,  or  bankruptcy of Borrower,  Guarantor,  or any other
party  at any  time  liable  for  the  payment  of any or all of the  Guaranteed
Indebtedness;  (d) any renewal, extension,  modification,  waiver, amendment, or
rearrangement  of any or all of the Guaranteed  Indebtedness  or any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed  Indebtedness;  (e) any adjustment,  indulgence,  forbearance,
waiver,  settlement,  or compromise that may be granted or given by any Agent or
any Lender to Borrower, Guarantor, or any other party ever liable for any or all
of the Guaranteed  Indebtedness;  (f) the subordination of the payment of all or
any part of the  Guaranteed  Indebtedness  to the  payment  of any  obligations,
indebtedness,  or  liabilities  which  may be due  or  become  due to any of the
Agents,  any of the  Lenders  or  others;  (g) the  application  of any  deposit
balance,  fund,  payment,  collections  through process of law or otherwise,  or
other  collateral  of  Borrower  to  the  satisfaction  and  liquidation  of the
indebtedness or obligations of Borrower to Agents or any of the Lenders, if any,
not guaranteed under this Guaranty;  (h) the application of any sums paid to any
of the Agents or any of the Lenders by Guarantor,  any other guarantor of all or
any part of the  Guaranteed  Indebtedness,  Borrower or others to the Guaranteed
Indebtedness  in such order and manner as any Agent may  determine in accordance
with the Loan Agreement;  (i) any neglect, delay, omission,  failure, or refusal
of any Agent or any Lender to take or prosecute any action for the collection of
any of the  Guaranteed  Indebtedness  or to foreclose  or take or prosecute  any
action in connection with any  instrument,  document,  or agreement  evidencing,
securing,  or otherwise  relating to any or all of the Guaranteed  Indebtedness;
(j)  the  unenforceability  or  invalidity  of any  or  all  of  the  Guaranteed
Indebtedness or of any instrument,  document, or agreement evidencing, securing,
or  otherwise  relating to any or all of the  Guaranteed  Indebtedness;  (k) any
payment  by  Borrower  or any other  party to any Agent or any Lender is held to
constitute a preference under applicable  bankruptcy or insolvency law or if for
any other  reason any Agent or any Lender is  required  to refund any payment or
pay the amount  thereof to someone else; (l) the settlement or compromise of any
of the Guaranteed Indebtedness;  (m) the non-perfection of any security interest
or lien securing any or all of the Guaranteed  Indebtedness;  (n) any impairment
of any collateral  securing any or all of the Guaranteed  Indebtedness;  (o) the
failure of any Agent or any Lender to sell any collateral securing any or all of
the Guaranteed  Indebtedness in a commercially reasonable manner or as otherwise
required  by law;  (p) any  change in the  corporate  existence,  structure,  or
ownership  of  Borrower;  (q)  any  other  circumstance  which  might  otherwise
constitute  a  defense  available  to,  or  discharge  of,  Borrower;   (r)  the
unenforceability  of all or any  part  of the  Guaranteed  Indebtedness  against
Borrower  by reason of the fact that the  Guaranteed  Indebtedness  exceeds  the
amount  permitted  by  law;  (s)  the  act of  creating  all or any  part of the
Guaranteed  Indebtedness is ultra vires; or (t) the officers creating all or any
part of the Guaranteed Indebtedness acted in excess of their authority.

     8.   Guarantor hereby represents and warrants to the Agents and the Lenders
          the  following:

               (a) This Guaranty may reasonably be expected to benefit, directly
          or indirectly, Guarantor.

                  (b) Guarantor is familiar with, and has independently reviewed
         the books and records  regarding,  the financial  condition of Borrower
         and is familiar with the value of any and all collateral intended to be
         security  for  the  payment  of  all  or any  part  of  the  Guaranteed
         Indebtedness.  However,  Guarantor  is not  relying  on such  financial
         condition or collateral as an inducement to enter into this Guaranty.

                  (c) Guarantor has adequate  means to obtain from Borrower on a
         continuing  basis  information  concerning  the financial  condition of
         Borrower,  and Guarantor is not relying on the Agents or the Lenders to
         provide such information to Guarantor either now or in the future.

                  (d) Guarantor has the power and authority to execute, deliver,
         and perform  this  Guaranty and any other  agreements  executed by such
         Guarantor contemporaneously herewith, and the execution,  delivery, and
         performance  of this  Guaranty  and any other  agreements  executed  by
         Guarantor  contemporaneously  herewith  do not and will not violate (i)
         any agreement or instrument to which  Guarantor is a party, or (ii) any
         law, rule, regulation,  or order of any Governmental Authority to which
         Guarantor is subject.

                  (e) Neither the Agents,  the Lenders,  nor any other party has
         made any representation,  warranty,  or statement to Guarantor in order
         to induce any Guarantor to execute this Guaranty.

                  (f) The financial  statements and other financial  information
         regarding Guarantor  heretofore and hereafter delivered to any Agent or
         any Lender are and shall be true and correct in all  material  respects
         and fairly present the financial  position of Guarantor as of the dates
         thereof,  and no material  adverse change has occurred in the financial
         condition of Guarantor as reflected in those financial disclosures.

                  (g) As of the date  hereof,  and after  giving  effect to this
         Guaranty and the  obligations  evidenced  hereby,  (i) Guarantor is and
         will be Solvent  (to the extent  necessary,  taking  into  account  any
         rights of contribution,  reimbursement and subrogation),  (ii) the fair
         saleable  value of  Guarantor's  assets  exceeds  and will  continue to
         exceed its liabilities (both fixed and contingent),  (iii) Guarantor is
         and will continue to be able to pay its debts as they mature,  and (iv)
         Guarantor has and will continue to have sufficient  capital to carry on
         its business and all businesses in which it is about to engage.

               (h) All  representations  and warranties  about Guarantor made in
          the Loan Agreement are true and correct.


<PAGE>


         9.  Guarantor  hereby  represents  and  warrants  to the Agents and the
Lenders  that (for  purposes  of  Sections 9 and 10, all  capitalized  terms not
otherwise defined shall have the meanings assigned thereto in the Fourth Amended
and Restated Loan Agreement dated the date hereof (the "Prime  Agreement") among
Guarantor, B of A, as administrative agent,  BankBoston,  N.A., as documentation
agent,  and the lenders from time to time defined  therein;  provided,  that the
terms  "Loan  Documents",  "Obligations",   "Agents",  "Lenders",  "Guarantors",
"Administrative       Agent",       "Agent",       "Collateral",       "Guaranty
Agreement","Commitment",  shall have the  meaning  assigned  thereto in the Loan
Agreement):

         9.1      Existence.

         (a) Corporate Existence. Each of the Companies (other than the Excepted
Subsidiaries and the Partnerships): (a) is a corporation duly organized, validly
existing,  and in  good  standing  under  the  laws of the  jurisdiction  of its
incorporation;  (b) has all requisite  corporate  power and authority to own its
assets and carry on its  business as now being or as  proposed to be  conducted;
and (c) is qualified to do business in all  jurisdictions in which the nature of
its business makes such qualification  necessary and where failure to so qualify
would have a material  adverse effect on the business,  condition  (financial or
otherwise),  operations,  or  properties  of the  Companies  taken  as a  whole,
Guarantor,  or any Material  Subsidiary.  Each Company  (other than the Excepted
Subsidiaries)  has the corporate  power and authority to execute,  deliver,  and
perform  its  obligations  under  this  Guaranty  Agreement  and the other  Loan
Documents to which it is or may become a party.

         (b) Partnership Existence.  Each of the Partnerships:  (a) is a general
partnership,  limited  partnership or limited liability company, as appropriate,
duly  organized,  validly  existing,  and in good standing under the laws of the
jurisdiction  of its  formation;  (b) has all  requisite  partnership  power and
authority or company power and authority, as appropriate,  to own its assets and
carry on its  business as now being or as proposed to be  conducted;  and (c) is
qualified  to do  business  in all  jurisdictions  in which  the  nature  of its
business  makes such  qualification  necessary  and where  failure to so qualify
would have a material  adverse effect on the business,  condition  (financial or
otherwise),  operations,  or  properties  of the  Companies  taken  as a  whole,
Guarantor, or any Material Subsidiary.

         9.2 Financial Statements. Guarantor has delivered to the Administrative
Agent audited  consolidated  financial statements of the Companies as of and for
the fiscal year ended  December 31, 1998, and unaudited  consolidated  financial
statements of Guarantor for the nine (9) month period ended  September 30, 1999.
Such financial statements have been prepared in accordance with GAAP, and fairly
present,  on a consolidated  basis, the financial condition of the Companies and
Litho and the Partnerships, as appropriate, as of the respective dates indicated
therein and the  results of  operations  for the  respective  periods  indicated
therein.  There has been no material  adverse change in the business,  condition
(financial or otherwise),  operations, or properties of the Companies taken as a
whole,  Guarantor,  or any Material  Subsidiary  since the effective date of the
most recent financial statements referred to in this Section.

