Document:

ASSET PURCHASE AGREEMENT

                                      Among

                        PRIME LITHOTRIPSY SERVICES, INC.

                                    as Buyer,

                   RESTON HOSPITAL LITHOTRIPTER JOINT VENTURE

                                   as Seller,

                       RESTON LITHOTRIPSY ASSOCIATES, INC.

                  COLUMBIA ARLINGTON HEALTHCARE SYSTEM, L.L.C.

                                       and

                                ROBERT BALL, M.D.

                              Dated July 21, 1999

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                            ASSET PURCHASE AGREEMENT

         This Asset Purchase  Agreement  ("Agreement") is entered into as of the
21 day of July, 1999 ("Effective Date"), between and among PRIME LITHOTRIPSY
SERVICES,  INC., a New York corporation ("Buyer"),  RESTON HOSPITAL LITHOTRIPTER
JOINT VENTURE,  a Virginia general  partnership  ("Seller"),  RESTON LITHOTRIPSY
ASSOCIATES, INC., a Virginia corporation and partner in Seller ("RLA"), COLUMBIA
ARLINGTON  HEALTHCARE  SYSTEM,  L.L.C., a Virginia limited liability company and
partner in Seller ("CAHS"), and Robert Ball, M.D., an individual residing in the
Commonwealth of Virginia and partner in Seller ("ROBERT BALL, M.D.").

                             Preliminary Statements

         Seller owns a Dornier  Model HMT 482L  Extracorporeal  Shockwave  Renal
Lithotripter,  serial number 293, ("Lithotripter"),  leases the Lithotripter for
use to others, and provides related services to others.

         Buyer  desires to purchase  from  Seller and Seller  desires to sell to
Buyer the Lithotripter.

     RLA, CAHS and ROBERT BALL,  M.D. are the only partners of Seller,  and each
joins in the execution of this Agreement for the purposes set forth herein.

                             Statement of Agreement

         NOW,  THEREFORE,  in consideration of the premises and mutual covenants
contained  herein,  and  for  other  valuable  consideration,  the  receipt  and
sufficiency of which are acknowledged, the parties intending to be legally bound
hereby, agree as follows:

                                   ARTICLE I.

                           SALE AND PURCHASE OF ASSETS

         On the terms and subject to the conditions contained in this Agreement,
at the Closing (as hereinafter  defined),  Seller hereby agrees to sell, convey,
assign and  transfer to Buyer,  and Buyer agrees to purchase  from  Seller,  the
assets of Seller set forth  below,  free and clear of any  indebtedness,  liens,
encumbrances  or claims  by any  person or  entity.  The  assets of Seller to be
purchased by Buyer pursuant to this Agreement shall be collectively  referred to
herein as the "Assets," and are as follows:

     a. Property and Equipment. Lithotripter, operating manuals and the trailer.

     b.  Goodwill.  The  goodwill and  business  reputation  related to Seller's
business as of the Closing Date.

                                   ARTICLE II.

                         WARRANTIES, REPRESENTATIONS AND

              COVENANTS OF SELLER, RLA, CAHS AND ROBERT BALL, M.D.

         Each of the parties hereto other than Buyer (collectively, the "Control
Parties")  hereby  represents and warrants to Buyer as follows.  If a particular
representation and warranty is expressly stated below to be made, in whole or in
part,  about the  "Control  Parties,"  each  Control  Party will be deemed to be
making that  representation and warranty only about itself.  Representations and
warranties  expressly  about the "Seller"  will be deemed to be made jointly and
severally  by Seller  and each of the other  Control  Parties.  Otherwise,  each
Control Party (severally, and not jointly) is making each of the representations
and warranties in this Article II as to all matters  stated  therein  (including
without  limitation  paragraph h of this  Article  II).  Any  reference  in this
Agreement  to the "actual  knowledge"  of Seller  shall be defined as the actual
knowledge of Robert Ball, M.D., William A. Adams and A. Daniel Laurent, M.D. Any
reference in this  Agreement to the "actual  knowledge" of a particular  Control
Party  shall be  defined  (i) in the case of ROBERT  BALL,  M.D.,  as the actual
knowledge  of  Robert  Ball,  M.D.;  (ii) in the  case of  CAHS,  as the  actual
knowledge  of  William  A.  Adams;  and (iii) in the case of RLA,  as the actual
knowledge of A. Daniel Laurent, M.D.

                  a. Existence and Power.  Seller is a general  partnership duly
organized,  validly existing and in good standing under the laws of the State of
Virginia  and has all  requisite  power to own and operate  its  business as now
conducted  and as  proposed to be  conducted,  and to enter into and perform the
terms of this Agreement. RLA represents that it is a corporation duly organized,
validly  existing  and  in  good  standing  under  the  laws  of  its  state  of
incorporation,  and has all requisite  corporate power to enter into and perform
the terms of this  Agreement.  CAHS  represents  that it is a limited  liability
company duly organized,  validly existing and in good standing under the laws of
the Commonwealth of Virginia,  and has all requisite  limited  liability company
power to enter into and perform the terms of this Agreement.  ROBERT BALL, M.D.,
represents that he is an individual residing in the Commonwealth of Virginia and
possesses  all  necessary  power to enter  into and  perform  the  terms of this
Agreement.

                  b. Corporate Action.  The execution,  delivery and performance
of this Agreement and each other agreement,  document, instrument or certificate
required  to be  executed  by Seller or any other  Control  Party in  connection
herewith (collectively,  including this Agreement, the "Transaction Documents"),
are  authorized  by (as  applicable)  Seller's  or such  other  Control  Party's
respective shareholders,  members, directors,  governors,  partners, managers or
other  persons  having a right to direct its affairs,  and no further  action or
consent is needed by or from Seller or such other  Control  Party to make any of
the  Transaction  Documents  valid and binding upon Seller or such other Control
Party in accordance  with its terms.  Except with respect to Buyer,  each of the
Transaction  Documents  has been,  or prior to Closing will be, duly and validly
executed and delivered by Seller  and/or the other  Control  Parties (if a party
thereto) and  constitutes  a valid and binding  obligation  of Seller and/or the
other Control Parties,  enforceable  against each of them in accordance with its
terms.

     c. Consents and Approvals.  No action,  consent,  or approval of, or filing
with,  any  governmental  authority  is  required  by Seller or any of the other
Control Parties in connection with the execution, delivery or performance of any
of the Transaction Documents.

                  d. Title to Assets.  Seller  represents that it holds good and
marketable record and beneficial title and ownership to all of the Assets,  free
and  clear of any lien,  security  interest,  encumbrance  or claim and that the
Lithotripter  and  the  trailer  are in  reasonably  good  operating  condition.
Furthermore,  Seller  represents that, except for personnel and Permits (defined
below),  all the  assets of Seller  used in  connection  with the  operation  of
Seller's business as it is presently conducted, are included in the Assets to be
acquired by Buyer pursuant to this Agreement.

                  e. Licenses and Permits.  Schedule II(e) lists, to the best of
Seller's actual knowledge,  all third party and federal, state, county and local
governmental  licenses,  certificates and permits held by Seller and required in
connection with Seller's business activities or Seller's operation or use of the
Assets  (the  "Permits").  These  Permits  are not  assignable  and  will not be
transferred to Buyer at the Closing.  Seller represents that it is in compliance
with the terms and  conditions  of the  Permits,  except  to the  extent  that a
violation does not and cannot  reasonably be expected to have a material adverse
effect on the Assets. Seller further represents that it does not possess, nor is
it required to possess,  a  certificate  of public need to conduct the  Seller's
business as it is currently being conducted.

                  f. List of  Procedures.  Schedule II(f) lists the total number
of lithotripsy  procedures performed by Columbia Reston Hospital Center for each
of the calendar  years ending  December  31,  1996,  1997 and 1998,  and for the
period  beginning  January 1, 1999 and ending May 31, 1999.  Schedule II(f) also
lists the total number of Maryland residents who received  lithotripsy  services
at Columbia  Reston  Hospital  Center for the calendar year ending  December 31,
1998 and for the period  beginning  January 1, 1999 and  ending  June 29,  1999.
Seller  represents and warrants that Schedule II(f) fairly represents the number
of  lithotripsy  procedures  performed  on patients for the  indicated  periods.
Seller also represents and warrants that Schedule II(f) fairly  represents ^ the
number of Maryland residents receiving lithotripsy procedures at Columbia Reston
Hospital Center for the indicated periods.

                  g. No Adverse  Changes.  Since ^ May 31,  1999,  there has not
been any adverse change in the Assets,  business or operations of Seller,  other
than  changes in the  ordinary  course of business  that are not (when viewed in
conjunction with all other such changes) materially adverse.

                  h.  Claims  and  Litigation.  To the best of  Seller's  actual
knowledge, after due inquiry, there are no claims, actions, litigation, suits or
proceedings  pending  or  threatened  against  or  affecting  Seller,   Seller's
business, the Assets, or the transactions contemplated by this Agreement, at law
or in  equity,  at or before  any  federal,  state or  municipal  court or other
governmental department,  commission,  board, bureau, agency or instrumentality.
None of the  Control  Parties is subject  to or in default  with  respect to any
order, writ, injunction or decree of any federal, state, local or foreign court,
department,  agency or instrumentality  or arbitration  tribunal with respect to
the ownership,  operation or sale of the Assets or having a material and adverse
effect  on the  ability  of such  Control  Party  to  perform  their  respective
covenants and obligations set forth in this Agreement.

                  i. No Material Misstatements.  No representation,  warranty or
covenant of any of the Control Parties that is contained in this  Agreement,  or
in any Schedule or Exhibit hereto,  contains any untrue  statement of a material
fact or omits  any  material  fact  necessary  to make any such  representation,
warranty or covenant,  in light of the circumstances under which they were made,
not misleading.

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                  j. No Violation; Compliance with Laws. The execution, delivery
and performance of each of the Transaction  Documents,  and the  consummation of
the  transactions  contemplated  hereby  and  thereby,  do not and  will not (i)
violate any law or regulation or any judicial or  administrative  order,  award,
judgment or decree  applicable  to Seller or the Assets  (other than  applicable
"bulk sales" laws); (ii) result in the creation of any lien,  security interest,
charge or encumbrance upon any of the Assets;  or (iii) violate or conflict with
any provision of Seller's organizational documents, excluding from the foregoing
clauses  (i) and (iii)  such  violations  that do not and cannot  reasonably  be
expected to have a material adverse effect on the Assets.

     k. No Known Breaches by Other Parties.  Each Control Party (severally,  and
not jointly) represents and warrants to Buyer that it has no actual knowledge of
any  breach  or  default  by any of the  other  Control  Parties  hereto  of any
representation,  warranty  or  covenant  contained  in any  of  the  Transaction
Documents.

                  l.  Representations  and Warranties True at Closing.  Each and
every  representation  and  warranty  by the Control  Parties  shall be true and
correct as of the  Closing  Date in all  respects,  regardless  of  whether  the
Closing  Date occurs on the date of  execution  of this  Agreement or some later
date pursuant to Section 7.1 hereof.

     m. Ownership of Seller; Equity Interest Owners of RLA. RLA, CAHS and ROBERT
BALL,  M.D.  each possess a  partnership  interest in Seller of 72%, 27% and 1%,
respectively.  RLA,  CAHS and ROBERT BALL,  M.D. are the only partners of Seller
and no other person or entity holds an equity interest of Seller. Schedule II(m)
sets  forth a list of each and every  person or  entity  that owns an  ownership
interest in RLA.

                  n.  Disclaimer of Warranties.  BUYER  ACKNOWLEDGES  AND AGREES
THAT EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, SELLER HAS MADE AND MAKES
NO WARRANTIES EITHER EXPRESS OR IMPLIED,  WITH RESPECT TO THE ASSETS,  INCLUDING
WITHOUT  LIMITATION,  THE  IMPLIED  WARRANTY OF  MERCHANTABILITY  OR THE IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR  PURPOSE.  BUYER FURTHER  ACKNOWLEDGES  AND
AGREES THAT EXCEPT AS OTHERWISE  SPECIFICALLY  PROVIDED  HEREIN,  THE ASSETS ARE
BEING TRANSFERRED AS IS, WHERE IS, AND WITH ALL FAULTS.

                                  ARTICLE III.

                         WARRANTIES, REPRESENTATIONS AND

                               COVENANTS OF BUYER

         Buyer  hereby  represents,  warrants to, and  covenants  with Seller as
follows:

     a. Corporate  Existence.  Buyer is a corporation  duly  organized,  validly
existing  in good  standing  under the laws of the  State of New York.  Buyer is
authorized  to  transact  business  in  Virginia,  and Buyer  has all  requisite
corporate  power to own and operate its  business  and to enter into and perform
the terms of this Agreement.

                  b. Corporate Action.  The execution,  delivery and performance
of each  Transaction  Document to which Buyer is a party have been authorized by
all necessary  corporate  action,  and such Transaction  Document  constitutes a
valid and binding  obligation upon Buyer,  enforceable  against it in accordance
with its terms.

     c. No Violation.  The execution,  delivery and performance by Buyer of each
Transaction  Document to which  Buyer is a party,  and the  consummation  of the
transactions  contemplated  herein and therein,  do not and will not violate any
law or regulation or any judicial or administrative  order,  award,  judgment or
decree applicable to Buyer.

                                   ARTICLE IV.

                           PURCHASE PRICE AND PAYMENT

         The total purchase price and consideration for the Assets to be sold to
Buyer pursuant to this Agreement shall be $2,400,000.00, to be paid to Seller at
the Closing in immediately available funds.

                                   ARTICLE V.

                          ALLOCATION OF PURCHASE PRICE

         Seller and Buyer hereby agree to allocate the purchase  price among the
Assets, the  non-competition  covenant set forth in Article VIII hereof, and the
other agreements  entered into in connection with this Agreement,  in accordance
with the allocations set forth on Schedule V hereto.  Such allocations have been
mutually  determined by the parties at arm's length and the parties hereto agree
to use such allocations for federal income tax purposes.

                                   ARTICLE VI.

                                   LIABILITIES

         Buyer is not  assuming any debts,  liabilities  or  obligations  of any
kind, of Seller or any Control  Parties,  or otherwise,  in connection  with the
purchase of the  Assets,  the Closing or the  consummation  of the  transactions
contemplated  by this Agreement.  All claims,  liabilities or obligations of, or
against, Seller and each other Control Party (including, without limitation, any
and all federal,  state or other  governmental  taxes and related  liabilities),
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, fixed or contingent, known or unknown, will be and remain the liability and
responsibility of Seller or such other Control Party, as applicable.  SELLER AND
EACH OTHER CONTROL PARTY AGREE TO HOLD BUYER AND THE BUYER  INDEMNIFIED  PARTIES
HARMLESS  FOR SAME  AND  AGREE TO  DEFEND  AND  INDEMNIFY  BUYER  AND THE  BUYER
INDEMNIFIED  PARTIES  IN  CONNECTION  WITH  ANY  SUCH  CLAIMS,  LIABILITIES,  OR
OBLIGATIONS  ASSERTED  AGAINST  BUYER,  PURSUANT TO THE PROVISIONS OF ARTICLE IX
HEREOF.

                                  ARTICLE VII.

                                     CLOSING

         Section 7.1 Closing.  The purchase,  sale and transfer of possession of
the Assets  (the  "Closing")  shall take place at the  offices of Grad,  Logan &
Klewans, P.C., 1421 Prince Street, Suite 320, Alexandria, Virginia 22314, on the
date of execution of this  Agreement,  or at such other place,  date and time as
the parties  hereto  shall  mutually  agree upon in  writing.  The date that the
Closing occurs is referred to herein as the "Closing Date."

         Section 7.2 Action by Seller. At the Closing,  Seller shall execute (as
applicable),  acknowledge and deliver, or cause to be executed and delivered, to
Buyer, the following:

          a.  Assignment  and Warranty Bill of Sale, in  substantially  the form
     attached hereto as Exhibit A, covering all Assets.

                  b.  Executed  copies of  non-compete  agreements,  in the form
attached  hereto as Exhibit B, for each of the sixteen  shareholders  in RLA who
does not own an existing,  competing  interest and is not engaged in a competing
activity.

                  c.  Executed  copies of  non-compete  agreements,  in the form
attached  hereto as Exhibit C, for each of the two  shareholders in RLA who owns
an existing, competing interest or engages in a competing activity.

                  d.  Closing  certificate  executed  by an  authorized  general
partner of Seller stating that all  representations and warranties of Seller set
forth in any Transaction  Document are true, complete and correct at the time of
Closing,  and that  between the date hereof and the  Closing,  there has been no
material change in the condition of the Assets or Seller's business.

                  e.  Closing  certificate  executed  by  the  President  of RLA
stating  that  all  representations  and  warranties  of RLA  set  forth  in any
Transaction  Document are true,  complete and correct at the time of Closing and
that RLA has no actual knowledge of a breach of a representation and warranty by
either of the other Control Parties.

                  f. Closing  certificate  executed by an authorized  officer of
CAHS stating that all  representations  and  warranties of CAHS set forth in any
Transaction  Document are true,  complete and correct at the time of Closing and
that CAHS has no actual knowledge of a breach of any representation and warranty
by either of the other Control Parties.

          g. Closing certificate  executed by ROBERT BALL, M.D. stating that all
     representations  and  warranties  of  ROBERT  BALL,  M.D.  set forth in any
     Transaction  Document are true, complete and correct at the time of Closing
     and that  ROBERT  BALL,  M.D.  has no actual  knowledge  of a breach of any
     representation and warranty by either of the other Control Parties.

         Section 7.3 Action by Buyer.  At the Closing,  Buyer shall  execute (as
applicable),  acknowledge and deliver, or cause to be executed and delivered, to
Seller, the following:

          a. The cash sum in the amount of $2,400,000.00  pursuant to Article IV
     hereof, by wire transfer to an account designated by Seller.

                  b. Closing certificate  executed by the President or Secretary
of Buyer stating that all  representations  and warranties of Buyer set forth in
any Transaction Document are true, complete and correct at the time of Closing.