     9.3 Corporate Action: No Breach. The execution,  delivery,  and performance
by each  Company of the Loan  Documents to which such Company is or may become a
party and compliance with the terms and provisions  hereof and thereof have been
duly  authorized  by all  requisite  corporate  action (or, if such Company is a
partnership, then partnership action) on the part of such Company and do not and
will not (a) violate or conflict  with, or result in a breach of, or require any
consent under (i) the articles of  incorporation  or bylaws of such Company (or,
if such  Company  is a  partnership,  then  the  partnership  agreement  of such
Company),  (ii) any material applicable law, rule, or regulation or any material
order, writ, injunction,  or decree of any Governmental Authority or arbitrator,
or (iii) any material  agreement or  instrument to which such Company is a party
or by which such Company or any of its property is bound or subject  (other than
agreements  and  instruments  relating  to Debt  which will be paid off with the
proceeds of the initial Advance), or (b) constitute a material default under any
such agreement or instrument (other than agreements and instruments  relating to
Debt which will be paid off with the proceeds of the initial Advance), or result
in the  creation or  imposition  of any Lien (except as provided in Article V of
the Prime Agreement) upon any of the revenues or assets of any of the Companies.



<PAGE>


         9.4  Operation  of  Business.  Each of the  Companies  (other  than the
Excepted Subsidiaries)  possesses all licenses,  permits,  franchises,  patents,
copyrights,  trademarks, and tradenames, or rights thereto, necessary to conduct
their  respective  businesses  substantially  as now  conducted and as presently
proposed to be  conducted.  None of the  Companies  is in violation of any valid
rights of others with respect to any of the foregoing  (except where the failure
to do so would not have a material  adverse  effect on the  business,  condition
(financial or otherwise),  operations or properties of the Companies  taken as a
whole, Guarantor, or any Material Subsidiary).

         9.5  Litigation  and  Judgments.  As of  the  date  hereof,  except  as
disclosed  on Schedule  7.5 to the Prime  Agreement,  there is no action,  suit,
investigation,  or  proceeding  before  or  by  any  Governmental  Authority  or
arbitrator  pending,  or to the  knowledge of Guarantor,  threatened  against or
affecting any of the  Companies,  that would,  if adversely  determined,  have a
material  adverse  effect on the business,  condition  (financial or otherwise),
operations or properties of the Companies  taken as a whole,  Guarantor,  or any
Material  Subsidiary  or the  ability  of  Guarantor  to  pay  and  perform  the
Obligations. There are no outstanding judgments against any Company.

         9.6 Rights in  Properties;  Liens.  Each of the  Companies has good and
indefeasible title to or valid leasehold  interests in their respective material
properties and assets, real and personal, including the properties,  assets, and
leasehold interests reflected in the financial  statements  described in Section
9.2, and none of the properties,  assets, or leasehold  interests of any Company
is  subject  to any  Lien,  except  as  permitted  by  Section  9.2 of the Prime
Agreement.

         9.7 Enforceability.  This Guaranty Agreement constitutes, and the other
Loan Documents to which Guarantor is a party,  when delivered,  shall constitute
the legal,  valid,  and binding  obligations  of Borrower,  enforceable  against
Guarantor  in  accordance  with  their  respective  terms,  except as limited by
bankruptcy,  insolvency,  or other laws of general  application  relating to the
enforcement of creditors' rights. The Loan Documents to which each other Company
is a party,  when  delivered,  shall  constitute the legal,  valid,  and binding
obligations of such Company, enforceable against such Company in accordance with
their respective terms,  except as limited by bankruptcy,  insolvency,  or other
laws of general application relating to the enforcement of creditors' rights.

         9.8 Approvals. No authorization, approval, or consent of, and no filing
or registration  with, any  Governmental  Authority or third party is or will be
necessary  for the  execution,  delivery,  or  performance  by  Guarantor or any
Company  of this  Guaranty  Agreement  and the  other  Loan  Documents  to which
Guarantor  or any  Company  is or may  become  a party  or for the  validity  or
enforceability thereof.

     9.9 Debt.  As of the date hereof,  the  Companies  have no Debt,  except as
disclosed on Schedule 7.9 to the Prime Agreement.

         9.10 Taxes. The Companies (other than the Excepted  Subsidiaries)  have
filed or extended all tax returns  (federal,  state,  and local)  required to be
filed,  including all income,  franchise,  employment,  property,  and sales tax
returns,  and  have  paid  all  of  their  respective   liabilities  for  taxes,
assessments,  governmental  charges,  and other  levies that are due and payable
other than certain state tax returns  required to be filed on or before the date
hereof.  Except as previously  disclosed to the Administrative Agent in writing,
no  Company  knows of any  pending  investigation  of any of them by any  taxing
authority or of any pending but unassessed tax liability of any of them,  except
relating to the Excepted Subsidiaries.


<PAGE>


         9.11  Use  of  Proceeds;  Margin  Securities.  No  Company  is  engaged
principally, or as one of its important activities, in the business of extending
credit for the  purpose of  purchasing  or  carrying  margin  stock  (within the
meaning  of  Regulations  T, U, or X of the Board of  Governors  of the  Federal
Reserve  System),  and no part of the  proceeds of any  Advance  will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing  or carrying  margin  stock,  except for purchases of  Guarantor's
capital stock permitted by Section 9.4 of the Prime Agreement.

         9.12 ERISA.  The Companies  are in compliance in all material  respects
with all  applicable  provisions  of  ERISA.  Neither a  Reportable  Event nor a
Prohibited  Transaction has occurred and is continuing with respect to any Plan.
No notice of intent to  terminate a Plan has been  filed,  nor has any Plan been
terminated.  No circumstances  exist which constitute grounds entitling the PBGC
to institute  proceedings to terminate,  or appoint a trustee to  administer,  a
Plan, nor has the PBGC  instituted any such  proceedings.  None of the Companies
nor  any  ERISA   Affiliate  has  completely  or  partially   withdrawn  from  a
Multi-employer  Plan.  The  Companies  and each ERISA  Affiliate  have met their
minimum funding requirements under ERISA with respect to all of their Plans, and
the  present  value of all vested  benefits  under each Plan does not exceed the
fair market value of all Plan assets  allocable to such benefits,  as determined
on the most recent  valuation,  date of the Plan and in  accordance  with ERISA.
None of the Companies nor any ERISA  Affiliate has incurred any liability to the
PBGC under ERISA.

         9.13 Disclosure.  All factual  information (taken as a whole) furnished
by or on behalf of Guarantor  in writing to any Agent or any Lender  (including,
without limitation, all factual information contained in the Loan Documents) for
purposes  of or in  connection  with this  Guaranty  Agreement,  the other  Loan
Documents or any  transaction  contemplated  herein or therein is, and all other
such factual  information (taken as a whole) hereafter furnished by or on behalf
of Guarantor  in writing will be, true and accurate in all material  respects on
the date as of which such factual  information  is dated or certified and is not
(and such factual  information  (taken as a whole) hereafter  furnished will not
be)  incomplete  by omitting to state any facts  necessary  to make such factual
information  (taken as a whole) not  misleading in any material  respect at such
time in light of the  circumstances  under which such  factual  information  was
provided.

         9.14 Subsidiaries;  Partnerships. Each of the Guarantors is a direct or
indirect  wholly-owned  Subsidiary  of  Guarantor,  and as of the  date  hereof,
together  with the  Partnerships  listed on  Schedule 3 to the Prime  Agreement,
constitute all of the  Subsidiaries  of Guarantor.  Schedule 7.14.1 to the Prime
Agreement,  as the same may be amended from time to time to reflect transactions
permitted by this Agreement,  sets forth the outstanding shares of capital stock
(or other ownership  interests) and the name of each  shareholder of each of the
Subsidiaries of Guarantor. All of the outstanding capital stock of Guarantor and
each of its  Subsidiaries  has  been  validly  issued,  is  fully  paid,  and is
nonassessable.  Schedule  7.14.2  to the  Prime  Agreement,  as the  same may be
amended from time to time to reflect  transactions  permitted  by this  Guaranty
Agreement,  sets forth the outstanding partnership interests of the Partnerships
owned by each of the Companies.

         9.15  Agreements.  Except for the Senior  Subordinated  Indenture,  the
Senior  Subordinated  Notes,  and as set  forth on  Schedule  7.15 to the  Prime
Agreement,  none of the Companies is a party to any  indenture,  loan, or credit
agreement,  or to any lease or other agreement or instrument,  or subject to any
charter or corporate  restriction  which could  reasonably be expected to have a
material  adverse  effect on the business,  condition  (financial or otherwise),
operations or properties of the Companies  taken as a whole,  Guarantor,  or any
Material  Subsidiary  or the ability of  Guarantor  or any  Guarantor to pay and
perform its obligations under the Loan Documents to which it is a party. None of
the  Companies  is in  default  in any  material  respect  in  the  performance,
observance,  or fulfillment of any of the obligations,  covenants, or conditions
contained in any agreement or instrument to which it is a party,  which default,
in the aggregate  with all such other  defaults,  would have a material  adverse
affect on the  business,  condition  (financial  or  otherwise),  operations  or
properties  of the  Companies  taken  as a  whole,  Guarantor,  or any  Material
Subsidiary.