         Section 7.4 Further Assurances. At any time and from time to time after
the Closing,  Seller and the other  Control  Parties  shall,  at the  reasonable
request of Buyer, execute and deliver or cause to be executed and delivered, all
such bills of sale,  assignments,  consents,  documents  (including documents of
title  with  respect  to  any  titled  property   included  among  the  Assets),
certificates  and  instruments,  and take or cause  to be taken  all such  other
action, as may be reasonably deemed necessary or desirable in order to put Buyer
in actual  possession and operating  control of the Assets, or to more fully and
effectively vest in Buyer or to confirm in buyer full right,  title and interest
to the Assets, free and clear of all liens and security interests, in accordance
with this  Agreement,  or to assist Buyer in exercising  its rights with respect
thereto, or otherwise to carry out the intents and purposes of this Agreement.

         Section 7.5  Conditions  to Closing.  In the event the Closing does not
occur on the date of  execution  of this  Agreement,  it shall be a condition to
Closing by each party that (i) Buyer,  Prime Medical Services,  Inc., a Delaware
corporation ("Prime"),  or one of Prime's subsidiaries shall have entered into a
Lithotripsy  Agreement  with  CAHS  pursuant  to which  Buyer or one of  Prime's
subsidiaries  will provide  lithotripsy and related  services at Reston Hospital
Center;  (ii) all actions required to be taken by the other party or parties set
forth in this  Article  VII shall  have been  taken at or prior to the  Closing;
(iii) all  documents  to be  delivered  pursuant  to this  Article  VII shall be
satisfactory in form and substance to such party and its counsel;  and (iv) such
party or its counsel shall have received copies of all documents, instruments or
certificates,  executed  or  certified,  whichever  may  be  appropriate,  as is
required by this Article VII. For purposes of this Section, all forms of closing
documents  attached to this Agreement are hereby stipulated by the parties to be
in satisfactory form.

                                  ARTICLE VIII.

                            NON-COMPETITION COVENANTS

         Section 8.1 Seller,  RLA and Ball,  severally  and not jointly,  hereby
agrees that,  until the  expiration  of its  respective  Restriction  Period (as
defined for each below), it will not directly or indirectly,  either through any
kind of  ownership  (other  than  ownership  of  securities  of a publicly  held
corporation of which they own less than five percent of any class of outstanding
securities), or as a principal, agent, employer, advisor, consultant, co-partner
or in any individual or  representative  capacity  whatever,  either for its own
benefit or for the benefit of any other person, firm or corporation, without the
prior written  consent of Buyer,  commit any of the following  acts,  which acts
shall be considered violations of this covenant not to compete:

                  (a)  Lithotripsy  Services.  Except as  permitted  pursuant to
Section  8.3  below,   directly  or  indirectly  provide  lithotripsy  services,
including  without  limitation,   patient  lithotripsy   services,   lithotripsy
management  services,  Lithotripter  leasing,  or similar  lithotripsy  services
(collectively,  "Lithotripsy  Services"),  anywhere  within 50 miles of Columbia
Reston Hospital Center, Reston, Virginia.

                  (b)  Interference  with  Business  Relationships.  Directly or
indirectly request or advise any patient or physician or any other person,  firm
or  corporation  having a  business  relationship  with  Buyer or any of Buyer's
affiliates  (or having a past  business  relationship  with Seller) to withdraw,
curtail,  or cancel its business with Buyer or Buyer's  affiliates,  as the case
may be; or

                  (c) Solicitation of Employees. Directly or indirectly hire any
employee of Buyer or any of Buyer's affiliates or induce or attempt to influence
any  employee  of Buyer or any of Buyer's  affiliates  to  terminate  his or her
employment with such entity.

         Section 8.2 So long as Buyer,  its affiliates,  assignees or successors
continues to provide Lithotripsy Services to Reston Hospital Center, CAHS hereby
agrees that, until the expiration of its Restriction  Period (as defined below),
it will not  directly or  indirectly,  ^ whether  through any kind of  ownership
(other than ownership of securities of a publicly held corporation of which they
own less than five percent of any class of  outstanding  securities),  ^ through
the  actions of its  member  HCA Health  Services  of  Virginia,  Inc.,  or as a
principal, agent, employer, advisor, consultant, co-partner or in any individual
or  representative  capacity  whatever,  either  for its own  benefit or for the
benefit of any other  person,  firm or  corporation,  without the prior  written
consent  of  Buyer,  commit  any of the  following  acts,  which  acts  shall be
considered violations of this covenant not to compete:

                  (a)  Lithotripsy  Services.  Except as otherwise  permitted in
this  subparagraph  (a) and Section 8.3 below,  directly or  indirectly  provide
Lithotripsy  Services  anywhere within the Restriction  Area (defined below) for
the applicable  period. The restriction set forth in this subparagraph (a) shall
not apply to any facility in which CAHS, or any affiliate or successor  thereof,
acquires  after the  Closing a  beneficial  interest  that,  at the time of such
acquisition, provides Lithotripsy Services to the general public and for which ^
annual  gross  revenues  from  Lithotripsy  Services  do not exceed 5% of ^ such
facility's  ^  annual  gross  revenues.  For  purposes  of this  Agreement,  the
"Restriction  Area"  shall mean that area  within the  Commonwealth  of Virginia
which is defined by a driving  distance  radius from  Columbia  Reston  Hospital
Center,  Reston,  Virginia  of 50 miles  for the first  year of the  Restriction
Period, 30 miles for the second year of the Restriction  Period and 20 miles for
each of the third, fourth and fifth years of the Restriction Period.

                  (b)  Interference  with  Business  Relationships.  Directly or
indirectly request or advise any patient or physician or any other person,  firm
or  corporation  having a  business  relationship  with  Buyer or any of Buyer's
affiliates  (or having a past  business  relationship  with Seller) to withdraw,
curtail,  or cancel its business with Buyer or Buyer's  affiliates,  as the case
may be; or

                  (c) Solicitation of Employees. Directly or indirectly hire any
employee of Buyer or any of Buyer's affiliates or induce or attempt to influence
any  employee  of Buyer or any of Buyer's  affiliates  to  terminate  his or her
employment with such entity.

         Section  8.3  Medical  Judgment.  Nothing  in this  Agreement  shall be
construed to limit or infringe upon the professional medical judgment or ability
to practice medicine of any party hereto that is a physician (including, but not
limited to, the selection of appropriate  facilities  for medical care),  and no
exercise of such a party's professional medical judgment or act constituting the
practice of medicine shall be considered a violation of this Agreement.

         Section 8.4 Restriction  Period.  For purposes of this  Agreement,  the
"Restriction  Period" shall begin on the Effective  Date and continue until five
(5) years after the Effective Date.

         Section 8.5  Affiliates.  For purposes of this  Agreement,  the Buyer's
affiliates  shall  include  Prime,  and each of Prime's and  Buyer's  respective
current and future  (throughout  the Restriction  Period),  direct and indirect,
subsidiaries and affiliates.

         Section 8.6 Restrictions  Reasonable.  RLA, CAHS and Ball have reviewed
and carefully  considered the  provisions of this Article VIII and,  having done
so, agree that the  restrictions  set forth  herein (a) are fair and  reasonable
with respect to time,  geographic area and scope, (b) are not unduly burdensome,
and (c) are reasonably  required for the protection of the respective  interests
of the parties.

         Section  8.7  Equitable  Relief.  RLA,  CAHS and Ball each agree that a
violation on its part of any covenant  contained in this Article VIII will cause
the  other  parties  irreparable  damage  for  which  remedies  at  law  may  be
insufficient,  and for that  reason,  each agrees that the other  parties  shall
each,  independently,  be entitled as a matter of right to  equitable  remedies,
including  specific  performance and injunctive relief,  therefor.  The right to
specific  performance and injunctive  relief shall be cumulative and in addition
to whatever other remedies,  at law or in equity,  may be available,  including,
specifically, recovery of additional damages.

                                   ARTICLE IX.

                            INDEMNIFICATION OF BUYER

         Section 9.1  Indemnification  of Buyer. For a period of two years after
the Closing  Date,  Seller and each of the other  Control  Parties,  jointly and
severally, but subject to the limitation set forth below, agree to indemnify and
hold Buyer,  Prime and each of Prime's and Buyer's  respective  representatives,
officers,  directors,  employees,  and  affiliates  (collectively,   the  "Buyer
Indemnified  Parties")  harmless  from and against any and all damages,  losses,
claims,  liabilities,  demands,  charges, suits, penalties,  costs, and expenses
(including court costs and reasonable  attorneys' fees and expenses  incurred in
investigating  and preparing for any  litigation or  proceeding)  (collectively,
"Indemnified  Costs") in connection  with the  commencement  or assertion of any
action,  proceeding,  demand,  or  claim  by  a  third  party  (collectively,  a
"third-party  action") which any of the Buyer  Indemnified  Parties may sustain,
arising  out of, or with  respect to, (i) any breach or default by Seller or any
of  the  other  Control  Parties  of any  of  the  representations,  warranties,
covenants  or  agreements  contained  in  any  Transaction  Document,  (ii)  any
obligations or any  liabilities to any finder,  broker or sales agent engaged or
retained by Seller or another  Control  Party,  (iii) any debts,  liabilities or
obligations of Seller (iv) any debts,  liabilities or obligations of any Control
Parties with respect to the Assets or business  conducted  utilizing the Assets,
(v) any act or omission by Seller that  occurred  prior to the Closing,  or (vi)
any act or omission by any of the Control  Parties that relates to the Assets or
business  conducted  utilizing  the Assets and  occurred  prior to the  Closing.
Regardless of anything  contained in this  Agreement to the  contrary,  Seller's
indemnification  liability  shall be limited to an amount  equal to the purchase
price  and  each of the  Control  Parties'  indemnification  liability  shall be
limited to an amount equal to $24,000.00  for ROBERT BALL,  M.D.,  $1,728,000.00
for RLA and $648,000.00 for CAHS, and in no case shall the collective  liability
of the Seller and Control Parties be greater than the purchase price.

         Section 9.2 Defense of Third-Party  Claims. A Buyer  Indemnified  Party
shall give prompt written notice to Seller and the other Control  Parties of the
commencement  or  assertion of any  third-party  action in respect of which such
Buyer Indemnified Party shall seek indemnification  hereunder. Any failure so to
notify  Seller and the other Control  Parties  shall not relieve  Seller and the
other  Control  Parties  from any  liability  that  they may have to such  Buyer
Indemnified  Party under this Article IX, unless the failure to give such notice
materially and adversely prejudices Seller and the other Control Parties. Seller
and the other  Control  Parties  shall  have the right to assume  control of the
defense of,  settle,  or otherwise  dispose of such  third-party  action on such
terms as they deem appropriate; provided, however, that:

          (a) The Buyer Indemnified Party shall be entitled, at his, her, or its
     own expense, to participate in the defense of such third-party action;

                  (b)  Seller and the other  Control  Parties  shall  obtain the
prior written approval of the Buyer Indemnified  Party, which approval shall not
be  unreasonably  withheld  or  delayed,  before  entering  into or  making  any
settlement,  compromise,  admission,  or  acknowledgment of the validity of such
third-party  action or any liability in respect  thereof if, pursuant to or as a
result of such settlement, compromise, admission, or acknowledgment,  injunctive
or other equitable relief would be imposed against the Buyer  Indemnified  Party
or  if,  in  the  reasonable  opinion  of  the  Buyer  Indemnified  Party,  such
settlement,  compromise,  admission,  or  acknowledgment  would  have a material
adverse effect on its business or, in the case of a Buyer  Indemnified Party who
is a natural person, on his or her assets or interests;

                  (c) Seller and the other Control  Parties shall not consent to
the entry of any judgment or enter into any settlement  that does not include as
an  unconditional  term thereof the giving by each claimant or plaintiff to each
Buyer  Indemnified  Party of a release  from all  liability  in  respect of such
third-party action;

                  (d) Seller and the other Control Parties shall not be entitled
to control  (but shall be  entitled to  participate  at their own expense in the
defense  of),  and the Buyer  Indemnified  Party  shall be entitled to have sole
control   over,   the  defense  or   settlement,   compromise,   admission,   or
acknowledgment  of any  third-party  action (i) as to which Seller and the other
Control  Parties fail to assume the defense  within a reasonable  length of time
after  giving  notice to Seller  and the other  Control  Parties  or (ii) to the
extent the  third-party  action seeks an order,  injunction,  or other equitable
relief  against  the  Buyer  Indemnified  Party  which,  if  successful,   would
materially  adversely  affect the  business,  operations,  assets,  or financial
condition of the Buyer  Indemnified  Party;  provided,  however,  that the Buyer
Indemnified  Party  shall  make  no  settlement,   compromise,   admission,   or
acknowledgment  which would give rise to  liability on the part of Seller or the
other Control  Parties without the prior written consent of Seller and the other
Control Parties;

                  (e) Seller and the other  Control  Parties shall make payments
of all amounts required to be made pursuant to the foregoing  provisions of this
Article  IX to or for the  account of the Buyer  Indemnified  Party from time to
time  promptly  upon  receipt  of bills or  invoices  relating  thereto  or when
otherwise due and payable,  provided that the Buyer Indemnified Party has agreed
in writing to reimburse Seller and the other Control Parties for the full amount
of such payments if the Buyer Indemnified Party is ultimately  determined not to
be entitled to such indemnification; and

                  (f) The parties hereto shall extend reasonable  cooperation in
connection with the defense of any  third-party  action pursuant to this Article
IX and, in connection therewith,  shall furnish such records,  information,  and
testimony and attend such conferences,  discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.

                                   ARTICLE X.

                               INDEMNIFICATION OF

                               THE CONTROL PARTIES

         Section 10.1  Indemnification  of Seller and the other Control Parties.
For a period of one year after the Closing  Date,  Buyer agrees to indemnify and
hold harmless Seller and the other Control Parties, and, where applicable, their
respective   partners,   officers,   directors,    employees,   and   affiliates
(collectively,  the "Seller  Indemnified  Parties") from and against any and all
Indemnified  Costs in  connection  with the  commencement  or  assertion  of any
third-party  action,  which any of the Seller  Indemnified  Parties may sustain,
arising out of, or with respect to, (i) any breach or default by Buyer of any of
the  representations,  warranties,  covenants  or  agreements  contained  in any
Transaction Document,  (ii) any obligations or liabilities to any finder, broker
or sales  agent  engaged or  retained  by Buyer or (iii) any act or  omission by
Buyer that  relates to the Assets and occurs after the  Closing.  Regardless  of
anything  contained in this Agreement to the contrary,  Buyer's  indemnification
liability  to each  Control  Party  shall  be  limited  to an  amount  equal  to
$24,000.00 for ROBERT BALL,  M.D.,  $1,728,000.00  for RLA and  $648,000.00  for
CAHS, and in no case shall the collective liability of the Buyer be greater than
the purchase price.

         Section 10.2 Defense of Third-Party  Claims. A Seller Indemnified Party
shall give prompt  written notice to Buyer of the  commencement  or assertion of
any third-party  action in respect of which such Seller  Indemnified Party shall
seek indemnification hereunder. Any failure so to notify Buyer shall not relieve
Buyer from any liability that it may have to such Seller Indemnified Party under
this Article X unless the failure to give such notice  materially  and adversely
prejudices  Buyer.  Buyer shall have the right to assume  control of the defense
of, settle, or otherwise dispose of such third-party  action on such terms as it
deems appropriate; provided, however, that:

          (a) The Seller  Indemnified  Party shall be entitled,  at his, her, or
     its own expense, to participate in the defense of such third-party action;

                  (b) Buyer  shall  obtain  the prior  written  approval  of the
Seller Indemnified  Party, which approval shall not be unreasonably  withheld or
delayed, before entering into or making any settlement,  compromise,  admission,
or acknowledgment of the validity of such third-party action or any liability in
respect thereof if, pursuant to or as a result of such  settlement,  compromise,
admission,  or  acknowledgment,  injunctive or other  equitable  relief would be
imposed against the Seller Indemnified Party or if; in the reasonable opinion of
the  Seller  Indemnified  Party,  such  settlement,  compromise,  admission,  or
acknowledgment  would have a material  adverse effect on its business or, in the
case of a Seller Indemnified Party who is a natural person, on his or her assets
or interests;

                  (c) Buyer  shall not  consent to the entry of any  judgment or
enter into any settlement that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to each Seller  Indemnified  Party of a
release from all liability in respect of such third-party action; and

                  (d) Buyer  shall not be  entitled  to  control  (but  shall be
entitled to  participate  at its own expense in the defense  of), and the Seller
Indemnified  Party shall be entitled to have sole control  over,  the defense or
settlement,  compromise,  admission, or acknowledgment of any third-party action
(i) as to which Buyer fails to assume the defense within a reasonable  length of
time or (ii) to the extent the third-party action seeks an order, injunction, or
other  equitable  relief  against  the  Seller   Indemnified   Party  which,  if
successful, would materially adversely affect the business,  operations, assets,
or financial condition of the Seller Indemnified Party; provided,  however, that
the Seller Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment  which would give rise to liability on the part of Buyer  without
the prior written consent of Buyer.

                  (e) Buyer shall make  payments  of all amounts  required to be
made  pursuant  to the  foregoing  provisions  of this  Article  X to or for the
account of the Seller  Indemnified Party from time to time promptly upon receipt
of bills  or  invoices  relating  thereto  or when  otherwise  due and  payable,
provided  that the Seller  Indemnified  Party has agreed in writing to reimburse
Buyer for the full amount of such  payments if the Seller  Indemnified  Party is
ultimately determined not to be entitled to such indemnification.

                  (f) The parties hereto shall extend reasonable  cooperation in
connection with the defense of any third-party action pursuant to this Article X
and, in  connection  therewith,  shall furnish such  records,  information,  and
testimony and attend such conferences,  discovery proceedings, hearings, trials,
and appeals as may be reasonably requested.

                                   ARTICLE XI

                                     GENERAL

         Section 11.1 Costs.  Each party hereto  agrees to pay their  respective
costs and expenses incurred by them in the negotiation, preparation, performance
of and compliance  with all  agreements,  covenants and conditions  contained in
each Transaction Document to which it is a party, including, but not limited to,
their respective attorney's fees and accountant's fees.

         Section 11.2 No Brokers. Each party represents that no brokers,  agents
or finders are  involved in this  transaction  and each agrees to hold the other
harmless  from  liability  for  any  brokerage,  agency,  or  finder's  fees  or
commissions  with  respect  to  which  any  such  party  may  have  incurred  an
obligation.

         Section 11.3  Assignability.  This Agreement may not be assigned by any
party  hereto  without the prior  written  consent of all other  parties to this
Agreement,  except that Buyer may,  upon written  notice to Seller and the other
Control Parties, assign its rights pursuant to the non-competition covenants set
forth in Article  VIII hereof  without  the  written  consent of any other party
hereto,  provided that any such  assignment is made in connection with a sale or
transfer  of  (i)  all  or  substantially  all  of  the  Assets,   (ii)  all  or
substantially  all of the  business  or assets of Buyer  (including  the  assets
required to provide  Lithotripsy  Services to Reston Hospital Center),  (iii) at
least 50% of the  outstanding  voting stock of Buyer or consummation of a merger
or other  transaction  that  results in a change of control of Buyer,  or (iv) ^
Buyer's or Buyer's  affiliates' ^  obligations  under the  lithotripsy  services
agreement referred to in Section 7.5.

         Section 11.4 Entire Agreement. This Agreement and the other Transaction
Documents, together with all schedules and exhibits referred to herein, which by
this  reference  are hereby  incorporated  herein and made a part hereof for all
purposes,  contain the entire agreement  between the parties hereto with respect
to the  transactions  contemplated  herein,  and  supersede  all written or oral
negotiations,  commitments, warranties or representations, and cannot be altered
or otherwise  amended except pursuant to an instrument in writing signed by each
of the parties hereto. For all purposes of this Agreement, in lieu of physically
attaching referenced exhibits to this Agreement, such exhibits may be signed and
approved by the parties hereto and delivered concurrently with the execution and
delivery of this Agreement and deemed attached hereto.

         Section  11.5  Notices.  All  notices,   requests,  demands  and  other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if personally  delivered or mailed by certified or  registered  mail,
postage prepaid to:

         If to Buyer:               Prime Lithotripsy Services, Inc.
                                    1301 Capital of Texas Highway
                                    Suite C-300
                                    Austin, TX 78746
                                    Attn: Cheryl L. Williams

                  With Copy to:     Akin, Gump, Strauss, Hauer & Feld L.L.P.
                                            816 Congress Avenue, Suite 1900
                                            Austin, TX 78701
                                            Attn: Tim LaFrey

         If to Seller:              Reston Hospital Lithotripter Joint Venture
                                    1850 Town Center Parkway
                                    Reston, Virginia  22090

                  With Copy to:     Michael P. Logan, Esquire
                                            Grad, Logan & Klewans, P.C.
                                            1421 Prince Street, Suite 320
                                            Alexandria, Virginia 22314

         If to RLA:                 Reston Lithotripsy Associates, Inc.
                                    1850 Town Center Parkway
                                    Reston, VA 22090
                                    Attn: A. Daniel Laurent, M.D.

                  With Copy to:     Michael P. Logan, Esquire
                                            Grad, Logan & Klewans, P.C.
                                            1421 Prince Street, Suite 320
                                            Alexandria, Virginia 22314

         If to CAHS:                Reston Hospital Center
                                    1850 Town Center Parkway
                                    Reston, VA 22090
                                    Attn: William A. Adams, CEO

                  With Copy to:     McGuire, Woods, Battle & Boothe LLP
                                            One James Center
                                            901 East Cary Street
                                            Richmond, Virginia 23219
                                            Attn: Thomas J. Stallings

         If to ROBERT BALL, M.D.: Robert Ball, M.D.
                                             7005 Symphony Court
                                             McLean, Virginia 22101

         Section 11.6  Waiver.  The failure of any party at any time or times to
require  performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same.  Except as otherwise  provided  herein,  no
waiver by any party of any  condition,  or of any breach of any term,  covenant,
representation  or  warranty  contained  in this  Agreement,  in any one or more
instances,  shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach, or a waiver of any other condition or breach of
any other term, covenant, representation or warranty.

         Section 11.7  Headings.  The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and shall in
no way restrict or otherwise modify any of the terms or provisions hereof.

         Section 11.8 Materiality. The term "material" as used in this Agreement
is hereby defined to mean all accounting  adjustments,  costs, values,  damages,
deficiencies,  assessments  or expenses  with respect to the value of the Assets
and  businesses  to be purchased by Buyer  hereunder  or the  liabilities  to be
assumed by Buyer hereunder,  which either  separately or in the aggregate exceed
the sum of $10,000.

         Section 11.9 Counterparts.  This Agreement,  and each other Transaction
Document may be executed simultaneously in multiple counterparts,  each of which
when so executed shall be deemed to be an original,  and such counterparts shall
together constitute one and the same instrument.

         Section  11.10  Severance.  Should  any  portion of this  Agreement  be
declared  invalid and  unenforceable,  then such  portion  shall be deemed to be
severed from this Agreement and shall not affect the remainder thereof.

         Section 11.11 Extension of Benefits. All of the terms and conditions of
this  Agreement  shall be binding upon and inure to the benefit of, and shall be
enforceable  by,  the  parties  hereto  and  their  respective  heirs,  personal
representatives,  executors,  successors and assigns; provided, however, that in
the event that CAHS is dissolved, the terms and conditions of this Agreement, if
still applicable, shall solely be binding upon, and inure to the benefit of, HCA
Health Services of Virginia, Inc., a Virginia corporation and a member of CAHS.

         Section 11.12 Tax Advice. Each party hereto acknowledges that they have
consulted with their respective tax advisors in connection with the transactions
contemplated by this  Agreement,  and each party hereto  acknowledges  that they
have not relied  upon any  advice or  opinions  given by the other  party or its
attorneys or agents,  nor has any party hereto  guaranteed  any  particular  tax
consequences in connection with the transactions contemplated by this Agreement.

         Section 11.13  Survival of  Representations,  Warranties and Covenants.
All of the representations, warranties and covenants contained in this Agreement
shall survive the Closing Date for a period of two years.

         IN WITNESS WHEREOF, the parties have executed and delivered,  or caused
this Agreement to be executed and delivered by their  respective duly authorized
officers, on the day and year first above written.

BUYER:                     PRIME LITHOTRIPSY SERVICES, INC.

                                    By:/s/ Cheryl Williams
                                    ---------------------
                                    Printed Name: Cheryl Williams
                                    Title: Chief Financial Officer

SELLER:                    RESTON HOSPITAL LITHOTRIPTER
                                    JOINT VENTURE
                           Reston Lithotripsy Associates, Inc.
                           General Partner

                                    By: /s/ Michael R. Hardy, President
                                    ----------------------------------
                                    Printed Name: Michael R. Hardy, President
                                    Title: President, Reston Lithotripsy
                                           Associates, Inc.

RLA:                                RESTON LITHOTRIPSY ASSOCIATES, INC.

                                    By: /s/ Michael R. Hardy
                                    ------------------------
                                    Printed Name: Michael R. Hardy
                                    Title: President

CAHS:                      COLUMBIA ARLINGTON HEALTHCARE SYSTEM, L.L.C.

                                    By:/s/ William A. Adams
                                    -----------------------
                                    Printed Name: William A. Adams
                                    Title: COO/Authorized Agent

BALL:

                                    /s/ Robert Ball, M.D.
                                    -------------------------------------
                                    ROBERT BALL, M.D.

<PAGE>

                                 Schedule II(e)

                        Non-Assignable Permits of Seller

Business and Professional Occupations License issued by the County of
Fairfax, Virginia.

<PAGE>

                                 Schedule II(f)

                               List of Procedures

                           Year                          Procedures

                           1996                               506

                           1997                               443

                           1998                               534

                           1999, up to May 31, 1999           228

                                Maryland Patients

                           Year                             Patients

                           1998                                 8

                           1999, up to June 29, 1999            7

<PAGE>

                                                                  Schedule II(m)

                                Ownership of RLA

  Amer Z. Al-Juberi, M.D.
  Janice Arnold, M.D.
  John J. Basile, M.D.
  Michael E. Beall, M.D.
  Myron Berger, M.D.
  Robert M. Berger, M.D.
  Mark Bilowus, M.D.
  Giovanni DiSandro, M.D.
  William Glover, Jr., M.D.
  Michael R. Hardy, M.D.
  A. Daniel Laurent, M.D.
  J. Martin Lebowitz, M.D.
  EK Seng Lou, M.D.
  Jeff Pan, M.D.
  Philip A. St. Raymond, M.D.
  William Reha, M.D.
  Domingo Suatengco, M.D.
  Anthony Vara, M.D.

<PAGE>

                                   Schedule V

                          Allocation of Purchase Price

                                     <PAGE>

                                    EXHIBIT A

                  Form of Assignment and Warranty Bill of Sale

<PAGE>

                                    EXHIBIT B

                          Form of Non-compete Agreement

                            Non-competition Agreement

         THIS NON-COMPETITION AGREEMENT (this "Agreement") entered into this ___
day of July, 1999 (the  "Effective  Date"),  by the undersigned  individual (the
"Restricted Party") for the benefit of Prime Medical Services,  Inc., a Delaware
corporation (the "Company") and the Company's affiliates.

         WHEREAS,  the  Company,  through a  subsidiary,  has  acquired  certain
lithotripsy  equipment from the Restricted  Party and certain  affiliates of the
Restricted Party; and

         WHEREAS,  as a material  inducement for the Company's  purchase of such
equipment, the Restricted Party has agreed, among other things, not to engage in
certain competitive  activities,  or assist or participate with any other person
or entity engaging in such activities, as provided herein.

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

         1. Agreement.  The Restricted  Party hereby  covenants and agrees that,
until  the  expiration  of  the  Restriction  Period  (as  defined  below),  the
Restricted  Party will not,  directly or indirectly,  either through any kind of
ownership  (other than ownership of securities of a publicly held corporation of
which the  Restricted  Party  owns less than five  percent  (5%) of any class of
outstanding  securities),   or  as  a  principal,   agent,  employer,   advisor,
consultant, co-partner or in any individual or representative capacity whatever,
either for the  Restricted  Party's  own benefit or for the benefit of any other
person,  corporation or other entity,  without the prior written  consent of the
Company,  commit any of the following  acts  described in paragraphs (a) through
(c) below,  which acts shall be  considered  violations  of this covenant not to
compete:

         (a) Lithotripsy Services. Except as permitted pursuant to paragraph (d)
below,  directly or indirectly provide lithotripsy  services,  including without
limitation,  patient  lithotripsy  services,  lithotripsy  management  services,
lithotripter  leasing,  or similar lithotripsy  services,  anywhere within fifty
(50) miles of Columbia  Reston  Hospital  Center in Reston,  Virginia.  The area
described  in  the  preceding  sentence  is  hereinafter   referred  to  as  the
"Restricted Area."

         (b) Interference  with Business  Relationships.  Directly or indirectly
request or advise any patient or physician or any other person,  corporation  or
other  entity  having a  business  relationship  with the  Company or any of the
Company's  affiliates  to withdraw,  curtail,  or cancel its business  with such
entity.

         (c) Solicitation of Employees. Directly or indirectly hire any employee
of the  Company  or any of the  Company's  affiliates  or induce or  attempt  to
influence  any  employee of the Company or any of the  Company's  affiliates  to
terminate his or her employment with such entity.

         (d) Medical  Judgment.  Nothing in this Agreement shall be construed to
limit or infringe upon the professional  medical judgment or ability to practice
medicine  of the  Restricted  Party,  if the  Restricted  Party  is a  physician
(including,  but not limited to, the  selection of  appropriate  facilities  for
medical  care),  and  no  exercise  of  professional  medical  judgment  or  act
constituting  the practice of medicine  shall be  considered a violation of this
Agreement.

        2. Restriction Period. For purposes of this Agreement,  the "Restriction
Period" shall begin on the  Effective  Date and continue  until five (5) years
after the Effective Date.

        3. General. For purposes of this Agreement,  the Company's affiliates
shall  include  its  current  and future  (throughout  the  Restriction  Period)
subsidiaries  and  affiliates.  The Restricted  Party has reviewed and carefully
considered the provisions of this Agreement and, having done so, agrees that the
restrictions  set forth herein (a) are fair and reasonable with respect to time,
geographic area and scope, (b) are not unduly burdensome, and (c) are reasonably
required for the protection of the  legitimate  interests of the Company and its
affiliates.  The  Restricted  Party  agrees that a violation  on its part of any
covenant  contained in this  Agreement will cause the Company and its affiliates
irreparable  damage for which remedies at law may be insufficient,  and for that
reason, agrees that the Company and its affiliates shall each,  independently be
entitled  as a  matter  of  right  to  equitable  remedies,  including  specific
performance and injunctive relief,  therefor.  The right to specific performance
and  injunctive  relief shall be  cumulative  and in addition to whatever  other
remedies,  at  law or in  equity,  may be  available,  including,  specifically,
recovery of additional damages.

         4.       Miscellaneous.
         (a)  Collateral  Agreements,  Amendments,  and Waivers.  This Agreement
(together with the documents  delivered  pursuant  hereto)  supersedes all prior
documents,  understandings,  and agreements,  oral or written, relating to these
transactions  and  constitutes the entire  understanding  among the parties with
respect to the subject  matter  hereof.  Any  modification  or amendment  to, or
waiver of, any provision of this Agreement (or any document  delivered  pursuant
to this Agreement unless otherwise  expressly provided therein) may be made only
by an instrument in writing executed by the Company.

         (b)      Expenses.  The Restricted  Party shall pay all costs and
expenses incurred by it in connection  with this Agreement, including the fees
and disbursements of its counsel.
         (c) Invalid  Provisions.  If any provision of this Agreement is held to
be  illegal,  invalid,  or  unenforceable  under  present or future  laws,  such
provision  shall be fully  severable,  this  Agreement  shall be  construed  and
enforced as if such  illegal,  invalid,  or  unenforceable  provision  had never
comprised  a part  of  this  Agreement,  and the  remaining  provisions  of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal,  invalid,  or  unenforceable  provision or by its  severance  from this
Agreement.

         (d)  Waiver.  No  failure  or  delay  on the  part  of the  Company  in
exercising  any  right,  power,  or  privilege  hereunder  or  under  any of the
documents  delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege;  nor shall any single or partial exercise of
any such  right,  power,  or  privilege  preclude  any other or future  exercise
thereof or the exercise of any other right, power or privilege.

         (e)  Construction.  This  Agreement  and any  documents or  instruments
delivered  pursuant hereto or in connection  herewith shall be construed without
regard to the identity of the person who drafted the various  provisions  of the
same.  Each and every  provision of this Agreement and such other  documents and
instruments shall be construed as though all of the parties participated equally
in the drafting of the same. Consequently, the Restricted Party acknowledges and
agrees that any rule of construction  that a document is to be construed against
the  drafting  party shall not be  applicable  either to this  Agreement or such
other documents and instruments.

         (f)  Forum.   The   Restricted   Party  consents  to  the  in  personam
jurisdiction  of any state or federal court in  Alexandria,  Virginia and waives
any objection to the venue of any such suit, action or proceeding.  In the event
that the Restricted Party institutes a proceeding  involving this Agreement in a
jurisdiction outside Alexandria,  Virginia, the Restricted Party shall indemnify
the Company and its  affiliates for any losses and expenses that may result from
the failure to institute  such  proceeding  only in a state or federal  court in
Alexandria,  Virginia,  including  without  limitation any  additional  expenses
incurred as a result of litigating in another  jurisdiction,  such as reasonable
fees and expenses of local counsel and travel and lodging  expenses for parties,
witnesses, experts and support personnel.

                            [Signature page follows]

<PAGE>

                                 SIGNATURE PAGE

                                       TO

                            NON-COMPETITION AGREEMENT

         IN  WITNESS  WHEREOF,  the  Restricted  Party  has duly  executed  this
Agreement as of the day and year first above written.

                                RESTRICTED PARTY

                                   Signature:

                                  Printed Name:

<PAGE>

                                    EXHIBIT C

                          Form of Non-compete Agreement

                            Non-competition Agreement

         THIS NON-COMPETITION AGREEMENT (this "Agreement") entered into this ___
day of July, 1999 (the  "Effective  Date"),  by the undersigned  individual (the
"Restricted Party") for the benefit of Prime Medical Services,  Inc., a Delaware
corporation (the "Company") and the Company's affiliates.

         WHEREAS,  the  Company,  through a  subsidiary,  has  acquired  certain
lithotripsy  equipment from the Restricted  Party and certain  affiliates of the
Restricted Party; and

         WHEREAS,  as a material  inducement for the Company's  purchase of such
equipment, the Restricted Party has agreed, among other things, not to engage in
certain competitive  activities,  or assist or participate with any other person
or entity engaging in such activities, as provided herein.