         9.16  Compliance with Legal Requirements; Governmental Authorizations.



<PAGE>


         (a) Except for the Excepted  Subsidiaries  and as set forth in Schedule
7.16.1 to the Prime Agreement: (i) each Company is in compliance in all material
respects with each Legal  Requirement  that is or was applicable to it or to the
conduct or  operation  of its  business  or the  ownership  or use of any of its
assets; and (ii) no Company has received any notice or other  communication from
any  Governmental  Authority or other Person of any event or circumstance  which
could  constitute  a  violation  of,  or  failure  to  comply  with,  any  Legal
Requirement.

         (b) Except for the Excepted  Subsidiaries  and as set forth in Schedule
7.16 to the Prime Agreement: (i) each Company is in material compliance with all
of the terms and requirements of each  Governmental  Authorization  held by such
Company; (ii) no Company has received any notice or other communication from any
Governmental Authority or other Person of, any event or circumstance which could
constitute a violation of, or failure to comply with, any term or requirement of
any  Governmental  Authorization,  or of any  actual  or  potential  revocation,
withdrawal,  cancellation  or termination of, or material  modification  to, any
Governmental  Authorization;  (iii) all applications required to have been filed
for the renewal of any required Governmental Authorizations have been duly filed
on a timely basis with the appropriate Governmental  Authorities,  and all other
filings   required  to  have  been  made  with  respect  to  such   Governmental
Authorizations  have  been  duly  made on a timely  basis  with the  appropriate
Governmental Authorities;  (iv) all Governmental Authorizations of the Companies
are  transferable to the Companies;  (v) upon  consummation of the  transactions
contemplated  hereby,  the Companies  will  lawfully hold all such  Governmental
Authorizations; and (vi) none of such Governmental Authorizations will terminate
upon  consummation  of the  transactions  contemplated  hereby.  Except  for the
Excepted  Subsidiaries and as set forth on Schedule 7.16 to the Prime Agreement,
each of the Companies  possesses the necessary  Governmental  Authorizations (i)
necessary to permit each Company to lawfully  conduct and operate its respective
business in the manner it currently  conducts and operates  such business and to
permit  such  Company  to own and use its  assets  in the  manner  in  which  it
currently owns and uses such assets,  and (ii) necessary to permit each Company,
upon the  consummation  of the  transactions  contemplated  hereby,  to lawfully
conduct and operate its  business  and to permit each Company to own and use its
assets,  where the failure to have such Governmental  Authorization would have a
material  adverse  effect on the business,  condition  (financial or otherwise),
operations or properties of the Companies  taken as a whole,  Guarantor,  or any
Material Subsidiary.

     9.17 Investment  Company Act. No Company is an "investment  company" within
the meaning of the Investment Company Act of 1940, as amended.

         9.18  Public  Utility  Holding  Company  Act.  No Company is a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

     9.19  Environmental  Matters.  Except as disclosed on Schedule  7.19 to the
Prime Agreement, as the same may be amended from time to time, hereto:

         (a)  Each of the  Companies  and all of  their  respective  properties,
assets,  and  operations  are in  compliance  in all material  respects with all
Environmental Laws. No Company is aware of, nor have any of them received notice
of, any past, present, or future conditions,  events, activities,  practices, or
incidents  which may  interfere  with or  prevent  the  material  compliance  or
continued  material  compliance  of any Company with all material  Environmental
Laws; and

         (b) The  Companies  have  obtained all material  permits,  licenses and
authorizations  that are required under applicable  Environmental  Laws, and all
such  permits are in good  standing  and each  Company is in  compliance  is all
material respects with all of the terms and conditions of such permits.


<PAGE>


         9.20 Year 2000 Compliance. Guarantor represents that it is aware of the
possible  impact  of the year 2000  problem  (that  is,  the risk that  computer
applications may not be able to properly perform date-sensitive  functions after
December  31,  1999)  upon its  computer  applications  and  on-going  business.
Borrower  represents that any corrective action necessary will be taken and that
the year 2000  problem  will not  result  in a  material  adverse  change in the
Companies' business condition (financial or otherwise),  operations,  properties
or prospects, or ability to repay the Obligations.

         10.  Guarantor  agrees to deliver to  Administrative  Agent each of the
items described in Section 8.1 of the Prime Agreement on the same dates required
by the Prime Agreement. In addition,  Guarantor will perform and observe each of
the following  positive covenants so long as the Obligations or any part thereof
are outstanding or any Lender has any Commitment under the Loan Agreement:

         10.1  Maintenance  of Existence;  Conduct of Business.  Guarantor  will
preserve and maintain its corporate existence and all of its leases, privileges,
licenses, permits, franchises,  qualifications, and rights that are necessary or
desirable in the ordinary conduct of its business.  Guarantor will cause each of
its Subsidiaries other than the Excepted Subsidiaries,  to preserve and maintain
its  corporate,  partnership  or other similar  existence and all of its leases,
privileges,  licenses, permits,  franchises,  qualifications and rights that are
necessary or desirable in the ordinary conduct of its business,  except, in each
case,  where  failure to do so would not have a material  adverse  effect on the
business,  condition  (financial or otherwise),  operations or properties of the
Companies taken as a whole,  Guarantor,  or any Material  Subsidiary.  Guarantor
will conduct,  and will cause each of its Subsidiaries to conduct,  its business
in an orderly and efficient manner in accordance with good business practices.

         10.2  Maintenance  of Properties.  Guarantor  will maintain,  keep, and
preserve,  and cause each of its  Subsidiaries to maintain,  keep, and preserve,
all of its  properties  (tangible  and  intangible)  necessary  or useful in the
proper conduct of its business in good working order and condition,  except,  in
each case,  as  permitted  by Section 9.8 of the Prime  Agreement  or 9.9 of the
Prime Agreement or where the failure to do so would not have a material  adverse
effect on the  business,  condition  (financial  or  otherwise),  operations  or
properties  of the  Companies  taken  as a  whole,  Guarantor,  or any  Material
Subsidiary.

         10.3 Taxes and Claims.  Guarantor will pay or discharge, and will cause
each  of its  Subsidiaries  other  than  the  Excepted  Subsidiaries,  to pay or
discharge,  at or before maturity or before becoming delinquent (a) all material
taxes, levies, assessments, and governmental charges imposed on it or its income
or profits or any of its material  property,  and (b) all material lawful claims
for labor,  material,  and supplies,  which, if unpaid, might become a Lien upon
any of its property; provided, however, that no Company shall be required to pay
or discharge any tax, levy,  assessment,  or governmental  charge which is being
contested in good faith by appropriate  proceedings  diligently pursued, and for
which adequate reserves have been established.

         10.4  Insurance.  Guarantor will  maintain,  and will cause each of its
Subsidiaries to maintain (except in the case of the Partnerships,  in which case
Guarantor shall maintain for the Partnerships), insurance with financially sound
and reputable  insurance companies in such amounts and covering such risks as is
usually carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which the Companies operate,  consistent
with past practices of the Companies and to the extent available on commercially
reasonable  terms,  provided that in any event Guarantor will maintain and cause
each of its Subsidiaries (except in the case of the Partnerships,  in which case
Guarantor   shall  maintain  for  the   Partnerships)   to  maintain   workmen's
compensation  insurance,  property  insurance,  comprehensive  general liability
insurance, professional liability insurance, and business interruption insurance
reasonably   satisfactory  to  the  Lenders.   Each  insurance  policy  covering
Collateral shall name the Administrative Agent as loss payee, for the benefit of
the Lenders, as its interests may appear and shall provide that such policy will
not be canceled or reduced without thirty (30) days' prior written notice to the
Administrative  Agent.  Guarantor will annually provide the Administrative Agent
with all  certificates  of  insurance  evidencing  all  policies of insurance of
Guarantor and its Subsidiaries.


<PAGE>


         10.5  Inspection  Rights.  At any reasonable time and from time to time
after reasonable notice to Guarantor, Guarantor will permit, and will cause each
of its Subsidiaries to permit,  representatives of the Administrative  Agent and
each Lender to examine,  copy, and make extracts from its books and records,  to
visit and inspect its properties,  and to discuss its business,  operations, and
financial  condition  with  its  officers,   and  independent  certified  public
accountants.  Prior to removing  any such  copies or  extracts  from a Company's
premises,  such  Company's   representatives  shall  be  provided  a  reasonable
opportunity to review such information and mark or identify it as "confidential"
or "confidential information" as reasonably deemed appropriate by such Company.