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

         1. Agreement.  The Restricted  Party hereby  covenants and agrees that,
until  the  expiration  of  the  Restriction  Period  (as  defined  below),  the
Restricted  Party will not,  directly or indirectly,  either through any kind of
ownership  (other than ownership of securities of a publicly held corporation of
which the  Restricted  Party  owns less than five  percent  (5%) of any class of
outstanding  securities),   or  as  a  principal,   agent,  employer,   advisor,
consultant, co-partner or in any individual or representative capacity whatever,
either for the  Restricted  Party's  own benefit or for the benefit of any other
person,  corporation or other entity,  without the prior written  consent of the
Company,  commit any of the following  acts  described in paragraphs (a) through
(c) below,  which acts shall be  considered  violations  of this covenant not to
compete:

         (a) Lithotripsy Services. Except as permitted pursuant to paragraph (d)
below,  directly or indirectly provide lithotripsy  services,  including without
limitation,  patient  lithotripsy  services,  lithotripsy  management  services,
lithotripter  leasing,  or similar lithotripsy  services,  anywhere within fifty
(50) miles of Columbia  Reston  Hospital  Center in Reston,  Virginia.  The area
described  in  the  preceding  sentence  is  hereinafter   referred  to  as  the
"Restricted Area." Notwithstanding the foregoing, the passive ownership interest
by  Restricted  Party  in that  certain  lithotripsy  partnership  described  on
Exhibit-A  hereto  shall not be deemed a violation by  Restricted  Party of this
paragraph (a); provided,  however, that Restricted Party agrees that, during the
term of this  Agreement,  Restricted  Party shall not increase its  ownership in
such lithotripsy partnership.

         (b) Interference  with Business  Relationships.  Directly or indirectly
request or advise any patient or physician or any other person,  corporation  or
other  entity  having a  business  relationship  with the  Company or any of the
Company's  affiliates  to withdraw,  curtail,  or cancel its business  with such
entity.

         (c) Solicitation of Employees. Directly or indirectly hire any employee
of the  Company  or any of the  Company's  affiliates  or induce or  attempt  to
influence  any  employee of the Company or any of the  Company's  affiliates  to
terminate his or her employment with such entity.

         (d) Medical  Judgment.  Nothing in this Agreement shall be construed to
limit or infringe upon the professional  medical judgment or ability to practice
medicine  of the  Restricted  Party,  if the  Restricted  Party  is a  physician
(including,  but not limited to, the  selection of  appropriate  facilities  for
medical  care),  and  no  exercise  of  professional  medical  judgment  or  act
constituting  the practice of medicine  shall be  considered a violation of this
Agreement.

         2.       Restriction  Period. For purposes of this Agreement,  the
"Restriction  Period" shall begin on the Effective Date and continue until five
(5) years after the Effective Date.
         3.       General.  For purposes of this Agreement,  the Company's
affiliates  shall  include its current and future  (throughout  the  Restriction
Period)  subsidiaries  and  affiliates.The  Restricted  Party has  reviewed  and
carefully  considered  the  provisions of this  Agreement  and,  having done so,
agrees that the  restrictions  set forth herein (a) are fair and reasonable with
respect to time,  geographic area and scope, (b) are not unduly burdensome,  and
(c) are reasonably  required for the  protection of the legitimate  interests of
the Company and its affiliates.
         The  Restricted  Party  agrees  that a  violation  on its  part  of any
covenant  contained in this  Agreement will cause the Company and its affiliates
irreparable  damage for which remedies at law may be insufficient,  and for that
reason, agrees that the Company and its affiliates shall each,  independently be
entitled  as a  matter  of  right  to  equitable  remedies,  including  specific
performance and injunctive relief,  therefor.  The right to specific performance
and  injunctive  relief shall be  cumulative  and in addition to whatever  other
remedies,  at  law or in  equity,  may be  available,  including,  specifically,
recovery of additional damages.

         4.       Miscellaneous.
         (a)  Collateral  Agreements,  Amendments,  and Waivers.  This Agreement
(together with the documents  delivered  pursuant  hereto)  supersedes all prior
documents,  understandings,  and agreements,  oral or written, relating to these
transactions  and  constitutes the entire  understanding  among the parties with
respect to the subject  matter  hereof.  Any  modification  or amendment  to, or
waiver of, any provision of this Agreement (or any document  delivered  pursuant
to this Agreement unless otherwise  expressly provided therein) may be made only
by an instrument in writing executed by the Company.

         (b) Expenses.  The Restricted  Party shall pay all costs and expenses
incurred by it in connection with this  Agreement,  including the fees and
disbursements of its counsel.

         (c)Invalid  Provisions.  If any provision of this Agreement is held to
be  illegal,  invalid,  or  unenforceable  under  present or future  laws,  such
provision  shall be fully  severable,  this  Agreement  shall be  construed  and
enforced as if such  illegal,  invalid,  or  unenforceable  provision  had never
comprised  a part  of  this  Agreement,  and the  remaining  provisions  of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal,  invalid,  or  unenforceable  provision or by its  severance  from this
Agreement.

         (d)  Waiver.  No  failure  or  delay  on the  part  of the  Company  in
exercising  any  right,  power,  or  privilege  hereunder  or  under  any of the
documents  delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege;  nor shall any single or partial exercise of
any such  right,  power,  or  privilege  preclude  any other or future  exercise
thereof or the exercise of any other right, power or privilege.

         (e)  Construction.  This  Agreement  and any  documents or  instruments
delivered  pursuant hereto or in connection  herewith shall be construed without
regard to the identity of the person who drafted the various  provisions  of the
same.  Each and every  provision of this Agreement and such other  documents and
instruments shall be construed as though all of the parties participated equally
in the drafting of the same. Consequently, the Restricted Party acknowledges and
agrees that any rule of construction  that a document is to be construed against
the  drafting  party shall not be  applicable  either to this  Agreement or such
other documents and instruments.

         (f)  Forum.   The   Restricted   Party  consents  to  the  in  personam
jurisdiction  of any state or federal court in  Alexandria,  Virginia and waives
any objection to the venue of any such suit, action or proceeding.  In the event
that the Restricted Party institutes a proceeding  involving this Agreement in a
jurisdiction outside Alexandria,  Virginia, the Restricted Party shall indemnify
the Company and its  affiliates for any losses and expenses that may result from
the failure to institute  such  proceeding  only in a state or federal  court in
Alexandria,  Virginia,  including  without  limitation any  additional  expenses
incurred as a result of litigating in another  jurisdiction,  such as reasonable
fees and expenses of local counsel and travel and lodging  expenses for parties,
witnesses, experts and support personnel.

                            [Signature page follows]

<PAGE>

                                 SIGNATURE PAGE

                                       TO

                            NON-COMPETITION AGREEMENT

         IN  WITNESS  WHEREOF,  the  Restricted  Party  has duly  executed  this
Agreement as of the day and year first above written.

                                RESTRICTED PARTY

                                   Signature:

                                  Printed Name:

<PAGE>

                                    EXHIBIT A

                          TO NON-COMPETITION AGREEMENT

                       DESCRIPTION OF EXISTING INVESTMENT

<PAGE>AGREEMENT OF LIMITED PARTNERSHIP

                                       OF

                           MOBILE KIDNEY STONE CENTERS
                             OF CALIFORNIA III, L.P.

<PAGE>

                                    AGREEMENT

                             OF LIMITED PARTNERSHIP

                                       OF

               MOBILE KIDNEY STONE CENTERS OF CALIFORNIA III, L.P.
               ---------------------------------------------------

                                TABLE OF CONTENTS

         1.       FORMATION..................................................1
                  ---------

         2.       NAME.......................................................1
                  ----

         3.       OFFICES....................................................1
                  -------

         4.       PURPOSE....................................................2
                  -------

         5.       TERM.......................................................2
                  ----

         6.       CERTAIN DEFINED TERMS......................................2
                  ---------------------

         7.       CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS...............6
                  --------------------------------------------

         8.       GUARANTIES.................................................7
                  ----------

         9.       CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF CERTAIN LIMITED
                  ----------------------------------------------------------
                  PARTNERS...................................................7
                  --------

         10.      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GENERAL
                  --------------------------------------------------------
                  PARTNER....................................................7
                  -------

         11.      ADMISSION OF LIMITED PARTNERS..............................8
                  -----------------------------

         12.      CAPITAL ACCOUNTS...........................................9
                  ----------------

         13.      ALLOCATIONS...............................................10
                  -----------

         14.      DISTRIBUTIONS.............................................13
                  -------------

         l5.      RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................14
                  ------------------------------------------

         16.      LIMITED LIABILITY.........................................16
                  -----------------

                                                         i

<PAGE>

         17.      TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS...........16
                  -----------------------------------------------

         18.      OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS ON
                  -----------------------------------------------------
                  CERTAIN EVENTS............................................20
                  --------------

         19.      SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL PARTNER'S
                  -----------------------------------------------------------
                  INTEREST..................................................26
                  --------

         20.      TERMINATION OF THE SERVICES OF THE GENERAL PARTNER........27
                  --------------------------------------------------

         21.      MANAGEMENT AND OPERATION OF BUSINESS......................27
                  ------------------------------------

         22.      RESERVES..................................................30
                  --------

         23.      INDEMNIFICATION AND EXCULPATION OF THE GENERAL PARTNER
                  ------------------------------------------------------
                   .........................................................30

         24.      DISSOLUTION OF THE PARTNERSHIP............................31
                  ------------------------------

         25.      DISTRIBUTION UPON DISSOLUTION.............................32
                  -----------------------------

         26.      BOOKS OF ACCOUNT, RECORDS AND REPORTS.....................33
                  -------------------------------------

         27.      NOTICES...................................................34
                  -------

         28.      AMENDMENTS................................................34
                  ----------

         29.      LIMITATIONS ON AMENDMENTS.................................34
                  -------------------------

         30.      MEETINGS, CONSENTS AND VOTING.............................35
                  -----------------------------

         31.      SUBMISSIONS TO THE LIMITED PARTNERS.......................35
                  -----------------------------------

         32.      ADDITIONAL DOCUMENTS......................................35
                  --------------------

         33.      SURVIVAL OF RIGHTS........................................36
                  ------------------

         34.      INTERPRETATION AND GOVERNING LAW..........................36
                  --------------------------------

         35.      SEVERABILITY..............................................36
                  ------------

         36.      AGREEMENT IN COUNTERPARTS.................................36
                  -------------------------

                                                        ii

<PAGE>

         37.      THIRD PARTIES.............................................36
                  -------------

         38.      POWER OF ATTORNEY.........................................36
                  -----------------

         39.      ARBITRATION...............................................37
                  -----------

         40.      CREDITORS.................................................37
                  ---------

                                    SCHEDULES

Schedule A  -  Schedule of Partnership Interests

                                                        iii

<PAGE>

THE  LIMITED  PARTNERSHIP  INTERESTS  REPRESENTED  BY THIS  LIMITED  PARTNERSHIP
AGREEMENT HAVE NOT BEEN REGISTERED  WITH THE SECURITIES AND EXCHANGE  COMMISSION
UNDER THE  SECURITIES ACT OF 1933, AS AMENDED,  UNDER THE  CALIFORNIA  CORPORATE
SECURITIES LAW OF 1968, AS AMENDED,  OR REGISTERED UNDER SIMILAR LAWS OR ACTS OF
OTHER  STATES IN RELIANCE  UPON  EXEMPTIONS  UNDER SUCH LAWS.  IN  ADDITION,  NO
TRANSFERS OF LIMITED  PARTNERSHIP  INTERESTS MAY BE MADE WITHOUT COMPLIANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE 17 BELOW.

                                    AGREEMENT

                             OF LIMITED PARTNERSHIP

                                       OF

                           MOBILE KIDNEY STONE CENTERS
                             OF CALIFORNIA III, L.P.

                  THIS AGREEMENT OF LIMITED  PARTNERSHIP  (the  "Agreement")  is
made as of August  12,  1999,  by and  among  MOBILE  KIDNEY  STONE  CENTERS  OF
CALIFORNIA,  LTD. I, a California limited  partnership (the "General  Partner"),
and persons listed on Schedule A attached hereto as the Limited Partners.

                  1.       FORMATION.
                           ---------

                  The  Partnership  was  formed  pursuant  to the  filing in the
Office of the Secretary of State of California on or about February 2, 1999 of a
Certificate of Limited Partnership in accordance with the provisions of the Act.

                  2.       NAME.
                           ----

                    2.1 The name of the  Partnership  is  "Mobile  Kidney  Stone
               Centers of California III, L.P."

                  2.2 The  Partnership  business  shall be conducted  under such
names as the General  Partner may from time to time deem necessary or advisable,
provided that appropriate amendments to this Agreement and all necessary filings
under  applicable  assumed  or  fictitious  name  statutes  or the Act are first
obtained.

                  3.       OFFICES.
                           -------

                  3.1 The initial  principal office of the Partnership  shall be
at 1301 Capital of Texas Highway,  Suite C-300,  Austin, Texas 78746, or at such
other place as the General  Partner may from time to time designate by notice to
the Limited Partners. Pursuant to the Act, the Partnership will

                                                        -1-

<PAGE>

also maintain certain  Partnership records in California at a location set forth
in the Partnership's Certificate of Limited Partnership (the "Records Office").

                  3.2 The Partnership  may have such  additional  offices as the
General Partner may, from time to time, deem necessary or advisable.

                  4.       PURPOSE.
                           -------

                  The purpose and business of the  Partnership  shall be: (i) to
acquire and operate one or more transportable  lithotripters (or any other renal
stone  treatment  equipment)  for the  treatment  of renal  stones  primarily in
California in the counties of Alameda, Contra Costa, Merced, Nevada, Placer, San
Joaquin and Stanislaus,  or in such other location(s) as the General Partner may
determine,  in  its  sole  discretion,  to be  in  the  best  interests  of  the
Partnership;  (ii) to acquire  and  operate  in the future any other  urological
device or equipment; provided, that such equipment as of the date of acquisition
by the  Partnership  has received FDA  premarket  approval;  (iii) to acquire an
interest  in any  business  entity,  including,  without  limitation,  a limited
partnership,  limited  liability  company or  corporation,  that  engages in any
business activity described in this Article 4; and (iv) to engage in any and all
activities incidental or related to the foregoing, upon and subject to the terms
and conditions of this Agreement.

                  5.       TERM.
                           ----

                  The Partnership  shall terminate on December 31, 2049,  unless
sooner terminated as herein provided.

                  6.       CERTAIN DEFINED TERMS.
                           ---------------------

                  Certain terms used in this Agreement  shall have the following
meanings:

                    Act.   The  Act  means  the   California   Revised   Limited
               Partnership Act, as then in effect.

                    Affiliate.  An  Affiliate  is (i) any  person,  partnership,
               corporation,   association  or  other  legal  entity   ("person")
               directly or indirectly controlling, controlled by or under common
               control  with  another   person;   (ii)  any  person   owning  or
               controlling  10% or more of the  outstanding  voting  interest of
               such other person; (iii) any officer, director or partner of such
               person; and (iv) if such other person is an officer,  director or
               partner, any entity for which such person acts in such capacity.

                    Agreement.  This  Agreement of Limited  Partnership,  as the
               same may be amended from time to time.

                    Bank.  First-Citizens  Bank & Trust Company,  its successors
               and assigns.

                                                        -2-

<PAGE>

                    Capital  Account.  The  Partnership  capital  account  of  a
               Partner as computed pursuant to Article 12 of this Agreement.

                  Capital  Contributions.  All capital  contributions  made by a
Partner or his or her  predecessor  in  interest  which shall  include,  without
limitation, contributions made pursuant to Article 7 of this Agreement.

     Capital  Transaction.  Any transaction which, were it to generate proceeds,
would produce Partnership Sales Proceeds or Partnership Refinancing Proceeds.

                    Code.  The  Internal  Revenue Code of 1986,  as amended,  or
               corresponding provisions of subsequent, superseding revenue laws.

                  Dilution  Offering.   As  provided  in  Article  7.4  of  this
Agreement,  the future offering of additional limited  partnership  interests in
the  Partnership  as  determined  by the General  Partner.  Except as  otherwise
provided in Article 7.4, any successful  Dilution Offering will  proportionately
reduce the Percentage Interests of the then current Partners in the Partnership.

                    Domestic Proceeding. Any divorce,  annulment,  separation or
               similar domestic proceeding between a married couple.

                  Equipment.   The  equipment  used  in  the  operation  of  the
Lithotripsy System, including the mobile transport vehicle, the lithotripter and
miscellaneous  medical  equipment  and  supplies,  and  any  similar  additional
equipment acquired by the Partnership in the future.

                  FDA.  The United States Food and Drug Administration.

                    General  Partner.  The general  partner of the  Partnership,
               Mobile Kidney Stone Centers of  California,  Ltd. I, a California
               limited partnership.

                  Guaranty.  The  Guaranty  Agreement  pursuant  to  which  each
Limited Partner will guarantee a portion of the Partnership's obligations to the
Bank under the Loan.  The form of the  Guaranty  Agreement  is  included  in the
Subscription Packet accompanying the Memorandum.

                  Initial Limited Partner.  Stan Johnson,  a resident of Arizona
and an  Affiliate  of the general  partner of the General  Partner.  The Initial
Limited Partner is to be the only limited partner of the Partnership  until such
time as the new Limited Partners are admitted to the Partnership,  at which time
the Initial Limited Partner shall withdraw from the Partnership.

                  Limited Partners.  The Limited Partners are those investors in
the Units  admitted  to the  Partnership  and any person  admitted  as a Limited
Partner in accordance with the provisions of this Agreement.

                                                        -3-

<PAGE>

                    Lithotripter.  The extracorporeal shock-wave lithotripter to
               be acquired by the Partnership and any  replacements  therefor or
               additional lithotripters to be purchased by the Partnership.

                    Lithotripsy   System.   The  mobile  transport  vehicle  and
               operational Lithotripter.