         10.6 Keeping Books and Records. Guarantor will maintain, and will cause
each of its  Subsidiaries  to  maintain,  proper  books of record and account in
which full,  true, and correct  entries in conformity with GAAP shall be made of
all dealings and transactions in relation to its business and activities.

         10.7 Compliance with Laws.  Guarantor will comply,  and will cause each
of its  Subsidiaries  to comply,  in all  material  respects  with all  material
applicable laws,  rules,  regulations,  orders,  and decrees of any Governmental
Authority or arbitrator.

         10.8 Compliance with Agreements.  Guarantor will comply, and will cause
each  of  its  Subsidiaries  to  comply,  in  all  material  respects  with  all
agreements, contracts, and instruments binding on it or affecting its properties
or business, except where the failure to do so would not have a material adverse
effect on the  business,  condition  (financial  or  otherwise),  operations  or
properties  of the  Companies  taken  as a  whole,  Guarantor,  or any  Material
Subsidiary.

         10.9 Further Assurances. Guarantor will (a), and will cause each of its
Subsidiaries  (other than the Partnerships) to, execute and deliver such further
agreements  and  instruments  and take such further  action as may be reasonably
requested by the  Administrative  Agent to carry out the provisions and purposes
of this Guaranty  Agreement and the other Loan Documents and, (b) and will cause
each of its Subsidiaries (including the Partnerships) to, create,  preserve, and
perfect the Liens of the  Administrative  Agent, for the benefit of the Lenders,
in the Collateral.

         10.10  ERISA.  Guarantor  will  comply,  and  will  cause  each  of its
Subsidiaries  to comply,  with all minimum funding  requirements,  and all other
material  requirements,  of ERISA, if applicable,  so as not to give rise to any
liability thereunder.

         10.11 Information Relating to Proposed Acquisitions. Guarantor will use
its best efforts to keep the  Administrative  Agent and the Lenders  informed of
the relevant  information  and status of and will share with the  Administrative
Agent and the Lenders and provide copies to the extent possible, of all material
due  diligence   information  relating  to  any  proposed  Permitted  Refractive
Acquisition  with  respect to which  Guarantor or any  Subsidiary  enters into a
letter of intent or  acquisition  agreement,  during  the term of this  Guaranty
Agreement.

     11.  Guarantor  covenants  and  agrees  that,  as  long  as the  Guaranteed
Indebtedness or any part thereof is outstanding or any Lender has any Commitment
under the Loan Agreement:

                  (a) No Guarantor shall, so long as its obligations  under this
         Guaranty  continue,  transfer  or pledge  any  material  portion of its
         assets for less than full and adequate consideration.

                  (b)   Each   Guarantor   shall   promptly   furnish   to   the
         Administrative  Agent at any time and from time to time such  financial
         statements and other financial  information as the Administrative Agent
         may require,  in form and substance  satisfactory to the Administrative
         Agent.


<PAGE>


                  (c) Each Guarantor  shall comply with all terms and provisions
         of the Loan Documents that apply to such Guarantor.

                  (d) Each Guarantor  shall promptly  inform the  Administrative
         Agent of (i) any litigation or governmental  investigation against such
         Guarantor  or  affecting  any  security  for  all  or any  part  of the
         Guaranteed   Indebtedness   or  this  Guaranty   which,  if  determined
         adversely,  might have a material  adverse  effect  upon the  financial
         condition  of such  Guarantor  or upon such  security  or might cause a
         default under any of the Loan Documents,  (ii) any claim or controversy
         which  might  become the  subject of such  litigation  or  governmental
         investigation,  and (iii) any material  adverse change in the financial
         condition of Guarantor.

         12. (a)  Guarantor  hereby  agrees that the  Subordinated  Indebtedness
(hereinafter defined) shall be subordinate and junior in right of payment to the
prior  payment in full of all  Guaranteed  Indebtedness,  and  Guarantor  hereby
assigns the  Subordinated  Indebtedness  to the  Administrative  Agent,  for the
benefit of the Lenders, as security for the Guaranteed Indebtedness. If any sums
shall be paid to  Guarantor by Borrower or any other person or entity on account
of the Subordinated Indebtedness,  such sums shall be held in trust by Guarantor
for the benefit of the  Administrative  Agent and shall forthwith be paid to the
Administrative  Agent without  affecting  the liability of Guarantor  under this
Guaranty and may be applied by the Administrative  Agent and the Lenders against
the Guaranteed Indebtedness in such order and manner as the Administrative Agent
and the Lenders may determine in their sole discretion.  Upon the request of the
Administrative  Agent,  Guarantor  shall  execute,  deliver,  and endorse to the
Administrative  Agent such documents and instruments as the Administrative Agent
may request to perfect, preserve, and enforce its rights hereunder. For purposes
of this Guaranty,  the term "Subordinated  Indebtedness" means all indebtedness,
liabilities,   and   obligations   of  Borrower  to   Guarantor,   whether  such
indebtedness,  liabilities,  and obligations now exist or are hereafter incurred
or arise, or whether the obligations of Guarantor thereon are direct,  indirect,
contingent,  primary,  secondary,  several, joint and several, or otherwise, and
irrespective  of whether such  indebtedness,  liabilities,  or  obligations  are
evidenced by a note, contract,  open account, or otherwise,  and irrespective of
the  person  or  persons  in whose  favor  such  indebtedness,  obligations,  or
liabilities may, at their inception,  have been, or may hereafter be created, or
the manner in which they have been or may hereafter be acquired by Guarantor.

                  (b)  Guarantor  agrees  that  any  and  all  liens,   security
interests, judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of any Subordinated  Indebtedness  shall be and remain inferior
and  subordinate  to any and all  liens,  security  interests,  judgment  liens,
charges,  or other  encumbrances  upon Borrower's assets securing payment of the
Guaranteed  Indebtedness  or  any  part  thereof,  regardless  of  whether  such
encumbrances in favor of Guarantor or the  Administrative  Agent presently exist
or are hereafter  created or attached.  Without the prior written consent of the
Lenders,  Guarantor  shall not (i) file suit  against  Guarantor  or exercise or
enforce  any  other  creditor's  right it may have  against  Guarantor,  or (ii)
foreclose, repossess, sequester, or otherwise take steps or institute any action
or  proceedings   judicial  or  otherwise,   including  without  limitation  the
commencement  of, or joinder  in, any  liquidation,  bankruptcy,  rearrangement,
debtor's  relief or  insolvency  proceeding)  to  enforce  any  liens,  security
interests,  collateral rights, judgments or other encumbrances held by Guarantor
on assets of Borrower.

                  (c)   In  the   event   of   any   receivership,   bankruptcy,
reorganization,  rearrangement,  debtor's relief, or other insolvency proceeding
involving Guarantor as debtor, the Administrative  Agent shall have the right to
prove and vote any claim  under the  Subordinated  Indebtedness  and to  receive
directly from the  receiver,  trustee or other court  custodian  all  dividends,
distributions,  and payments made in respect of the  Subordinated  Indebtedness.
The  Administrative  Agent  and  the  Lenders  may  apply  any  such  dividends,
distributions,  and payments  against the Guaranteed  Indebtedness in such order
and manner as the  Administrative  Agent and the Lenders may  determine in their
sole discretion.


<PAGE>


                  (d)  Guarantor  agrees  that all  promissory  notes,  accounts
receivable, ledgers, records, or any other evidence of Subordinated Indebtedness
shall contain a specific written notice thereon that the indebtedness  evidenced
thereby is subordinated under the terms of this Guaranty.

         13.  Guarantor  waives  (a)  promptness,   diligence,   and  notice  of
acceptance  of this  Guaranty  and notice of the  incurring  of any  obligation,
indebtedness,  or  liability  to which  this  Guaranty  applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice of
protest,  notice of  intent to  accelerate,  notice of  acceleration,  notice of
dishonor,  diligence in enforcement,  and indulgences of every kind, and (b) the
taking  of any other  action  by the  Administrative  Agent,  including  without
limitation,  giving any notice of default or any other  notice to, or making any
demand on,  Guarantor,  any other guarantor of all or any part of the Guaranteed
Indebtedness  or any other party.  To the maximum extent lawful,  each Guarantor
waives all rights by which it might be  entitled  to require  suit on an accrued
right of action in  respect  of any  Guaranteed  Indebtedness  or  require  suit
against  Guarantor  or  others,  whether  arising  under ss.  34.02 of the Texas
Business  and  Commerce  Code,  as  amended  (regarding  its  right  to  require
Administrative  Agent or Lenders  to sue  Guarantor  on accrued  right of action
following its written notice to Administrative Agent or Lenders),  ss. 17.001 of
the Texas Civil Practice and Remedies Code, as amended (allowing suit against it
without suit against  Guarantor,  but  precluding  entry of judgment  against it
before entry of judgment against Guarantor), Rule 31 of the Texas Rules of Civil
Procedure,  as  amended  (requiring  Administrative  Agent  or  Lenders  to join
Guarantor in any suit against it unless  judgment  has been  previously  entered
against Guarantor), or otherwise.