                  Loan.  The  loan  of up to  $487,125  from  the  Bank  to  the
Partnership.  Loan  proceeds will be used by the  Partnership  to (i) acquire an
extracorporeal shockwave lithotripter with options (estimated at $400,000), (ii)
acquire  and upfit a mobile van to  transport  the  lithotripter  (estimated  at
$50,000)  and (iii) pay state  sales taxes on the  purchase  of the  Lithotripsy
System (estimated at $37,125).

                    Losses.  The net loss  (including  Net Losses  from  Capital
               Transactions) of the Partnership for each Year of the Partnership
               as determined for federal income tax purposes.

                  Majority  in Interest  of the  Limited  Partners.  The Limited
Partners who hold more than 50% of the Percentage  Interests in the  Partnership
held by the Limited Partners.

                    Memorandum. The Confidential Private Placement Memorandum of
               the  Partnership  dated  February  8,  1999,  as  amended  or  as
               supplemented.

                  Net Gains from Capital Transactions. The gains realized by the
Partnership  as a result of or upon any sale,  exchange,  condemnation  or other
disposition of the capital assets of the Partnership (which assets shall include
Code Section 1231 assets) or as a result of or upon the damage or destruction of
such capital assets.

                  Net Losses from Capital  Transactions.  The losses realized by
the Partnership as a result of or upon any sale, exchange, condemnation or other
disposition of the capital assets of the  Partnership  (which shall include Code
Section 1231 assets) or as a result of or upon the damage or destruction of such
capital assets.

                    Offering.  The  offer  to  potential  investors  of 60 Units
               pursuant to the Memorandum.

                    Partners.  The General  Partner  and the  Limited  Partners,
               collectively,  where no distinction is required by the context in
               which the term is used herein.

                    Partnership.  Mobile Kidney Stone Centers of California III,
               L.P., a California limited partnership.

                  Partnership Cash Flow. For the applicable  period, the excess,
if any,  of (A) the sum of (i) all  gross  receipts  from  any  source  for such
period,  other than from  Partnership  loans,  Capital  Transactions and Capital
Contributions,  and (ii) any funds released by the  Partnership  from previously
established  reserves,  over  (B) the sum of (i) all cash  expenses  paid by the
Partnership for

                                                        -4-

<PAGE>

such  period;  (ii) the  amount of all  payments  of  principal  on loans to the
Partnership;  (iii)  capital  expenditures  of the  Partnership;  and (iv)  such
reasonable  reserves as the General  Partner shall deem  necessary or prudent to
set  aside  for  future  repairs,   improvements  or  equipment  replacement  or
additions,  or to meet working  capital  requirements  or foreseen or unforeseen
future liabilities and contingencies of the Partnership; provided, however, that
the  amounts  referred  to in (B)(i),  (ii) and (iii)  above shall be taken into
account  only to the extent not funded by Capital  Contributions,  loans or paid
out of previously  established reserves.  Such term shall also include all other
funds deemed  available for  distribution  and designated as  "Partnership  Cash
Flow" by the General Partner.

                    Partnership  Interest.  The  interest  of a  Partner  in the
               Partnership as defined by the Act and this Agreement.

                  Partnership  Refinancing Proceeds.  The cash realized from the
refinancing of Partnership assets after retirement of any secured loans and less
(i) payment of all expenses  relating to the transaction and (ii)  establishment
of such  reasonable  reserves as the General  Partner  shall deem  necessary  or
prudent to set aside for future repairs,  improvements, or equipment replacement
or additions,  or to meet working capital requirements or foreseen or unforeseen
future liabilities or contingencies of the Partnership.

                  Partnership  Sales Proceeds.  The cash realized from the sale,
exchange,  casualty  or other  disposition  of all or a portion  of  Partnership
assets after the retirement of all secured loans and less (i) the payment of all
expenses  related to the transaction and (ii)  establishment  of such reasonable
reserves as the General Partner shall deem necessary or prudent to set aside for
future repairs,  improvements, or equipment replacement or additions, or to meet
working  capital  requirements or foreseen or unforeseen  future  liabilities or
contingencies of the Partnership.

                  Percentage  Interest.  The  interest  of each  Partner  in the
Partnership,  to be  determined  initially  in the case of a Limited  Partner by
reference to his or her Unit ownership based upon the Limited  Partners  holding
an aggregate 60% Percentage Interest in the Partnership,  with each initial Unit
sold representing an initial 1% interest. The General Partner will initially own
a 40% Percentage  Interest in the Partnership.  A Partner's  Percentage Interest
may be reduced by a future Dilution Offering. The Partners' Percentage Interests
in the Partnership as of the date hereof are as set forth in Schedule A attached
hereto. Any future  adjustments in the Partners'  Percentage  Interests,  due to
future Dilution Offerings or otherwise,  will also be reflected by amendments to
Schedule A.

                    Profit.  The net income of the  Partnership  (including  Net
               Gains from Capital Transactions) for each Year of the Partnership
               as determined for federal income tax purposes.

                  Pro  Rata  Basis.   In   connection   with  an  allocation  or
distribution,  an allocation  or  distribution  in proportion to the  respective
Percentage Interests of the class of Partners to which reference is made.

                                                        -5-

<PAGE>

                    Sales Agency  Agreement.  The sales agency agreement through
               which  MedTech  Investments,  Inc.,  an  Affiliate of the General
               Partner  and  a   broker-dealer   company   registered  with  the
               Securities  and Exchange  commission and a member of the National
               Association of Securities Dealers,  Inc. shall offer and sell the
               limited partnership  interest of the Partnership  pursuant to the
               Memorandum.

                    Sales Commission.  The $250 sales commission paid to MedTech
               Investments, Inc. for each Unit sold.

                  Service.  The Internal Revenue Service.

                  Units.   The  60  equal  limited  partner   interests  in  the
Partnership offered pursuant to the Memorandum for a price per Unit of $2,500 in
cash, plus a personal guaranty of 1% of the Partnership's  obligations under the
Loan (up to $4,871.25 principal guaranty obligation).

                    Year. An annual  accounting  period ending on December 31 of
               each year during the term of the Partnership.

                  7.       CAPITAL CONTRIBUTIONS AND DILUTION OFFERINGS.
                           --------------------------------------------

                  7.1  General  Partner  Contribution.  On or before the date of
this  Agreement,  the  General  Partner  will  contribute  to the capital of the
Partnership  cash in the amount  equal to 40% (up to $100,000) of the total cash
contributed to the  Partnership by the Partners in the Offering made pursuant to
the Memorandum.

                  7.2 Limited Partner Contribution.  Each Limited Partner hereby
agrees to contribute and shall  contribute to the capital of the  Partnership on
the date of his or her  admission to the  Partnership  the cash amount set forth
opposite his or her name on Schedule A attached hereto.

                    7.3 No Interest.  Except as otherwise  provided  herein,  no
               interest shall be paid on any  contribution to the capital of the
               Partnership.

                  7.4 Dilution  Offerings.  If the General Partner,  in its sole
discretion,  determines that it is in the best interest of the Partnership,  the
General Partner may, from time to time, offer, sell and issue, for and on behalf
of the Partnership,  additional limited partnership interests in the Partnership
(a  "Dilution  Offering")  to  investors  who are not already  Limited  Partners
("Qualified  Investors").  The primary purpose of any Dilution Offering would be
to raise additional capital for any legitimate  Partnership purpose as set forth
in Article 4. Any limited partnership  interests offered by the Partnership in a
Dilution  Offering  shall  be sold in the  manner  and  according  to the  terms
prescribed in the sole  discretion of the General  Partner;  provided,  however,
that any additional limited partnership interests offered in a Dilution Offering
will be sold for a price no lower than the highest price for which proportionate
limited  partnership  interests in the Partnership  have been previously sold by
the Partnership unless otherwise determined by a vote of the General Partner and

                                                        -6-

<PAGE>

a Majority in Interest of the Limited Partners.  Any sale of additional  limited
partnership  interests  will  result  in  the  proportionate   dilution  of  the
Percentage Interests of the existing Partners. Notwithstanding the above, in the
event of a  Dilution  Offering,  the  General  Partner  may  elect,  in its sole
discretion,   to  prevent   dilution  of  its  Percentage   Interest  by  either
contributing  additional  capital to the  Partnership  or purchasing  additional
limited partnership  interests in any Dilution Offering.  Limited Partners shall
have no right to purchase  additional  limited partner interests in any Dilution
Offering or to make additional capital contributions or take any other action to
prevent dilution of their Percentage Interest.  Any investor acquiring a limited
partnership interest in a Dilution Offering shall agree to be bound by the terms
of this Agreement,  and shall be automatically  admitted as a Limited Partner of
the Partnership.  Any adjustment in the Partners' Percentage Interests resulting
from a  Dilution  Offering  shall be set forth on an  amended  Schedule  A to be
attached hereto.

                  8.       GUARANTIES.
                           ----------

                  Each Partner agrees to execute and deliver to the  Partnership
on the date of his or her admission to the  Partnership a Guaranty in the amount
set forth opposite his or her name on Schedule A attached hereto.

                  9.       CONDITIONS TO THE CAPITAL CONTRIBUTIONS OF CERTAIN
                           --------------------------------------------------
                           LIMITED PARTNERS.
                           ----------------

                  The  obligations  of  any  Limited  Partners  acquiring  their
Partnership  Interests  in the  Offering  or a  Dilution  Offering  to make cash
Capital   Contributions   hereunder  are  subject  to  the  condition  that  the
representations, warranties, agreements and covenants of the General Partner set
forth in Article 10 of this  Agreement are and shall be true and correct or have
been and will have been complied with in all material  respects on the date such
Capital  Contributions  are  required to be made,  except to the extent that any
such representation or warranty expressly pertains to an earlier date.

                  10.      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
                           ------------------------------------------------
                           GENERAL PARTNER.
                           ---------------

                    10.1 The General  Partner hereby  represents and warrants to
               the Limited Partners that:

                    (a) The  Partnership  is a  limited  partnership  formed  in
               accordance with and validly  existing under the Act and the other
               applicable laws of the State of California;

                  (b) The interests in the  Partnership of the Limited  Partners
         will have been duly  authorized  or created and validly  issued and the
         Limited  Partners shall have no personal  liability to contribute money
         to the Partnership other than the amounts

                                                        -7-

<PAGE>

         agreed to be  contributed  by them in the  manner  and on the terms set
         forth in this Agreement,  subject,  however, to such limitations as may
         be imposed under the Act;

                  (c) Except as disclosed  in the  Memorandum  or  documentation
         prepared in connection with a Dilution Offering,  no material breach or
         default adverse to the Partnership  exists under the terms of any other
         material agreement affecting the Partnership; and

                    (d) The General Partner is a California limited  partnership
               formed and existing under the laws of the State of California.

                    10.2 The General  Partner  hereby  covenants  to the Limited
               Partners that:

                    (a) It will at all  times  act in a  fiduciary  manner  with
               respect to the Partnership and the Limited Partners;

                    (b) Except as  provided  in Article 19, it will serve as the
               General  Partner  of the  Partnership  until the  Partnership  is
               terminated without reconstitution; and

                  (c) It will cause the  Partnership  to carry  adequate  public
         liability,  property  damage and other insurance as is customary in the
         business to be engaged in by the Partnership.

                  11.      ADMISSION OF LIMITED PARTNERS.
                           -----------------------------

                  The  General  Partner may permit the offer and sale of limited
partnership  interests on the terms and conditions provided in the Memorandum or
future  Dilution  Offerings and may admit persons  subscribing  for interests as
Limited  Partners in the  Partnership  on the terms and  conditions set forth in
this Article 11.

                  (a) The General  Partner  shall have approved of the admission
         of said person in writing on such terms and  conditions  as the General
         Partner shall determine;

                  (b)  Said  person  shall  have  executed  such   documents  or
         instruments  as the General  Partner may deem necessary or desirable to
         effect his or her admission as a Limited Partner;

                    (c) Said person  shall have  accepted and adopted all of the
               terms and provisions of this Agreement, as then amended;

                    (d) Said  person  (if a  corporation)  shall  deliver to the
               General  Partner a certified copy of a resolution of its Board of
               Directors authorizing it to become a

                                                        -8-

<PAGE>

         Limited Partner under the terms and conditions of this Agreement; and

                  (e) Said person,  upon request by the General  Partner,  shall
         pay such reasonable  expenses as may be incurred in connection with its
         admission as a Limited Partner.

                  12.      CAPITAL ACCOUNTS.
                           ----------------

                  A Capital  Account shall be  established  for each Partner and
shall at all times be determined  and  maintained  in accordance  with the Final
Treasury  Regulations  under  Section  704(b)  of the  Code,  as the same may be
amended.  A Partner  shall not be entitled  to  withdraw  any part of his or her
Capital Account or to receive any distribution  from the Partnership,  except as
provided in Articles 14 and 25.

                  (a)      Each Partners' Capital Account shall be increased by:

                    (i) The amount of his or her Capital  Contribution  pursuant
               to Article 7; and

                    (ii) The amount of Profits  allocated to him or her pursuant
               to Article 13; and

                           (iii) The Partner's pro rata share (determined in the
                  same  manner as such  Partner's  share of  Profits  and Losses
                  allocated pursuant to Article 13 hereof) of any income or gain
                  exempt from tax.

                  (b)      Each Partner's Capital Account shall be decreased by:

                    (i) The amount of Losses allocated to him or her pursuant to
               Article 13; and

                    (ii) The amount of Partnership Cash Flow,  Partnership Sales
               Proceeds and Partnership  Refinancing Proceeds distributed to him
               or her pursuant to Article 14; and

                           (iii)  The  Partner's  pro rata  share  of any  other
                  expenditures  of the  Partnership  which are not deductible in
                  computing  Partnership  Profits  or  Losses  and which are not
                  added to the tax basis of any Partnership property, including,
                  without   limitation,   expenditures   described   in  Section
                  705(a)(2)(B) of the Code. The Partner's pro rata share of such
                  expenditures  shall be  determined  in the same manner as such
                  Partner's  share of Profits and Losses  allocated  pursuant to
                  Article 13.

                                                        -9-

<PAGE>

                  13.      ALLOCATIONS

                    (a) Nonrecourse Deductions.  Nonrecourse Deductions shall be
               allocated among the Partners in accordance with their  respective
               Percentage Interests.

                  (b) Partner  Nonrecourse  Deductions.  Any Partner Nonrecourse
         Deductions  shall be  specially  allocated to the Partner who bears the
         economic risk of loss with respect to the Partner  Nonrecourse  Debt to
         which  such  Partner   Nonrecourse   Deductions  are   attributable  in
         accordance with Treasury Regulations Section 1.704-2(i).

                  (c)      Profits and Losses.

                           (i) The Profits and Losses of the  Partnership  shall
                  be  allocated  among the  Partners  in  accordance  with their
                  respective  Percentage  Interests.  In allocating  Profits and
                  Losses, Net Gains and Losses from Capital Transactions (a part
                  of Profits and Losses), if any, shall be allocated first.

                           (ii) In no event shall Losses be allocated under this
                  Article  13(c) to a Limited  Partner if and to the extent that
                  such  allocation  would cause,  as of the end of the Year, the
                  negative balance in such Limited  Partner's Capital Account to
                  exceed such Limited  Partner's  share of  Partnership  Minimum
                  Gain plus such  Limited  Partner's  share,  if any, of Partner
                  Minimum  Gain.  Any  Losses  which  are not  allocated  to the
                  Limited  Partner by virtue of the application of the preceding
                  sentence  shall  be  allocated  to the  General  Partner.  For
                  purposes of this Article  13(c), a Partner's  Capital  Account
                  shall be treated as reduced by Qualified  Income  Offset Items
                  as provided in Article 13(d)(iii).  All items of income, gain,
                  loss,  deduction,  or  credit  shall be  allocated  among  the
                  Partners   proportionately.   Further,   notwithstanding   the
                  foregoing,  after giving effect to the special  allocations in
                  Article 13(d), the General Partner shall be allocated at least
                  1% of all items of income, gain, loss, deduction or credit.

                    (d) Special  Allocations.  The following special allocations
               shall be made:

                           (i) Partnership Minimum Gain Chargeback.  If there is
                  a net  decrease in  Partnership  Minimum Gain during any Year,
                  each Partner shall be specially allocated items of Partnership
                  income and gain for such Year (and, if  necessary,  subsequent
                  Years) in an amount equal to such  Partner's  share of the net
                  decrease in Partnership

                                                       -10-

<PAGE>

                  Minimum  Gain,   determined   in   accordance   with  Treasury
                  Regulations Section 1.704-2(g)(2). Allocations pursuant to the
                  previous   sentence   shall  be  made  in  proportion  to  the
                  respective  amounts  required to be allocated to each Partner.
                  The items to be so allocated shall be determined in accordance
                  with Treasury  Regulations  Section 1.704- 2(f).  This Article
                  13(d)(i)  is   intended  to  comply  with  the  minimum   gain
                  chargeback  requirement in such Section of the Regulations and
                  shall be interpreted consistently therewith.

                           (ii) Partner Minimum Gain Chargeback. Notwithstanding
                  any  other   provision  of  this  Article  13  except  Article
                  13(d)(i),  if there is a net decrease in Partner  Minimum Gain
                  attributable  to a Partner  Nonrecourse  Debt during any Year,
                  each  Partner  who has a share  of the  Partner  Minimum  Gain
                  attributable to such Partner  Nonrecourse Debt,  determined in
                  accordance with Treasury Regulations Section 1.704-2(f), shall
                  be specially  allocated  items of Partnership  income and gain
                  for such Year  (and,  if  necessary,  subsequent  Years) in an
                  amount  equal to such  Partner's  share of the net decrease in
                  Partner Minimum Gain attributable to such Partner  Nonrecourse
                  Debt, to the extent  required by and  determined in accordance
                  with Treasury Regulations Section  1.704-2(i)(4).  Allocations
                  pursuant to the previous  sentence shall be made in proportion
                  to the  respective  amounts  required to be  allocated to each
                  Partner pursuant  thereto.  The items to be so allocated shall
                  be determined in accordance with Treasury  Regulations Section
                  1.704-2(i)(4).  This  Article  13(d)(ii) is intended to comply
                  with the minimum gain  chargeback  requirement in such Section
                  of the  Regulations  and  shall  be  interpreted  consistently
                  therewith.