         14. In addition  to any other  waivers,  agreements  and  covenants  of
Guarantor set forth herein,  Guarantor  hereby  further  waives and releases all
claims,  causes of action,  defenses  and offsets for any act or omission of the
Administrative  Agent, its directors,  officers,  employees,  representatives or
agents in  connection  with the  Administrative  Agent's  administration  of the
Guaranteed   Indebtedness,   except  for  the  Administrative   Agent's  willful
misconduct and gross negligence.

         15. This Guaranty shall  continue to be effective or be reinstated,  as
the case may be, if at any time any payment of all or any part of the Guaranteed
Indebtedness  is  rescinded  or must  otherwise  be returned by any Agent or any
Lender  upon  the  insolvency,   bankruptcy,  or  reorganization  of  Guarantor,
Guarantor,   any  other   guarantor  of  all  or  any  part  of  the  Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.

         16. Any acknowledgment or new promise,  whether by payment of principal
or  interest  or  otherwise  and  whether  by  Guarantor  or  others  (including
Guarantor),  with respect to any of the Guaranteed  Indebtedness  shall,  if the
statute of limitations in favor of Guarantor against the Administrative Agent or
any Lender  shall have  commenced  to run,  toll the running of such  statute of
limitations  and,  if the  period of such  statute  of  limitations  shall  have
expired, prevent the operation of such statute of limitations.

         17. This  Guaranty is for the benefit of the Agents and the Lenders and
their  respective  successors and assigns,  and in the event of an assignment of
the  Guaranteed  Indebtedness,  or any part  thereof,  the rights  and  benefits
hereunder,  to the extent  applicable to the  indebtedness  so assigned,  may be
transferred  with  such  indebtedness.  This  Guaranty  is  binding  not only on
Guarantor, but on Guarantor's successors and assigns.

         18.  Guarantor  recognizes  that the Agents and the Lenders are relying
upon  this  Guaranty  and the  undertakings  of  Guarantor  hereunder  in making
extensions  of  credit  to  Guarantor  under  the  Loan  Agreement  and  further
recognizes  that the  execution  and  delivery  of this  Guaranty  is a material
inducement  to the Agents and the Lenders in entering  into the Loan  Agreement.
Guarantor  hereby  acknowledges  that  there  are  no  conditions  to  the  full
effectiveness of this Guaranty.


<PAGE>


         19. This Guaranty is a Loan Document and,  therefore,  this Guaranty is
subject  to the  applicable  provisions  of the  Loan  Agreement,  all of  which
applicable  provisions are  incorporated  herein by reference the same as if set
forth herein  verbatim.  Moreover,  Guarantor  acknowledges and agrees that this
Guaranty is subject to the offset provisions in favor of the Lenders in the Loan
Agreement.

         20. Guarantor expressly assumes all responsibilities to remain informed
of the  financial  condition of Guarantor  and any  circumstances  affecting (a)
Guarantor's  ability  to  perform  under the Loan  Agreement  and the other Loan
Documents to which it is a party or (b) any collateral  securing all or any part
of the Guaranteed Indebtedness.

         21. In the event that Guarantor is entitled to receive any notice under
the  Uniform  Commercial  Code,  as it exists in the  state  governing  any such
notice, of the sale or other  disposition of any collateral  securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be
deemed given when such notice is deposited  in the United  States mail,  postage
prepaid,  at the address for Guarantor  set forth on the signature  page of this
Guaranty,  five  days  prior to the date any  public  sale,  or after  which any
private sale,  of any such  collateral is to be held;  provided,  however,  that
notice  given in any other  reasonable  manner or at any other  reasonable  time
shall be sufficient.

         22. No delay on the part of the Administrative  Agent in exercising any
right  hereunder  or failure to exercise  the same shall  operate as a waiver of
such right.  In no event shall any waiver of the  provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties in
accordance with the Loan Agreement,  and then only in the specific  instance and
for the purpose given.

     23.  Nothing  contained  herein shall be construed as an  obligation on the
part of the Agents or the  Lenders  to extend or  continue  to extend  credit to
Guarantor.

         24.  Notwithstanding  any other  provision  of this  Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of the
Guaranteed   Indebtedness,   Guarantor  and  the  Administrative  Agent  by  its
acceptance hereof agree that no Guarantor shall ever be required or obligated to
pay  interest  in  excess of the  maximum  nonusurious  interest  rate as may be
authorized by applicable  law for the written  contracts  which  constitute  the
Guaranteed  Indebtedness.  It is the intention of Guarantor, the Agents, and the
Lenders to conform  strictly to the applicable  laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantor,  shall be held to be subject to reduction to the maximum  nonusurious
interest rate allowed under said law.

         25. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING
TRANSACTION  CONSUMMATED AND PERFORMABLE IN TRAVIS COUNTY,  TEXAS,  AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

         26.  Guarantor  shall pay on demand all reasonable  attorneys' fees and
all other costs and expenses  incurred by the Agents or any Lender in connection
with the enforcement or collection of this Guaranty.


<PAGE>


         27. THIS GUARANTY  EMBODIES THE FINAL,  ENTIRE  AGREEMENT OF GUARANTOR,
THE  AGENTS  AND  THE  LENDERS  WITH  RESPECT  TO  GUARANTOR'S  GUARANTY  OF THE
GUARANTEED INDEBTEDNESS AND RESTATES ANY AND ALL PRIOR COMMITMENTS,  AGREEMENTS,
REPRESENTATIONS,  AND  UNDERSTANDINGS,  WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT  MATTER HEREOF.  THIS GUARANTY IS INTENDED BY GUARANTOR,  THE AGENTS AND
THE LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND
NO COURSE OF DEALING BETWEEN GUARANTOR,  THE AGENTS OR THE LENDERS, NO COURSE OF
PERFORMANCE,  NO TRADE PRACTICES,  AND NO EVIDENCE OF PRIOR,  CONTEMPORANEOUS OR
SUBSEQUENT  ORAL  AGREEMENTS OR DISCUSSIONS OR OTHER  EXTRINSIC  EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT,  VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY.  THERE ARE NO ORAL  AGREEMENTS  AMONG  GUARANTOR,  THE  AGENTS AND THE
LENDERS.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK.

                            SIGNATURE PAGES FOLLOW.]


<PAGE>






         EXECUTED as of the 31st day of January, 2000.

                                                    GUARANTOR:
                                                    ---------

                                                    PRIME MEDICAL SERVICES, INC.
                                                    a Delaware corporation

                            By: /s/ Teena E. Belcik
                                 Teena E. Belcik

                                 Vice President-Treasurer

                                                  Address for Notices:

                                               1301 Capital of Texas Highway
                                               Suite C-300
                                               Austin, Texas 78746
                                               Attn: Treasurer
                                               Fax Number:  (512) 328-8510
                                               Telephone Number:  (512) 328-4554

<PAGE>



                               GUARANTY AGREEMENT

         WHEREAS,   PRIME  MEDICAL  SERVICES,   INC.,  a  Delaware   corporation
("Borrower"),  has entered into a Fourth  Amended and Restated Loan Agreement of
even date herewith with certain banks and other lending  institutions  which are
or may  from  time to time  become  signatories  thereto,  BANKBOSTON,  N.A.,  a
national banking  association,  as documentation  agent for itself and the other
Lenders,  BANK OF AMERICA,  N.A. ("B of A"), a national banking association,  as
administrative  agent  for  itself  and the  other  Lenders  (in such  capacity,
together with its  successors in such  capacity,  the  "Administrative  Agent"),
pursuant to which the Lenders have agreed to make a revolving credit loan to the
Borrower with advances thereunder not to exceed an aggregate principal amount of
Eighty-Six  Million and 00/100 Dollars at any time outstanding  ($86,000,000.00)
(such Fourth Amended and Restated Loan Agreement,  as may be amended,  extended,
restated,  supplemented  or modified from time to time,  the "Loan  Agreement");
terms defined in the Loan  Agreement and not otherwise  defined  herein are used
herein as defined therein; and

         WHEREAS,  the Agents and the Lenders have conditioned their obligations
under  the  Loan  Agreement  upon  the  execution  and  delivery  by  Guarantors
(hereinafter defined) of this Guaranty Agreement (this "Guaranty");

         NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which  are  hereby  acknowledged,  each  of  the  undersigned  (individually,  a
"Guarantor" and collectively,  the "Guarantors"),  hereby jointly and severally,
irrevocably and  unconditionally  guarantees to the Agents,  and to the Lenders,
the full and prompt  payment  and  performance  of the  Guaranteed  Indebtedness
(hereinafter defined), this Guaranty being upon the following terms:

         1 . The term "Guaranteed Indebtedness", as used herein means all of the
Obligations  and shall include any and all  post-petition  interest and expenses
(including  attorneys'  fees)  whether  or not  allowed  under  any  bankruptcy,
insolvency, or other similar law.