                           (iii)  Qualified   Income  Offset.   If  any  Partner
                  unexpectedly   receives   any   adjustment,    allocation   or
                  distribution   described  in  Treasury   Regulations   Section
                  1.704-1(b)(2)(ii)(d)(4)  through (6) which causes or increases
                  a deficit balance in such Partner's  Capital Account (adjusted
                  for  this   purpose  in  the  manner   provided   in  Treasury
                  Regulations    Section    1.704-1(b)(2)(ii)(d)),    items   of
                  Partnership  income and gain shall be  specially  allocated to
                  each  such  Partner  in an amount  and  manner  sufficient  to
                  eliminate,  to the extent  required  by the  Regulations,  the
                  deficit   Capital  Account  of  such  Partner  as  quickly  as
                  possible, provided that an allocation pursuant to this Article
                  13(b)  shall  be made  if and  only to the  extent  that  such
                  Partner would have a deficit  Capital  Account after all other
                  allocations   provided  for  in  this  Article  13  have  been
                  tentatively  made as if this  Article  13(b)  were  not in the
                  Agreement. This provision is

                                                       -11-

<PAGE>

                  intended  to be a  "qualified  income  offset,"  as defined in
                  Treasury   Regulations  Section   1.704-1(b)(2)(ii)(d),   such
                  Regulation   being   specifically   incorporated   herein   by
                  reference.

                           (iv) Sales Commission.  The Sales Commission shall be
                  allocated  to the  Units  which  are not  held by the  General
                  Partner and its Affiliates and are acquired in the Offering in
                  proportion to the respective capital contributions represented
                  by such Units (i.e.,  $250 in Sales  Commissions per each such
                  Unit).  The purpose of this  Article  13(c)(iv) is to allocate
                  the Sales  Commission to those  Partners who actually bore the
                  burden of paying the Sales Commission.

                    (e)  Ordering  Provision.  In  applying  the  provisions  of
               Articles 13 and 14 with respect to distributions and allocations,
               the following ordering of priorities shall apply:

                    (i)  Capital  Accounts  shall be  deemed  to be  reduced  by
               Qualified Income Offset Items.

                    (ii) Capital  Accounts shall be reduced by  Distributions of
               Partnership Cash Flow under Article 14(a).

                    (iii) Capital  Accounts shall be reduced by Distributions of
               Partnership Sales Proceeds and Partnership  Refinancing  Proceeds
               under Article 14(b).

                    (iv) Capital Accounts shall be increased by any Minimum Gain
               Chargeback under Articles 13(d)(i) and (ii).

                    (v) Capital  Accounts  shall be increased  by any  Qualified
               Income Offset under Article 13(d)(iii).

                    (vi) Capital  Accounts  shall be reduced by  allocations  of
               Nonrecourse Deductions under Article 13(a).

                           (vii)   Capital   Accounts   shall  be   reduced   by
                  allocations of Partner  Nonrecourse  Deductions  under Article
                  13(b).

                           (viii)   Capital   Accounts  shall  be  increased  by
                  allocations of Profits under Article 13(c).

                    (ix) Capital  Accounts  shall be reduced by  allocations  of
               Losses under Article 13(c).

                                                       -12-

<PAGE>

                  To the maximum extent permitted under the Code, allocations of
         Profits  and Losses  shall be modified  so that the  Partners'  Capital
         Accounts  reflect the amount they would have  reflected if  adjustments
         required by Articles 13(d)(i), (ii) and (iii) had not occurred.

                  (f)  Allocations  Between  Transferor and  Transferee.  In the
         event of the transfer (other than the pledges of the General  Partner's
         interest  permitted  by Article 19 or  Permitted  Pledges  described in
         Article  17.2(b))  of all or  any  part  of a  Partner's  interest  (in
         accordance with the provisions of this Agreement) in the Partnership at
         any time other  than at the end of a Year,  or the  admission  of a new
         Partner  (in  accordance  with  the  terms  of  this  Agreement),   the
         transferring  Partner  or new  Partner's  share  of  the  Partnership's
         income,  gain,  loss,  deductions  and  credits,  as computed  both for
         accounting  purposes  and for  federal  income tax  purposes,  shall be
         allocated between the transferor Partner and the transferee Partner (or
         Partners),  or the new Partner and the other Partners,  as the case may
         be, in the same  ratio as the  number of days in such Year  before  and
         after the date of the transfer or admission; provided, however, that if
         there  has  been a sale  or  other  disposition  of the  assets  of the
         Partnership  (or any part thereof)  during such Year,  then the General
         Partner may elect, in its sole discretion,  to treat the periods before
         and after the date of the transfer or  admission as separate  Years and
         allocate the Partnership's net income,  gain, net loss,  deductions and
         credits for each of such deemed  separate  Years.  Notwithstanding  the
         foregoing, the Partnership's "allocable cash basis items," as that term
         is used in Section  706(d)(2)(B)  of the Code,  shall be  allocated  as
         required  by  Section   706(d)(2)  of  the  Code  and  the  regulations
         thereunder.

                  (g) Tax  Withholding.  The Partnership  shall be authorized to
         pay, on behalf of any  Partner,  any amounts to any  federal,  state or
         local taxing  authority,  as may be necessary  for the  Partnership  to
         comply with tax withholding  provisions of the Code or the other income
         tax or  revenue  laws  of any  taxing  authority.  To  the  extent  the
         Partnership  pays any such  amounts  that it may be  required to pay on
         behalf  of  a  Partner,  such  amounts  shall  be  treated  as  a  cash
         distribution  to such  Partner  and shall  reduce the amount  otherwise
         distributable to such Partner.

                  14.      DISTRIBUTIONS.
                           -------------

                  (a)  Distribution of Partnership  Cash Flow.  Partnership Cash
         Flow shall be distributed to the Partners  within 60 days after the end
         of each Year, or earlier in the discretion of the General  Partner,  in
         proportion  to their  respective  Percentage  Interests  at the time of
         distribution.

                    (b)  Distribution  of Partnership  Refinancing  Proceeds and
               Partnership Sales Proceeds.  Partnership Refinancing Proceeds and
               Partnership  Sales  Proceeds shall be distributed to the Partners
               within 60 days of the Capital Transaction giving

                                                       -13-

<PAGE>

         rise to such  proceeds,  or earlier in the  discretion  of the  General
         Partner, in proportion to their respective  Percentage Interests at the
         time of distribution.

                  (c)  Distribution  in  Liquidation.  Upon  liquidation  of the
         Partnership,  all of the  Partnership's  property  shall  be  sold  and
         Profits and Losses allocated accordingly. Proceeds from the liquidation
         of the Partnership shall be distributed in accordance with Article 25.

                  l5.      RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.
                           ------------------------------------------

                  15.1  Management.  The Limited Partners shall not take part in
the management of the business,  nor transact any business for the  Partnership,
nor  shall  they  have  power  to  sign  for or to  bind  the  Partnership.  The
Partnership may,  however,  contract with one or more Limited Partners to act as
the local medical  director(s) of the Lithotripsy System. No Limited Partner may
withdraw from the Partnership except as expressly permitted herein.

                  15.2 Operation of  Lithotripsy  System.  The Limited  Partners
shall  not  operate  or  utilize  the  Partnership  Lithotripsy  System or other
Partnership  equipment except pursuant to (i) an agreement with the Partnership;
or (ii) any other arrangement specifically approved by the General Partner.

                  15.3 Outside Activities.  The Limited Partners agree that they
owe fiduciary  duties to the  Partnership  and, as a  consequence,  each Limited
Partner (that is not the General Partner or an Affiliate of the General Partner)
agrees that (s)he shall not engage in "Outside Activities" (as defined below) in
the "Market  Area" (as defined  below)  while(s)he  is a Limited  Partner in the
Partnership  and shall  otherwise be subject to the  provisions  of this Article
15.3.  The phrase  "Outside  Activities"  means  directly or indirectly  owning,
leasing or  subleasing  a  lithotripter  (or any similar  equipment or competing
devices  used  for  treating  renal  or  biliary  stone  disease)  or any  other
therapeutic  equipment  acquired by the Partnership;  provided that an ownership
interest in the General Partner or an Affiliate of the General Partner shall not
constitute an Outside  Activity.  Prohibited  indirect  ownership  shall include
without  limitation  the  direct or  indirect  ownership  of any  interest  in a
business  venture  (through stock  ownership,  partnership  interest  ownership,
ownership by or through a close family  member,  or as otherwise  determined  in
good faith by the General  Partner)  involving the ownership,  purchase,  lease,
sublease,  promotion,  management  or  operation of a  lithotripter  (or similar
equipment or competing devices used for treating renal or biliary stone disease)
or other competing  device or equipment,  unless the General Partner  determines
that such  activity  by the  Limited  Partners  is not  detrimental  to the best
interests of the  Partnership.  Notwithstanding  the above,  Outside  Activities
shall not include (i) ownership of less than 1% of the capital stock (calculated
on a fully  diluted  basis) of a  corporation  whose stock is publicly  owned or
regularly  traded on any public  exchange,  (ii) any  ownership  interest  in an
entity  engaging  in an  Outside  Activity  acquired  before  the  date  hereof;
provided,  that  the  Limited  Partner  may not  increase  or  enhance  any such
previously held  investment  during the term of the  Partnership,  and (iii) any
other

                                                       -14-

<PAGE>

activity  determined by the General Partner,  in its sole discretion,  not to be
detrimental to the best interests of the Partnership.

                  Upon  the  termination  or  transfer  of a  Limited  Partner's
interest in the  Partnership  for any reason,  including a transfer  pursuant to
Article 18.3 hereof, the withdrawing  Limited Partner shall not, for a period of
two (2) years following the date of withdrawal, engage in any Outside Activities
in any "Market Area" in which the Partnership is transacting  business or within
the prior twelve months has transacted  business (the "Restricted  Facilities").
For the purposes of this Article 15.3, the term "Market Area" shall mean (i) the
area within a fifty (50) mile  radius of any  Restricted  Facility,  but if such
area is determined by a court of competent jurisdiction to be too broad, then it
shall  mean (ii) the area  within a thirty  (30) mile  radius of any  Restricted
Facility, but if such area is determined by a court of competent jurisdiction to
be too broad then it shall mean (iii) the area within a fifteen (15) mile radius
of any Restricted Facility.

                  In the event a Limited Partner wishes and intends to engage in
an Outside  Activity in a Market Area, he or she must provide  written notice of
such intent to the General  Partner  prior to engaging in the Outside  Activity.
The  written  notice  shall be deemed an  election  by the  Limited  Partner  to
withdraw from the Partnership (the "Notice of  Withdrawal"),  and shall give the
General  Partner the purchase  rights as provided in Article 18.3 hereof.  After
the Notice of Withdrawal,  the former  Limited  Partner may engage in an Outside
Activity in the Market Area only after waiting the period of two years specified
in this  Article  15.3.  In the  event of  breach  of the  waiting  period,  the
Partnership  shall be entitled  to any remedy at law or equity  with  respect to
such breach, including without limitation an injunction or suit for damages.

                  If a Limited  Partner during his or her  participation  in the
Partnership  engages in an  Outside  Activity  in a Market  Area  without  first
notifying  the General  Partner in violation of this Article  15.3,  the Limited
Partner  shall be deemed to have  given a Notice of  Withdrawal  on the date the
General Partner first becomes aware of the Limited Partner's Outside Activity in
the Market Area.  Upon  receiving a Limited  Partner's  Notice of  Withdrawal or
equivalent  thereof,  the Partnership may invoke the purchase rights provided in
Article  18.3  and  shall be  entitled  to any  other  remedy  at law or  equity
including without limitation an injunction or suit for damages.

                  15.4  Disclosure  of  Confidential  Information.  Each Limited
Partner acknowledges and agrees that his or her participation in the Partnership
under this Agreement necessarily involves his or her understanding of and access
to certain trade secrets and other  confidential  information  pertaining to the
business of the Partnership.  Accordingly,  each Limited Partner (other than the
General   Partner  and  its  Affiliates  that  may  also  hold  Limited  Partner
Partnership  Interests) agrees that at all times during his or her participation
in the Partnership as a Limited Partner and thereafter, (s)he will not, directly
or indirectly, without the express written authority of the Partnership,  unless
required by law or directed by a applicable legal authority having  jurisdiction
over  the  Limited  Partner,  disclose  or use for the  benefit  of any  person,
corporation  or other  entity  (other  than  the  Partnership),  or the  Limited
Partner, (i) any trade, technical, operational, management or other secrets, any
patient or customer  lists or other  confidential  or secret data,  or any other
proprietary,

                                                       -15-

<PAGE>

confidential or secret  information of the Partnership or (ii) any  confidential
information concerning any of the financial  arrangements,  financial condition,
hospital  or  physician  contracts,  third  party  payor  arrangements,  quality
assurance  and  outcome  analysis  programs,  competitive  status,  customer  or
supplier matters, internal organizational matters, technical abilities, or other
business affairs of or relating to the Partnership.  The Limited Partners (other
than the General  Partner and its Affiliates  that may also hold Limited Partner
Partnership  Interests)  acknowledge  that  all  of  the  foregoing  constitutes
proprietary information,  which is the exclusive property of the Partnership. In
the event of breach of this Article 15.4 as determined  by the General  Partner,
the Partnership shall be entitled to any remedy at law or equity with respect to
such breach, including without limitation, an injunction or suit for damages.

                  16.      LIMITED LIABILITY.
                           -----------------

                  No Limited Partner shall be required to make any  contribution
to the  capital of the  Partnership  except as set forth in Article 7, nor shall
any Limited  Partner in his or her capacity as such,  be bound by, or personally
liable for, any expense,  liability or obligation of the  Partnership  except to
the extent of his or her (i) interest in the  Partnership;  (ii)  Guaranties  of
Partnership  obligations;  and (iii) obligation to return  distributions made to
him or her under certain circumstances as required by the Act.

                  17.      TRANSFER OF INTERESTS AND ADMISSION OF PARTNERS.
                           -----------------------------------------------

                  17.1     Transferability.
                           ---------------

                  (a) The  term  "transfer"  when  used in this  Agreement  with
         respect to a Partnership  Interest includes a sale,  assignment,  gift,
         pledge,  exchange  or any other  disposition  (but does not include the
         issuance of new Partnership Interests pursuant to a Dilution Offering);

                    (b) Except as otherwise provided herein, the General Partner
               shall  not at  any  time  transfer  or  assign  its  interest  or
               obligation as General Partner;

                  (c) The Partnership  Interest of any Limited Partner shall not
         be  transferred,  in whole or in part,  except in  accordance  with the
         conditions and limitations set forth in Articles 17.2 or 18;

                  (d) The  transferee of a Partnership  Interest by  assignment,
         operation of law or otherwise,  shall have only the rights,  powers and
         privileges  enumerated in Article 17.3 or otherwise provided by law and
         may not be admitted to the  Partnership as a Limited  Partner except as
         provided in Article 17.4 or as a General  Partner except as provided in
         Article 17.5;

                                                       -16-

<PAGE>

                  (e) Notwithstanding any provision herein to the contrary,  the
         Partnership  Agreement  shall  in  no  way  restrict  the  issuance  or
         transfers of stock of the General  Partner or the merger of the General
         Partner with another person or entity; and

                  (f) Notwithstanding any provision herein to the contrary,  the
         issuance of Partnership  Interests  pursuant to a Dilution Offering and
         the admission of new Limited Partners  pursuant to a Dilution  Offering
         shall be governed by the provisions of Article 7.4 of this Agreement.

                  17.2     Restrictions on Transfers by Limited Partners.
                           ---------------------------------------------

                  (a) All or part of a Partnership  Interest may be  transferred
         by a  Limited  Partner  only  with the prior  written  approval  of the
         General  Partner,  which  approval may be granted or denied in the sole
         discretion of the General Partner.

                  (b) The General  Partner  shall not approve any  transfer of a
         Partnership  Interest,  except a pledge of any Partnership  Interest by
         the General Partner to any bank,  insurance  company or other financial
         institution to secure payment of indebtedness  (a "Permitted  Pledge"),
         or otherwise  unless the proposed  transferee  shall have furnished the
         General Partner with a sworn statement that:

                    (i) The proposed  transferee  proposes to acquire his or her
               Partnership Interest as a principal,  for investment and not with
               a view to resale or distribution;

                           (ii) The proposed  transferee meets such requirements
                  regarding sophistication,  income and net worth as required by
                  applicable state and federal securities laws;

                           (iii) The proposed  transferee has met such net worth
                  and income  suitability  standards as have been established by
                  the General Partner;

                           (iv)  The   proposed   transferee   recognizes   that
                  investment in the Partnership  involves  certain risks and has
                  taken  full  cognizance  of and  understands  all of the  risk
                  factors related to the purchase of a Partnership Interest; and

                    (v) The proposed  transferee has met all other  requirements
               of the General Partner for the proposed transfer.

                    (c) Other than in the case of a Permitted Pledge, a transfer
               of a Partnership  Interest may be made only if, prior to the date
               thereof, the Partnership

                                                       -17-

<PAGE>

         upon request  receives an opinion of counsel,  satisfactory in form and
         substance  to the General  Partner,  that  neither the offering nor the
         proposed transfer will require registration under federal or applicable
         state securities laws or regulations.

                  17.3 Rights of Transferee.  Unless admitted to the Partnership
in accordance  with Article 17.4, the transferee of a Partnership  Interest or a
part thereof or any right,  title or interest  therein  shall not be entitled to
any of the rights,  powers, or privileges of his or her predecessor in interest,
except that (s)he  shall be entitled to receive and be credited or debited  with
his or her proportionate share of Partnership income,  gains,  Profits,  Losses,
deductions, credits or distributions.

                  17.4  Admission  of  Limited  Partners.  Except  as  otherwise
provided in Article 18, the General Partner, or the transferee of all or part of
the Partnership  Interest of either a General Partner or a Limited Partner,  may
be admitted to the  Partnership  as a Limited  Partner  upon  furnishing  to the
General Partner all of the following:

                  (a) The  written  approval of a Majority in Interest of all of
         the Limited  Partners  (except the assignor  Partner),  or the assignor
         Partner  alone,  which  approval  may be  granted or denied in the sole
         discretion of such Partners or Partner (as the case may be);

                    (b) The  written  approval  of the  General  Partner,  which
               approval may be granted or denied in the sole  discretion  of the
               General Partner;

                  (c) Acceptance, in a form satisfactory to the General Partner,
         of all the  terms  and  conditions  of  this  Agreement  and any  other
         documents  required in connection with the operation of the Partnership
         pursuant to the terms of this Agreement;

                    (d) A  properly  executed  power of  attorney  substantially
               identical to that contained in Article 38;

                    (e) Such other  documents or  instruments as may be required
               in order to effect his or her admission as a Limited Partner; and

                    (f) Payment of such  reasonable  expenses as may be incurred
               in connection with his or her admission as a Limited Partner.

                    17.5 Admission of General  Partners.  A Limited Partner,  or
               the transferee of all or part of the Partnership  Interest of the
               General Partner,  may be admitted to the Partnership as a general
               partner  upon  furnishing  to  the  General  Partner  all  of the
               following:

                                                       -18-

<PAGE>

                  (a) The  written  consent of both the  General  Partner  and a
         Majority  in Interest of the  Limited  Partners,  which  consent may be
         granted or denied in the sole discretion of the Partners;

                  (b) Such financial statements,  guarantees or other assurances
         as the General  Partner  may require  with regard to the ability of the
         proposed  general  partner to fulfill the  financial  obligations  of a
         general partner hereunder;

                  (c) Acceptance,  in form  satisfactory to the General Partner,
         of all the  terms  and  provisions  of  this  Agreement  and any  other
         documents  required in connection with the operation of the Partnership
         pursuant to the terms of this Agreement;

                    (d) A  certified  copy  of a  resolution  of  its  Board  of
               Directors  (if it is a  corporation)  authorizing  it to become a
               general partner under the terms and conditions of this Agreement;

                    (e) A power  of  attorney  substantially  identical  to that
               contained in Article 38;

                    (f) Such other  documents or  instruments as may be required
               in  order  to  effect  his,  her or its  admission  as a  general
               partner; and

                    (g) Payment of such  reasonable  expenses as may be incurred
               in  connection  with  his,  her or  its  admission  as a  general
               partner.

                  Notwithstanding  the above,  a transferee  that controls or is
controlled by the General Partner or one or more of its Affiliates that receives
all or part of the  Partnership  Interest of the General Partner may be admitted
to the  Partnership as a general  partner upon complying with all the provisions
of Article  17.5  except for  subparagraph  17.5(a).  As long as the  transferee
either  controls or is controlled  by the General  Partner or one or more of its
Affiliates,  no  Limited  Partner  consents  will  be  required  to  admit  such
transferee as a general partner to the Partnership.

                  17.6  Amendment  of  Certificate  of Limited  Partnership  and
Qualification.   The  General   Partner  shall  take  all  steps  necessary  and
appropriate to prepare and record any  amendments to the  Certificate of Limited
Partnership, as may be necessary or appropriate from time to time to comply with
the requirements of the Act, including,  without limitation,  upon the admission
to the Partnership of any general partner  pursuant to the provisions of Article
17.5, and may for this purpose  exercise the power of attorney  delivered to the
General Partner pursuant to Article 17.5 or 38. In addition, the General Partner
shall take all steps necessary and appropriate to prepare and record any and all
documents  necessary to qualify the Partnership to do business in  jurisdictions
where the Partnership is doing business,  and may for this purpose  exercise the
power of attorney  delivered to the General  Partner  pursuant to Articles 17.4,
17.5 or 38.

                                                       -19-

<PAGE>

                  17.7 Fundamental  Changes.  In the event a plan is approved by
the General Partner and a Majority in Interest of the Limited Partners providing
for the  merger or  consolidation  of the  Partnership  with  another  person or
entity,  or the sale of all or substantially  all of the Partnership  Interests,
including  without  limitation the exchange of Partnership  Interests for equity
interests  in  another  person or entity or for cash or other  consideration  or
combination  thereof,  then and in such  event,  the Limited  Partners  shall be
obligated to take or refrain  from  taking,  as the case may be, such actions as
the plan may provide, including, without limitation, executing such instruments,
and providing such information as the General Partner shall reasonably  request.
Any plan  described  in this  Article  17.7 may also effect an  amendment to the
Partnership Agreement or the adoption of a new partnership agreement as provided
in Section  15678.2(e)  of the Act.  The plan may also  provide that the General
Partner  and  its  Affiliates  shall  receive  fees  for  services  rendered  in
connection  with  the  operation  of the  Partnership  or any  successor  entity
following  the  consummation  of the  transactions  described  in the plan,  and
neither the  Partnership nor the Partners shall have any right by virtue of this
Agreement in the income derived therefrom. Any securities or other consideration
to be distributed  to the Partners  pursuant to the plan shall be distributed in
the  manner  set forth in Article  25(c) as though  the  Partnership  were being
liquidated.  For this purpose only,  the fair market value of the  securities or
other  consideration  to be  received  pursuant  to the plan shall be treated as
"Profits"  and the capital  accounts of the  Partners  shall be increased in the
manner  provided  in Article  12(a)(ii).  No Partner  shall be  entitled  to any
dissent,  appraisal or similar rights in connection with a plan  contemplated by
this Article 17.7.

                  17.8 Withdrawal of Initial Limited Partner.  Upon the date the
first Limited  Partner is admitted to the Partnership in accordance with Article
11 of this  Agreement,  the Initial  Limited  Partner  shall  withdraw  from the
Partnership,  and thereupon his Capital  Contribution  shall be returned and his
Partnership Interest canceled and reallocated to the Limited Partners.

                  18.      OPTIONAL PURCHASE OF LIMITED PARTNERSHIP INTERESTS
                           --------------------------------------------------
                           ON CERTAIN EVENTS.
                           -----------------

                  18.1 Death. Upon the death of a Limited Partner,  the deceased
Limited  Partner's   executor,   administrator,   or  other  legal  or  personal
representative  shall give written  notice of that fact to the General  Partner.
The General Partner shall have the option to purchase at the Closing (as defined
below) the Partnership Interest of the deceased Limited Partner (whose executor,
administrator  or other  legal or  personal  representative  shall  then  become
obligated  to sell such  Partnership  Interest) at the price  determined  in the
manner  provided  in  Article  18.7  of  this  Agreement  and on the  terms  and
conditions provided in Article 18.8 of this Agreement. The General Partner shall
have a period of thirty (30) days  following  the date of notice of the death of
the Limited Partner (the "Option  Period") within which to notify in writing the
deceased Limited  Partner's  executor,  administrator or other legal or personal
representative,  whether the General Partner wishes to purchase all or a portion
of the  Partnership  Interest of the deceased  Limited  Partner.  If the General
Partner  does not elect to  purchase  the  entire  Partnership  Interest  of the
deceased  Limited  Partner before the expiration of the Option Period and in the
manner provided  herein,  the portion of the Partnership  Interest not purchased
shall be held by the deceased Limited Partner's executor,

                                                       -20-

<PAGE>

administrator  or  other  legal  representative  pursuant  to the  terms of this
Agreement. The General Partner, in its sole discretion,  may elect to assign its
rights to purchase  the  Partnership  Interest of the deceased  Limited  Partner
under this Article 18.1 to the  Partnership  and, in such case, the  Partnership
shall have the same rights as provided  for the General  Partner in this Article
18.1.

                  18.2  Bankruptcy,  Insolvency  or  Assignment  for  Benefit of
Creditors of a Limited  Partner.  In the event that an  involuntary or voluntary
proceeding  under the  Federal  Bankruptcy  Code,  as  amended,  is filed for or
against any Limited Partner,  or if any Limited Partner shall make an assignment
for the benefit of his  creditors,  or if any Limited  Partner has a receiver or
custodian  appointed for his assets,  or any Limited Partner  generally fails to
pay his debts when due, the insolvent  Limited Partner shall give written notice
(the "Notice of Insolvency")  to the General Partner of the  commencement of any
such  proceeding  or the  occurrence of such event within five days of the first
notice to him of such  commencement  or  occurrence  of such event.  The General
Partner shall have the option to purchase at the Closing (as defined  below) the
Partnership  Interest of the  insolvent  Limited  Partner  (which the  insolvent
Limited Partner or his trustee,  custodian,  receiver or other personal or legal
representative,  as the case may be, shall then become obligated to sell) at the
price determined in the manner provided in Article 18.7 of this Agreement and on
the terms and conditions provided in Article 18.8 of this Agreement. The General
Partner shall have a period of thirty (30) days following the date of the Notice
of  Insolvency  (the  "Option  Period")  within  which to notify in writing  the
insolvent Limited Partner or his trustee, custodian, receiver, or other legal or
personal representative, whether the General Partner wishes to purchase all or a
portion of the Partnership  Interest of the insolvent  Limited  Partner.  If the
General  Partner does not elect to purchase the entire  Partnership  Interest of
the insolvent  Limited Partner before the expiration of the Option Period and in
the  manner  provided  herein,  the  portion  of the  Partnership  Interest  not
purchased  shall  be held by the  insolvent  Partner,  his  trustee,  custodian,
receiver or other legal or personal representative pursuant to the terms of this
Agreement. The General Partner, in its sole discretion,  may elect to assign its
rights to purchase  the  Partnership  Interest of an insolvent  Limited  Partner
under this Article 18.2 to the  Partnership  and, in such case, the  Partnership
shall have the same rights as provided  for the General  Partner in this Article
18.2.

                  18.3 Breach of Article 15.3. In the event the General  Partner
either  receives a Notice of  Withdrawal as provided in Article 15.3 or receives
notice of a breach of Article 15.3 by or with respect to a Limited  Partner (the
"Competing  Limited  Partner"),  the  General  Partner  may  elect,  in its sole
discretion,  to treat such event as a default  under this  Agreement and enforce
the  provisions of this Article 18.3. If the General  Partner  elects to enforce
the  provisions  of this Article  18.3,  the General  Partner shall give written
notice of such  election  (the  "Notice of Default")  to the  Competing  Limited
Partner  within 180 days of the date the  General  Partner  first  received  the
Notice of  Withdrawal or notice of the  defaulting  event.  The General  Partner
shall  have the  option to  purchase  at the  Closing  (as  defined  below)  the
Partnership  Interest of the  Competing  Limited  Partner  (which the  Competing
Limited Partner shall then become  obligated to sell) at the price determined in
the manner  provided  in  Article  18.7 of this  Agreement  and on the terms and
conditions provided in Article 18.8 of this Agreement. The General Partner shall
have a period of  thirty  (30) days  following  the date it sends the  Notice of
Default (the "Option Period") within which to notify in

                                                       -21-

<PAGE>

writing  the  Competing  Limited  Partner,  whether  the  Partnership  wishes to
purchase all or a portion of the Partnership  Interest of the Competing  Limited
Partner.  If  the  General  Partner  does  not  elect  to  purchase  the  entire
Partnership  Interest of the Competing  Limited Partner before the expiration of
the  Option  Period  and in the  manner  provided  herein,  the  portion  of the
Partnership  Interest  not  purchased  shall  be held by the  Competing  Limited
Partner  pursuant to the terms of this Agreement.  The General  Partner,  in its
sole  discretion,  may elect to assign its rights to  purchase  the  Partnership
Interest  of a  Competing  Limited  Partner  under  this  Article  18.3  to  the
Partnership  and, in such case,  the  Partnership  shall have the same rights as
provided for the General Partner in this Article 18.3.

                  18.4  Domestic  Proceeding.  In the  event  that a spouse of a
Limited Partner  commences  against a Limited  Partner,  or a Limited Partner is
named in, a Domestic  Proceeding,  the Limited Partner shall give written notice
(the "Notice of Domestic Proceeding") to the General Partner of the commencement
of any such  proceeding  within  five  days of the  first  notice to him of such
commencement.  The  General  Partner  shall have the option to  purchase  at the
Closing  (as defined  below) the  Partnership  Interest  of the Limited  Partner
involved in the Domestic Proceeding (which the Limited Partner shall then become
obligated to sell),  at the price  determined in the manner  provided in Article
18.7 of this Agreement and on the terms and conditions  provided in Article 18.8
of this  Agreement.  The General Partner shall have a period of thirty (30) days
following the date of the Notice of Domestic  Proceeding  (the "Option  Period")
within which to notify in writing the Limited  Partner  involved in the Domestic
Proceeding,  whether the General  Partner wishes to purchase all or a portion of
the Partnership  Interest of such Limited  Partner.  If the General Partner does
not elect to purchase the Partnership  Interest of the Limited Partner  involved
in the Domestic Proceeding before the expiration of the Option Period and in the
manner provided  herein,  the portion of the Partnership  Interest not purchased
shall be held by such Limited  Partner  pursuant to the terms of this Agreement.
The General Partner,  in its sole discretion,  may elect to assign its rights to
purchase  the  Partnership  Interest  of the  Limited  Partner  involved  in the
Domestic  Proceeding  under this  Article 18.4 to the  Partnership  and, in such
case,  the  Partnership  shall have the same rights as provided  for the General
Partner in this Article 18.4.

                  18.5 Divestiture  Option.  If state or federal  regulations or
laws are enacted or applied, or if any other legal developments occur, which, in
the opinion of the General Partner  adversely  affect (or potentially  adversely
affect) the operation of the Partnership  (e.g., the enactment or application of
prohibitory physician  self-referral  legislation against the Partnership or its
Partners),  the General Partner shall promptly  either,  in its sole discretion,
(i) take the steps outlined in this Article 18.5 to divest the Limited  Partners
of their Partnership Interests,  or (ii) dissolve the Partnership as provided in
Article  24.1(e).  If the General Partner chooses option (i), it shall deliver a
written  notice to all of the Limited  Partners (the "Notice of  Election")  and
purchase such Partnership  Interests for its own account.  The purchase price to
be paid for each  Partnership  Interest  shall be  determined  in the  manner as
provided in Article 18.7 and shall be on the terms and conditions as provided in
Article  18.8.  The transfer of the  Partnership  Interests,  the payment of the
purchase price and the  assumption of the Limited  Partners'  obligations  under
their respective  Guaranties (as provided in Article 18.7) shall be made at such
time as  determined  by the General  Partner to be in the best  interests of the
Partnership and its Limited Partners. Each Limited Partner

                                                       -22-

<PAGE>

hereby makes,  constitutes and appoints the General Partner,  with full power of
substitution,  his true and lawful  attorney-in-fact,  to take such  actions and
execute such  documents on his behalf to effect the transfer of his  Partnership
Interest as provided in this Article 18.5. The foregoing power of attorney shall
not be affected by the subsequent incapacity,  mental incompetence,  dissolution
or bankruptcy of any Limited Partner.

                  18.6  Default  under  Guaranties.  Notwithstanding  any  other
provision in this Article 18 to the contrary,  if any of the events  outlined in
Articles  18.1 or 18.2 or any other  defaulting  event  outlined in the Guaranty
(the  "Defaulting  Events")  should occur with respect to a Limited Partner (the
"Defaulting  Limited Partner"),  and the General Partner determines (in its sole
discretion)  that  such  event may  result in  default  and  acceleration  of an
obligation  secured by the Guaranty unless another  guarantor  acceptable to the
Lender can be substituted in the place of the Defaulting  Limited Partner,  then
the  General  Partner  shall  have the  right to  immediately  take the steps as
outlined in this Article 18.6 to prevent such default.  Upon the General Partner
receiving  notice of a Defaulting  Event as provided above, the General Partner,
in its sole discretion,  shall immediately have the right to either (i) sell the
entire  Partnership  Interest of the Defaulting  Limited  Partner to an investor
approved of by the General Partner, (ii) purchase for its own account the entire
Partnership Interest of the Defaulting Limited Partner, or (iii) sell the entire
Partnership  Interest of the  Defaulting  Limited  Partner to one or more of the
other Limited  Partners.  The Defaulting  Limited  Partner shall sell his or her
Partnership  Interest to the purchaser at the purchase  price  determined in the
manner as provided in Article 18.7 and on the terms and  conditions  as provided
in Article 18.8. The transfer of the  Partnership  Interest,  the payment of the
purchase  price,  and  the  assumption  of  the  Defaulting   Limited  Partner's
obligations  under his or her Guaranty (as provided in Article  18.7),  shall be
made at such time as  determined  by the  General  Partner in order to avoid the
default and acceleration of the obligation secured by the Guaranty. Each Limited
Partner hereby makes,  constitutes and appoints the General  Partner,  with full
power of substitution, his or her true and lawful attorney-in-fact, to take such
actions and execute  such  documents on his or her behalf to effect the transfer
of his or her  Partnership  Interest as provided in this  Article  18.6,  in the
event such Limited Partner becomes a Defaulting Limited Partner.