         2. This Guaranty  shall be an absolute,  continuing,  irrevocable,  and
unconditional  guaranty  of  payment  and  performance,  and not a  guaranty  of
collection,  and each Guarantor shall remain liable on its obligations hereunder
until the payment and  performance  in full of the Guaranteed  Indebtedness  and
termination of the Commitments. No set-off, counterclaim, recoupment, reduction,
or  diminution  of any  obligation,  or any defense of any kind or nature  which
Borrower may have against any Agent, any Lender or any other party, or which any
Guarantor may have against Borrower or any other party (other than the Agents or
any  Lender),  shall be  available  to, or shall be asserted  by, any  Guarantor
against  any  Agent,  any  Lender or any  subsequent  holder  of the  Guaranteed
Indebtedness   or  any  part  thereof  or  against  payment  of  the  Guaranteed
Indebtedness or any part thereof.

         3. Notwithstanding any contrary provision,  it is the intention of each
Guarantor,  Lenders,  and Agents that the amount of the Guaranteed  Indebtedness
guaranteed by each  Guarantor by this  Guaranty  shall be, but not in excess of,
the maximum amount permitted by fraudulent  conveyance,  fraudulent transfer, or
similar Laws applicable to such Guarantor. Accordingly, notwithstanding anything
to the contrary  contained in this Guaranty or any other agreement or instrument
executed in connection  with the payment of any of the Guaranteed  Indebtedness,
the amount of the  Guaranteed  Indebtedness  guaranteed by any Guarantor by this
Guaranty  shall be limited to an aggregate  amount  equal to the largest  amount
that  would  not  render  such  Guarantor's  obligations  hereunder  subject  to
avoidance  under  Section  548 of  the  United  States  Bankruptcy  Code  or any
comparable provision of any applicable state law.


<PAGE>





                                        7



<PAGE>


         4. If any  Guarantor  becomes  liable  for any  indebtedness  owing  by
Borrower  to any Agent or any Lender by  endorsement  or  otherwise,  other than
under this  Guaranty,  such  liability  shall not be in any manner  impaired  or
affected hereby, and the rights of the Agents and the Lenders hereunder shall be
cumulative  of any and all other rights that the Agents and the Lenders may ever
have  against  such  Guarantor.  The exercise by the Agents or any Lender of any
right or remedy hereunder or under any other instrument, or at law or in equity,
shall not preclude the  concurrent or subsequent  exercise of any other right or
remedy.

         5. In the event of default by Borrower in payment or performance of the
Guaranteed Indebtedness,  or any part thereof, when such Guaranteed Indebtedness
becomes due,  whether by its terms, by  acceleration,  or otherwise,  Guarantors
shall promptly pay the amount due thereon to the  Administrative  Agent, for the
benefit of the Lenders,  upon demand in lawful  currency of the United States of
America and it shall not be necessary for the Administrative  Agent, in order to
enforce  such  payment by  Guarantors,  first to  institute  suit or exhaust its
remedies against Borrower or others liable on such Guaranteed  Indebtedness,  or
to enforce any rights against any collateral which shall ever have been given to
secure such Guaranteed Indebtedness.

         6. If  acceleration  of the time for  payment of any amount  payable by
Borrower  under  the  Guaranteed  Indebtedness  is stayed  upon the  insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to
acceleration under the terms of the Guaranteed Indebtedness shall nonetheless be
payable by Guarantors hereunder forthwith on demand by the Administrative Agent.


<PAGE>


         7.  Each  Guarantor  hereby  agrees  that its  obligations  under  this
Guaranty shall not be released,  discharged,  diminished,  impaired, reduced, or
affected for any reason or by the  occurrence of any event,  including,  without
limitation,  one or more of the following events,  whether or not with notice to
or the consent of such  Guarantor:  (a) the taking or accepting of collateral as
security for any or all of the  Guaranteed  Indebtedness  or the sale,  release,
surrender,  exchange,  or  subordination  of any  collateral  now  or  hereafter
securing any or all of the Guaranteed  Indebtedness;  (b) any partial release of
the  liability of any  Guarantor  hereunder,  or the full or partial  release of
Borrower or any other  guarantor from liability for any or all of the Guaranteed
Indebtedness;  (c) the dissolution,  insolvency,  or bankruptcy of Borrower, any
Guarantor,  or any other  party at any time liable for the payment of any or all
of the  Guaranteed  Indebtedness;  (d)  any  renewal,  extension,  modification,
waiver, amendment, or rearrangement of any or all of the Guaranteed Indebtedness
or any instrument,  document,  or agreement  evidencing,  securing, or otherwise
relating  to any or all of the  Guaranteed  Indebtedness;  (e)  any  adjustment,
indulgence,  forbearance,  waiver, settlement, or compromise that may be granted
or given by any Agent or any Lender to  Borrower,  any  Guarantor,  or any other
party  ever  liable  for  any or all of the  Guaranteed  Indebtedness;  (f)  the
subordination  of the payment of all or any part of the Guaranteed  Indebtedness
to the payment of any obligations, indebtedness, or liabilities which may be due
or become  due to any of the  Agents,  any of the  Lenders  or  others;  (g) the
application of any deposit balance,  fund, payment,  collections through process
of law or otherwise,  or other  collateral of Borrower to the  satisfaction  and
liquidation of the  indebtedness  or obligations of Borrower to Agents or any of
the Lenders, if any, not guaranteed under this Guaranty;  (h) the application of
any sums paid to any of the Agents or any of the Lenders by any  Guarantor,  any
other guarantor of all or any part of the Guaranteed  Indebtedness,  Borrower or
others to the Guaranteed  Indebtedness in such order and manner as any Agent may
determine  in  accordance  with  the Loan  Agreement;  (i) any  neglect,  delay,
omission,  failure,  or refusal of any Agent or any Lender to take or  prosecute
any  action  for the  collection  of any of the  Guaranteed  Indebtedness  or to
foreclose or take or prosecute  any action in  connection  with any  instrument,
document, or agreement evidencing, securing, or otherwise relating to any or all
of the Guaranteed Indebtedness; (j) the unenforceability or invalidity of any or
all of the Guaranteed Indebtedness or of any instrument,  document, or agreement
evidencing,  securing,  or  otherwise  relating to any or all of the  Guaranteed
Indebtedness; (k) any payment by Borrower or any other party to any Agent or any
Lender  is held to  constitute  a  preference  under  applicable  bankruptcy  or
insolvency law or if for any other reason any Agent or any Lender is required to
refund any payment or pay the amount thereof to someone else; (l) the settlement
or compromise of any of the Guaranteed  Indebtedness;  (m) the non-perfection of
any  security   interest  or  lien  securing  any  or  all  of  the   Guaranteed
Indebtedness;  (n) any impairment of any  collateral  securing any or all of the
Guaranteed Indebtedness;  (o) the failure of any Agent or any Lender to sell any
collateral securing any or all of the Guaranteed  Indebtedness in a commercially
reasonable  manner  or as  otherwise  required  by law;  (p) any  change  in the
corporate  existence,  structure,  or  ownership  of  Borrower;  (q)  any  other
circumstance  which  might  otherwise  constitute  a  defense  available  to, or
discharge  of,  Borrower;  (r) the  unenforceability  of all or any  part of the
Guaranteed  Indebtedness  against  Borrower  by  reason  of the  fact  that  the
Guaranteed  Indebtedness  exceeds the amount  permitted  by law;  (s) the act of
creating all or any part of the Guaranteed  Indebtedness  is ultra vires; or (t)
the officers  creating all or any part of the Guaranteed  Indebtedness  acted in
excess of their authority.

     8. Each  Guarantor  hereby  represents  and  warrants to the Agents and the
Lenders the following:

               (a) This Guaranty may reasonably be expected to benefit, directly
          or indirectly, each Guarantor.

               (b)  Each  Guarantor  is  familiar  with,  and has  independently
          reviewed the books and records regarding,  the financial  condition of
          Borrower  and is  familiar  with the  value of any and all  collateral
          intended  to be  security  for the  payment  of all or any part of the
          Guaranteed  Indebtedness.  However,  no  Guarantor  is relying on such
          financial  condition or collateral as an inducement to enter into this
          Guaranty.

                  (c) Each  Guarantor has adequate means to obtain from Borrower
         on a continuing basis information concerning the financial condition of
         Borrower,  and no  Guarantor is relying on the Agents or the Lenders to
         provide such information to any Guarantor either now or in the future.

                  (d) Each  Guarantor  has the power and  authority  to execute,
         deliver, and perform this Guaranty and any other agreements executed by
         such Guarantor contemporaneously herewith, and the execution, delivery,
         and performance of this Guaranty and any other  agreements  executed by
         each Guarantor  contemporaneously  herewith do not and will not violate
         (i) any agreement or  instrument to which any Guarantor is a party,  or
         (ii) any law, rule, regulation,  or order of any Governmental Authority
         to which any Guarantor is subject.

                  (e) Neither the Agents,  the Lenders,  nor any other party has
         made any  representation,  warranty,  or statement to any  Guarantor in
         order to induce any Guarantor to execute this Guaranty.

                  (f) The financial  statements and other financial  information
         regarding Guarantors heretofore and hereafter delivered to any Agent or
         any Lender are and shall be true and correct in all  material  respects
         and fairly present the financial position of Guarantors as of the dates
         thereof,  and no material  adverse change has occurred in the financial
         condition of any Guarantor as reflected in those financial disclosures.

                  (g) As of the date  hereof,  and after  giving  effect to this
         Guaranty and the obligations  evidenced  hereby,  (i) each Guarantor is
         and will be Solvent (to the extent  necessary,  taking into account any
         rights of contribution,  reimbursement and subrogation),  (ii) the fair
         saleable value of each Guarantor's  assets exceeds and will continue to
         exceed  its  liabilities  (both  fixed  and  contingent),   (iii)  each
         Guarantor  is and  will  continue  to be able to pay its  debts as they
         mature,  and  (iv)  each  Guarantor  has  and  will  continue  to  have
         sufficient capital to carry on its business and all businesses in which
         it is about to engage.

               (h) All  representations and warranties about each Guarantor made
          in the Loan Agreement are true and correct.

         9. Each Guarantor  covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Lender has any Commitment
under the Loan Agreement:


<PAGE>


                  (a) No Guarantor shall, so long as its obligations  under this
         Guaranty  continue,  transfer  or pledge  any  material  portion of its
         assets for less than full and adequate consideration.

                  (b)   Each   Guarantor   shall   promptly   furnish   to   the
         Administrative  Agent at any time and from time to time such  financial
         statements and other financial  information as the Administrative Agent
         may require,  in form and substance  satisfactory to the Administrative
         Agent.

                  (c) Each Guarantor  shall comply with all terms and provisions
         of the Loan Documents that apply to such Guarantor.

                  (d) Each Guarantor  shall promptly  inform the  Administrative
         Agent of (i) any litigation or governmental  investigation against such
         Guarantor  or  affecting  any  security  for  all  or any  part  of the
         Guaranteed   Indebtedness   or  this  Guaranty   which,  if  determined
         adversely,  might have a material  adverse  effect  upon the  financial
         condition  of such  Guarantor  or upon such  security  or might cause a
         default under any of the Loan Documents,  (ii) any claim or controversy
         which  might  become the  subject of such  litigation  or  governmental
         investigation,  and (iii) any material  adverse change in the financial
         condition of Guarantor.

         10. (a) Each Guarantor hereby agrees that the Subordinated Indebtedness
(hereinafter defined) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness,  and each Guarantor hereby
assigns the  Subordinated  Indebtedness  to the  Administrative  Agent,  for the
benefit of the Lenders, as security for the Guaranteed Indebtedness. If any sums
shall be paid to any  Guarantor  by  Borrower  or any other  person or entity on
account of the  Subordinated  Indebtedness,  such sums shall be held in trust by
such Guarantor for the benefit of the  Administrative  Agent and shall forthwith
be paid to the  Administrative  Agent  without  affecting  the  liability of any
Guarantor under this Guaranty and may be applied by the Administrative Agent and
the Lenders against the Guaranteed  Indebtedness in such order and manner as the
Administrative  Agent and the Lenders may  determine  in their sole  discretion.
Upon the request of the  Administrative  Agent,  each  Guarantor  shall execute,
deliver,  and endorse to the Administrative Agent such documents and instruments
as the Administrative  Agent may request to perfect,  preserve,  and enforce its
rights  hereunder.  For  purposes  of  this  Guaranty,  the  term  "Subordinated
Indebtedness" means all indebtedness,  liabilities,  and obligations of Borrower
to any Guarantor,  whether such indebtedness,  liabilities,  and obligations now
exist or are hereafter incurred or arise, or whether the obligations of Borrower
thereon are direct, indirect, contingent, primary, secondary, several, joint and
several,   or  otherwise,   and  irrespective  of  whether  such   indebtedness,
liabilities,  or obligations are evidenced by a note, contract, open account, or
otherwise,  and  irrespective  of the  person or  persons  in whose  favor  such
indebtedness, obligations, or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by any Guarantor.

                  (b) Each  Guarantor  agrees  that any and all liens,  security
interests, judgment liens, charges, or other encumbrances upon Borrower's assets
securing payment of any Subordinated  Indebtedness  shall be and remain inferior
and  subordinate  to any and all  liens,  security  interests,  judgment  liens,
charges,  or other  encumbrances  upon Borrower's assets securing payment of the
Guaranteed  Indebtedness  or  any  part  thereof,  regardless  of  whether  such
encumbrances  in favor of any Guarantor or the  Administrative  Agent  presently
exist or are hereafter created or attached. Without the prior written consent of
the Lenders,  no Guarantor  shall (i) file suit against  Borrower or exercise or
enforce  any  other  creditor's  right it may  have  against  Borrower,  or (ii)
foreclose, repossess, sequester, or otherwise take steps or institute any action
or  proceedings   judicial  or  otherwise,   including  without  limitation  the
commencement  of, or joinder  in, any  liquidation,  bankruptcy,  rearrangement,
debtor's  relief or  insolvency  proceeding)  to  enforce  any  liens,  security
interests,  collateral  rights,  judgments  or  other  encumbrances  held by any
Guarantor on assets of Borrower.


<PAGE>


                  (c)   In  the   event   of   any   receivership,   bankruptcy,
reorganization,  rearrangement,  debtor's relief, or other insolvency proceeding
involving Borrower as debtor,  the Administrative  Agent shall have the right to
prove and vote any claim  under the  Subordinated  Indebtedness  and to  receive
directly from the  receiver,  trustee or other court  custodian  all  dividends,
distributions,  and payments made in respect of the  Subordinated  Indebtedness.
The  Administrative  Agent  and  the  Lenders  may  apply  any  such  dividends,
distributions,  and payments  against the Guaranteed  Indebtedness in such order
and manner as the  Administrative  Agent and the Lenders may  determine in their
sole discretion.

                  (d) Each Guarantor agrees that all promissory notes,  accounts
receivable, ledgers, records, or any other evidence of Subordinated Indebtedness
shall contain a specific written notice thereon that the indebtedness  evidenced
thereby is subordinated under the terms of this Guaranty.

         11. Each  Guarantor  waives (a)  promptness,  diligence,  and notice of
acceptance  of this  Guaranty  and notice of the  incurring  of any  obligation,
indebtedness,  or  liability  to which  this  Guaranty  applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand, notice of
protest,  notice of  intent to  accelerate,  notice of  acceleration,  notice of
dishonor,  diligence in enforcement,  and indulgences of every kind, and (b) the
taking  of any other  action  by the  Administrative  Agent,  including  without
limitation,  giving any notice of default or any other  notice to, or making any
demand on,  Borrower,  any other  guarantor of all or any part of the Guaranteed
Indebtedness  or any other party.  To the maximum extent lawful,  each Guarantor
waives all rights by which it might be  entitled  to require  suit on an accrued
right of action in  respect  of any  Guaranteed  Indebtedness  or  require  suit
against  Borrower  or  others,  whether  arising  under  ss.  34.02 of the Texas
Business  and  Commerce  Code,  as  amended  (regarding  its  right  to  require
Administrative  Agent or Lenders  to sue  Borrower  on  accrued  right of action
following its written notice to Administrative Agent or Lenders),  ss. 17.001 of
the Texas Civil Practice and Remedies Code, as amended (allowing suit against it
without suit  against  Borrower,  but  precluding  entry of judgment  against it
before entry of judgment against Borrower),  Rule 31 of the Texas Rules of Civil
Procedure,  as  amended  (requiring  Administrative  Agent  or  Lenders  to join
Borrower in any suit  against it unless  judgment  has been  previously  entered
against Borrower), or otherwise.

         12. In addition  to any other  waivers,  agreements  and  covenants  of
Guarantors set forth herein,  each Guarantor  hereby further waives and releases
all claims,  causes of action,  defenses  and offsets for any act or omission of
the Administrative Agent, its directors, officers, employees, representatives or
agents in  connection  with the  Administrative  Agent's  administration  of the
Guaranteed   Indebtedness,   except  for  the  Administrative   Agent's  willful
misconduct and gross negligence.

         13. This Guaranty shall  continue to be effective or be reinstated,  as
the case may be, if at any time any payment of all or any part of the Guaranteed
Indebtedness  is  rescinded  or must  otherwise  be returned by any Agent or any
Lender upon the  insolvency,  bankruptcy,  or  reorganization  of Borrower,  any
Guarantor,   any  other   guarantor  of  all  or  any  part  of  the  Guaranteed
Indebtedness, or otherwise, all as though such payment had not been made.

         14. Any acknowledgment or new promise,  whether by payment of principal
or  interest  or  otherwise  and  whether  by  Borrower  or  others   (including
Guarantors),  with respect to any of the Guaranteed  Indebtedness  shall, if the
statute of  limitations  in favor of any  Guarantor  against the  Administrative
Agent or any  Lender  shall  have  commenced  to run,  toll the  running of such
statute of limitations  and, if the period of such statute of limitations  shall
have expired, prevent the operation of such statute of limitations.


<PAGE>


         15. This  Guaranty is for the benefit of the Agents and the Lenders and
their  respective  successors and assigns,  and in the event of an assignment of
the  Guaranteed  Indebtedness,  or any part  thereof,  the rights  and  benefits
hereunder,  to the extent  applicable to the  indebtedness  so assigned,  may be
transferred  with  such  indebtedness.  This  Guaranty  is  binding  not only on
Guarantors, but on each Guarantor's successors and assigns.

         16.  Each  Guarantor  recognizes  that the Agents and the  Lenders  are
relying upon this Guaranty and the  undertakings of each Guarantor  hereunder in
making  extensions  of credit to Borrower  under the Loan  Agreement and further
recognizes  that the  execution  and  delivery  of this  Guaranty  is a material
inducement  to the Agents and the Lenders in entering  into the Loan  Agreement.
Each  Guarantor  hereby  acknowledges  that there are no  conditions to the full
effectiveness of this Guaranty.

         17. This Guaranty is a Loan Document and,  therefore,  this Guaranty is
subject  to the  applicable  provisions  of the  Loan  Agreement,  all of  which
applicable  provisions are  incorporated  herein by reference the same as if set
forth herein  verbatim.  Moreover,  each Guarantor  acknowledges and agrees that
this Guaranty is subject to the offset provisions in favor of the Lenders in the
Loan Agreement.

         18. Each Guarantor  expressly  assumes all  responsibilities  to remain
informed of the financial condition of Borrower and any circumstances  affecting
(a)  Borrower's  ability to perform under the Loan  Agreement and the other Loan
Documents to which it is a party or (b) any collateral  securing all or any part
of the Guaranteed Indebtedness.

         19. In the event that any  Guarantor  is entitled to receive any notice
under the Uniform  Commercial Code, as it exists in the state governing any such
notice, of the sale or other  disposition of any collateral  securing all or any
part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be
deemed given when such notice is deposited  in the United  States mail,  postage
prepaid,  at the address for Guarantor  set forth on the signature  page of this
Guaranty,  five  days  prior to the date any  public  sale,  or after  which any
private sale,  of any such  collateral is to be held;  provided,  however,  that
notice  given in any other  reasonable  manner or at any other  reasonable  time
shall be sufficient.

         20. No delay on the part of the Administrative  Agent in exercising any
right  hereunder  or failure to exercise  the same shall  operate as a waiver of
such right.  In no event shall any waiver of the  provisions of this Guaranty be
effective unless the same be in writing and signed by the appropriate parties in
accordance with the Loan Agreement,  and then only in the specific  instance and
for the purpose given.

     21.  Nothing  contained  herein shall be construed as an  obligation on the
part of the Agents or the  Lenders  to extend or  continue  to extend  credit to
Borrower.

         22.  Notwithstanding  any other  provision  of this  Guaranty or of any
instrument or agreement evidencing, governing or securing all or any part of the
Guaranteed  Indebtedness,  each  Guarantor and the  Administrative  Agent by its
acceptance hereof agree that no Guarantor shall ever be required or obligated to
pay  interest  in  excess of the  maximum  nonusurious  interest  rate as may be
authorized by applicable  law for the written  contracts  which  constitute  the
Guaranteed Indebtedness.  It is the intention of Guarantors, the Agents, and the
Lenders to conform  strictly to the applicable  laws which limit interest rates,
and any of the aforesaid contracts for interest, if and to the extent payable by
Guarantors,  shall be held to be subject to reduction to the maximum nonusurious
interest rate allowed under said law.

         23. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING
TRANSACTION  CONSUMMATED AND PERFORMABLE IN TRAVIS COUNTY,  TEXAS,  AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.


<PAGE>


         24. Each Guarantor  shall pay on demand all reasonable  attorneys' fees
and all other  costs  and  expenses  incurred  by the  Agents  or any  Lender in
connection with the enforcement or collection of this Guaranty.

         25.  Guarantors  (other than Prime RVC, Inc.,  which has not previously
executed  any guaranty of the  Guaranteed  Indebtedness)  acknowledge  that this
Guaranty has been given in amendment,  renewal,  restatement and confirmation of
Guarantor's  obligations,  covenants,  and agreements  contained in the Guaranty
Agreements  previously executed by certain Guarantors in favor of Administrative
Agent and the Lenders,  including,  without  limitation,  those dated August 17,
1995,  April 26,  1996,  March 31,  1997,  and  April  20,  1998 (the  "Previous
Guaranties"). Guarantors further confirm and agree that neither the execution of
the Loan  Agreement  or any other Loan  Document,  nor the  consummation  of the
transactions described therein, shall in any way affect the liability of certain
Guarantors under the Previous Guaranties,  and the obligations  evidenced by the
Previous Guaranties  continue in full force and effect as modified,  amended and
restated by the terms contained herein.

         26. THIS GUARANTY  EMBODIES THE FINAL,  ENTIRE AGREEMENT OF GUARANTORS,
THE  AGENTS  AND  THE  LENDERS  WITH  RESPECT  TO  GUARANTORS'  GUARANTY  OF THE
GUARANTEED INDEBTEDNESS AND RESTATES ANY AND ALL PRIOR COMMITMENTS,  AGREEMENTS,
REPRESENTATIONS,  AND  UNDERSTANDINGS,  WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF.  THIS GUARANTY IS INTENDED BY GUARANTORS,  THE AGENTS AND
THE LENDERS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND
NO COURSE OF DEALING BETWEEN ANY GUARANTOR, THE AGENTS OR THE LENDERS, NO COURSE
OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT  ORAL  AGREEMENTS OR DISCUSSIONS OR OTHER  EXTRINSIC  EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT,  VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
GUARANTY.  THERE ARE NO ORAL  AGREEMENTS  AMONG  GUARANTORS,  THE AGENTS AND THE
LENDERS.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK.

                            SIGNATURE PAGES FOLLOW.]


<PAGE>






         EXECUTED as of the 31st day of January, 2000.

GUARANTORS:
----------

PROSTATHERAPIES, INC.,
a Delaware corporation
LITHOTRIPTORS, INC.,
a North Carolina corporation
FASTSTART, INC.,
a North Carolina corporation
NATIONAL LITHOTRIPTORS ASSOCIATION,
a North Carolina corporation
R.R. LITHO, INC.,
a Delaware corporation
OHIO LITHO, INC.,
a Delaware corporation
MEDTECH INVESTMENT, INC.,
a North Carolina corporation
PRIME MEDICAL OPERATING, INC.,
a Delaware corporation
PRIME MANAGEMENT, INC.,
a Nevada corporation
PRIME LITHOTRIPTER OPERATIONS, INC.,
a New York corporation
PRIME DIAGNOSTIC SERVICES, INC.,
a Delaware corporation
PRIME LITHOTRIPSY SERVICES, INC.,
a New York corporation
PRIME DIAGNOSTIC CORP. OF FLORIDA,
a Delaware corporation
SUN MEDICAL TECHNOLOGIES, INC.,
a California corporation
PRIME PRACTICE MANAGEMENT, INC.,
a New York corporation
PRIME CARDIAC REHABILITATION SERVICES,
INC., a Delaware corporation
ALABAMA RENAL STONE INSTITUTE, INC.,
an Alabama corporation
PRIME KIDNEY STONE TREATMENT, INC.,
a New Jersey corporation
SUN ACQUISITION, INC.,
a California corporation
EXECUTIVE MEDICAL ENTERPRISES, INC.,
a Delaware corporation
PRIME RVC, INC.,
a Delaware corporation


                            By: /s/ Teena E. Belcik
                                 Teena E. Belcik
                                 Treasurer


<PAGE>






                         PRIME MEDICAL MANAGEMENT, L.P.,
                         a Delaware limited partnership

                           By:      Prime Medical Operating, Inc.,
                                    a Delaware corporation, its
                                    General Partner

                           By: /s/ Teena E. Belcik
                                      Teena E. Belcik
                                      Treasurer

                                               Address for Notices:

                                               1301 Capital of Texas Highway
                                               Suite C-300
                                               Austin, Texas 78746
                                               Attn: President
                                               Fax Number:  (512) 328-8510
                                               Telephone Number:  (512) 328-2892