                  18.7  Purchase  Price.  The purchase  price to be paid for the
Partnership  Interest of any Limited  Partner whose interest is being  purchased
pursuant to the provisions of Articles 18.1, 18.2, 18.3, 18.4, 18.5 or 18.6 (the
"Selling  Limited  Partner")  shall be determined in the manner provided in this
Article 18.7. The purchase price for a Partnership  Interest  purchased pursuant
to the provisions of Article 18.1 shall be an amount equal to the greater of (i)
one and one-half  (1.5) times the aggregate  distributions  made with respect to
such  Partnership  Interest  pursuant to Article  14(a) during the  twelve-month
period  ending on the  Valuation  Date (as defined  below),  or (ii) the Selling
Limited Partner's share of the Partnership's book value determined in the manner
described  below.  The  purchase  price  for a  Partnership  Interest  purchased
pursuant to the provisions of Articles 18.2,  18.3,  18.4, 18.5 or 18.6 shall be
an  amount  equal to the  lesser  of (i) the fair  market  value of the  Selling
Limited  Partner's  Partnership  Interest on the Valuation Date (prorated in the
event that only a portion of his or her Partnership Interest is being purchased)
as  determined  by an  Appraiser  (as  defined  below)  selected  by the General
Partner, or (ii) the Selling Limited Partner's share of the

                                                       -23-

<PAGE>

Partnership's  book value,  if any (prorated in the event that only a portion of
his or her Partnership  Interest is being purchased) as reflected by the Capital
Account of the Selling  Limited  Partner  (unadjusted  for any  appreciation  in
Partnership  assets  and as reduced by  depreciation  deductions  claimed by the
Partnership for tax purposes) as of the Valuation Date (as defined  below).  The
General Partner, in its sole discretion,  may pursue both of the above valuation
methods  and choose  the  lesser  value of the two as  indicated  above,  or may
designate and follow only one of the methods in calculating  the purchase price.
For  purposes  of  this  Article  18.7,  the  term  "Appraiser"  shall  mean  an
independent  appraiser  who  is  qualified  in  appraising  limited  partnership
interests and who has at least five years experience. In determining fair market
value, the Appraiser shall take into consideration any outstanding indebtedness,
liabilities,   liens  and  obligations  of  the  Partnership  and  the  relative
Partnership  Interests and capital accounts of all Partners, as well as applying
any customary discounts for lack of liquidity and control.  Such appraisal shall
be conducted in accordance with professional appraisal standards.  The valuation
of the  Appraiser  shall be  conclusive  and binding upon the  Partnership,  the
purchaser and the Selling  Limited Partner and his or her  representatives.  The
determination  of the Selling  Limited  Partner's  Capital  Account or aggregate
distributable  amount on the Valuation  Date (as defined below) shall be made by
the  Partnership's  internal  accountant (the  "Partnership  Accountant") upon a
review of the  Partnership  books of account,  and a formal  audit is  expressly
waived. The statement of the Partnership  Accountant with respect to the Capital
Account or aggregate  distributable amount of the Selling Limited Partner on the
Valuation  Date  shall be  binding  and  conclusive  upon the  Partnership,  the
purchaser and the Selling  Limited Partner and his or her  representatives.  The
Valuation Date means the last day of the month  immediately  preceding the month
in which occurs:  (i) the death of a Selling Limited  Partner,  in the case of a
purchase by reason of death;  (ii) the  bankruptcy  or  insolvency  of a Selling
Limited  Partner,  in the case of a  purchase  by reason of such  bankruptcy  or
insolvency; (iii) the Notice of Withdrawal or breach of Article 15.3 as provided
in  Article  18.3  in the  case  of a  purchase  by  reason  thereof;  (iv)  the
commencement  of the  Domestic  Proceeding,  in the case of a purchase by reason
thereof;  (v) the Notice of Election as provided in Article 18.5, in the case of
a purchase by reason thereof; or (vi) the notice of Defaulting Event as provided
in Article  18.6,  in the case of a purchase  occurring by reason of one of such
events. Any Limited Partner whose Partnership  Interest is purchased pursuant to
the provisions of Article 18.1, 18.2, 18.3, 18.4, 18.5 or 18.6 shall be entitled
only to the  purchase  price  which  shall be paid at the Closing in cash (or by
certified  or  cashier's  check) and shall not be  entitled  to any  Partnership
distributions  made after the Valuation  Date.  The  Partnership  shall have the
right to deduct  the amount of any  distributions  made to the  Selling  Limited
Partner after the Valuation Date from the purchase  price.  If as of the date of
the  Closing the  Selling  Limited  Partner  still has an  outstanding  personal
obligation under the Guaranty (the "Obligation"), the purchaser shall assume the
portion of the Obligation as is equal to the portion of the Partnership Interest
being purchased,  indemnify the Selling Limited Partner from such portion of the
Obligation,  and take such steps  deemed  necessary  by the  General  Partner to
formally  evidence the assumption of such portion of the  Obligation,  including
without  limitation,  executing  such  documents  and providing  such  financial
information  to the Bank to  evidence  the  assumption  of such  portion  of the
Obligation,  and obtain if possible,  the release of the Selling Limited Partner
from such portion of the Obligation. The transfer of a Partnership Interest of a
Selling  Limited  Partner shall be deemed to occur as of the Valuation  Date and
the Selling Limited Partner shall have no voting

                                                       -24-

<PAGE>

or other rights as a Limited Partner after such date. Notwithstanding the above,
the  Partnership  shall not be  obligated  to assume  any  outstanding  personal
obligation of a Selling Limited Partner.

                  18.8     Closing.
                           -------

                  18.8.1  Closing  of  Purchase  and Sale.  The  Closing  of any
         purchase and sale of a Partnership  Interest  pursuant to Article 18.1,
         18.2,  18.3,  18.4 or 18.5 of this  Agreement  shall  take place at the
         principal office of the Partnership,  or such other place designated by
         the General Partner, on the date determined as follows (the "Closing"):

                  (a) In the case of a purchase and sale  occurring by reason of
         the death of a Limited  Partner as  provided  in  Article  18.1 of this
         Agreement,  the Closing  shall be held on the thirtieth day (or if such
         thirtieth  day is not a business  day, the next  business day following
         the thirtieth day) next following the last to occur of:

                    (i) Qualification of the executor or personal  administrator
               of the deceased Limited Partner's estate;

                    (ii) The date on which any  necessary  determination  of the
               purchase  price of the  Partnership  Interest to be purchased has
               been made; or

                    (iii) The date that  coincides  with the close of the Option
               Period.

                  (b) In the case of a purchase and sale  occurring by reason of
         the  occurrence of one of the events  described in Article 18.2,  18.3,
         18.4 or  18.5  of this  Agreement,  the  Closing  shall  be held on the
         thirtieth day (or if such thirtieth day is not a business day, the next
         business day following the thirtieth  day) next  following the later to
         occur of:

                    (i) The date on which  any  necessary  determination  of the
               purchase  price of the  Partnership  Interest to be purchased has
               been made; or

                    (ii) The date that  coincides  with the close of the  Option
               Period.

         At the Closing,  although not  necessary  to effect the  transfer,  the
         Selling Limited Partner shall  concurrently  with tender and receipt of
         the applicable  purchase price,  deliver to the purchaser duly executed
         instruments of transfer and  assignment,  assigning good and marketable
         title to the portion or portions of the Selling Limited

                                                       -25-

<PAGE>

         Partner's entire  Partnership  Interest thus purchased,  free and clear
         from any liens or encumbrances or rights of others therein. The parties
         acknowledge  that occurrence of any of the triggering  events described
         in Article 18.1, 18.2, 18.3, 18.4, 18.5 or 18.6 and compliance with all
         the Articles of this  Agreement,  except the  execution of the transfer
         documents  by the Selling  Limited  Partner as  provided  above in this
         Article 18.8.1,  are sufficient to effect the complete  transfer of the
         Selling Limited Partner's  Partnership Interest and the Selling Limited
         Partner shall be deemed to consent to admission of the  transferee as a
         substitute Limited Partner.  Notwithstanding the date of the Closing or
         whether a Closing is  successfully  held, the transfer of a Partnership
         Interest of a Selling  Limited  Partner  shall be deemed to occur as of
         the Valuation Date as defined in Article 18.7.  The deemed  transfer is
         effective  regardless of whether the Selling Limited  Partner  performs
         the duties set forth in this Article 18.8.1.

                  18.8.2  Terms and  Conditions  of  Purchase.  The  Partnership
         Interest of a Limited  Partner shall not be  transferred to any Partner
         unless the  requirements  of Articles 17.2 and 17.4 (b) through (f) are
         satisfied  with  respect to it. The  purchaser  shall be liable for all
         obligations  and  liabilities   connected  with  that  portion  of  the
         Partnership  Interest  transferred  to it  unless  otherwise  agreed in
         writing.

                  19.      SALE, ASSIGNMENT OR OTHER TRANSFER OF THE GENERAL
                           -------------------------------------------------
                           PARTNER'S INTEREST.
                           ------------------

                  19.1  The   General   Partner   may  not   mortgage,   pledge,
hypothecate,  transfer,  sell, assign or otherwise dispose of all or any part of
its interest in the  Partnership,  whether  voluntarily,  by operation of law or
otherwise (the foregoing  actions being  hereafter  collectively  referred to as
"Transfers" or singularly as a "Transfer") except as permitted by this Article.

                  19.2 If the  General  Partner  makes a Transfer  (other than a
mortgage,  pledge or  hypothecation)  of its  general  partner  interest  in the
Partnership pursuant to this Article, it shall be liable for all obligations and
liabilities  incurred  by it as the  general  partner of the  Partnership  on or
before  the  effective  date of such  Transfer,  but shall not be liable for any
obligations or liabilities of the  Partnership  arising after the effective date
of the Transfer.

                    19.3 No Transfer by the General  Partner  shall be permitted
               unless:

                  (a) Counsel for the Partnership shall have rendered an opinion
         that none of the actions  taken in  connection  with such Transfer will
         cause the Partnership to be classified  other than as a partnership for
         federal   income  tax  purposes  or  will  cause  the   termination  or
         dissolution of the Partnership under state law; and

                    (b) Such  documents or  instruments,  in form and  substance
               satisfactory  to  counsel  for the  Partnership,  shall have been
               executed and delivered as may be

                                                       -26-

<PAGE>

                    required in the opinion of counsel  for the  Partnership  to
               effect fully any such Transfer.

                  Notwithstanding the foregoing provisions of this Article 19.3,
the General  Partner may pledge its  interest  in the  Partnership  to any bank,
insurance   company  or  other  financial   institution  to  secure  payment  of
indebtedness.

                  20.      TERMINATION OF THE SERVICES OF THE GENERAL PARTNER.
                           --------------------------------------------------

                  If the General Partner shall be finally adjudged by a court of
competent  jurisdiction to be liable to the Limited  Partners or the Partnership
for any act of gross negligence or willful  misconduct in the performance of its
duties under the terms of this Agreement, the General Partner may be removed and
another  substituted  with the  consent  of all of the  Limited  Partners.  Such
consent  shall be evidenced  by a  certificate  of removal  signed by all of the
Limited Partners. In the event of removal, the new general partner shall succeed
to all of the powers, privileges and obligations of the General Partner, and the
General  Partner's  interest in the  Partnership  shall become that of a Limited
Partner,  and the General Partner shall maintain its same Percentage Interest in
the Partnership  notwithstanding  anything contained in the Act to the contrary.
In addition,  in the event of removal,  the new general  partner  shall take all
steps  necessary  and  appropriate  to prepare  and record an  amendment  to the
Certificate of Limited Partnership to reflect the removal of the General Partner
and the admission of such new general partner.

                  21.      MANAGEMENT AND OPERATION OF BUSINESS.
                           ------------------------------------

                  21.1 All  decisions  with  respect  to the  management  of the
business and affairs of the Partnership shall be made by the General Partner.

                  21.2 The General  Partner shall be under no duty to devote all
of its time to the business of the Partnership,  but shall devote only such time
as it deems  necessary  to conduct the  Partnership  business and to operate and
manage the Partnership in an efficient manner.

                  21.3 The  General  Partner may charge to the  Partnership  all
ordinary and necessary costs and expenses, direct and indirect,  attributable to
the activities,  conduct and management of the business of the Partnership.  The
costs and expenses to be borne by the  Partnership  shall  include,  but are not
limited to, all  expenditures  incurred in acquiring and financing the Equipment
or other Partnership property, legal and accounting fees and expenses,  salaries
of employees of the Partnership,  consulting and quality  assurance fees paid to
independent contractors, insurance premiums and interest.

                  21.4 In addition to, and not in limitation  of, any rights and
powers  covenanted by law or other  provisions of this Agreement,  and except as
limited,  restricted or prohibited by the express  provisions of this Agreement,
the General Partner shall have and may exercise on behalf of the Partnership all
powers and rights necessary, proper, convenient or advisable to effectuate and

                                                       -27-

<PAGE>

     carry out the purposes,  business and objectives of the  Partnership.  Such
powers shall include, without limitation, the following:

                    (a) To conduct the  Offering  and any  Dilution  Offering on
               behalf of the Partnership;

                  (b) To  acquire on behalf of the  Partnership  (i) one or more
         fixed  base  or  transportable   lithotripsy  systems,   including  the
         Lithotripsy  System,  (ii) any other assets related to the provision of
         lithotripsy  services,  or (iii) any other  assets or  equipment  or an
         interest  in  another  entity  consistent  with  the  purposes  of  the
         Partnership  as provided in Article 4  (collectively,  the  "Additional
         Assets"),  at such times and at such price and upon such terms,  as the
         General Partner deems to be in the best interest of the Partnership;

                  (c) To purchase,  hold, manage,  lease, license and dispose of
         Partnership assets, including the purchase,  exchange, trade or sale of
         the Partnership's assets at such price, or amount, for cash, securities
         or other property and upon such terms,  as the General Partner deems to
         be in the best interest of the Partnership;  provided,  that should the
         Partnership  assets be  exchanged  or traded  for  securities  or other
         property (the  "Replacement  Property") the General  Partner shall have
         the same  powers  with  regard to the  Replacement  Property as it does
         towards the traded property;

                    (d) To  exercise  the option of the  General  Partner or the
               Partnership to purchase a Limited Partner's  Partnership Interest
               pursuant to Article 18;

                    (e) To determine the travel itinerary and site locations for
               the Lithotripsy System or other Partnership technology;

                  (f) To borrow money for any Partnership purpose (including the
         acquisition  of the  Additional  Assets)  and,  if security is required
         therefor, to subject to any security device any portion of the property
         for the  Partnership,  to obtain  replacements  of any  other  security
         device, to prepay, in whole or in part,  refinance,  increase,  modify,
         consolidate or extend any encumbrance or other security device;

                  (g) To deposit,  withdraw,  invest, pay, retain (including the
         establishment  of reserves in order to acquire the  Additional  Assets)
         and distribute the  Partnership's  funds in any manner  consistent with
         the provisions of this Agreement;

                  (h)      To institute and defend actions at law or in equity;

                    (i) To enter into and carry out contracts and agreements and
               any or all documents and  instruments  and to do any and all such
               other things as may be in

                                                       -28-

<PAGE>

                    furtherance   of   Partnership   purposes  or  necessary  or
               appropriate to the conduct of the Partnership activities;

                    (j)  To  execute,   acknowledge  and  deliver  any  and  all
               instruments which may be deemed necessary or convenient to effect
               the foregoing;

                  (k) To engage or retain one or more persons to perform acts or
         provide  materials  as  may be  required  by  the  Partnership,  at the
         Partnership's  expense,  and to compensate  such person or persons at a
         rate to be set by the General  Partner,  provided that the compensation
         is at the then  prevailing  rate for the type of services and materials
         provided,  or both.  Any person,  whether a Partner,  an Affiliate of a
         Partner or otherwise, including without limitation the General Partner,
         may be employed or engaged by the  Partnership  to render  services and
         provide materials,  including, but not limited to, management services,
         professional   services,   accounting   services,   quality  assessment
         services, legal services,  marketing services,  maintenance services or
         provide materials; and if such person is a Partner or an Affiliate of a
         Partner, (s)he shall be entitled to, and shall be paid compensation for
         said services or materials,  anything in this Agreement to the contrary
         notwithstanding, provided that the compensation to be received for such
         services  or  materials  is  competitive  in price and terms  with then
         prevailing rate for the type of services and/or materials provided. The
         Partnership,  pursuant  to the terms of a  Management  Agreement,  will
         contract with Sun Medical Technologies,  Inc., a California corporation
         ("Sun")  with  respect  to  the  supervision  and  coordination  of the
         management  and  administration  of the  day-to-day  operations  of the
         Partnership's  business  for  a  monthly  fee  equal  to  7.5%  of  net
         Partnership  Cash Flow per month.  All costs  incurred by Sun under the
         Management  Agreement  shall be paid or reimbursed  by the  Partnership
         directly.  The Partnership may also contract with healthcare facilities
         and/or qualified  physicians desiring to use its Lithotripsy System for
         the treatment of patients.  Owning an interest in the Partnership shall
         not be a condition to using the Lithotripsy System. The General Partner
         and its Affiliates (including Sun) may engage in or possess an interest
         in other business ventures of any nature and description  independently
         or with  others,  including,  but not  limited to, the  operation  of a
         fixed-base  or mobile  lithotripsy  unit,  whether or not such business
         ventures are in direct or indirect  competition  with the  Partnership,
         and neither the  Partnership  nor the Partners  shall have any right by
         virtue of this Agreement in and to said independent  ventures or to the
         income or profits derived therefrom.

                  21.5  In  addition  to  other  acts  expressly  prohibited  or
restricted  by this  Agreement  or by law,  the  General  Partner  shall have no
authority to act on behalf of the Partnership in:

                    (a) Doing any act in  contravention of this Agreement or the
               Partnership's Certificate of Limited Partnership;

                                                       -29-

<PAGE>

                    (b) Doing any act which would make it impossible to carry on
               the ordinary business of the Partnership;

                    (c)   Possessing   or  in  any  manner   dealing   with  the
               Partnership's property or assigning the rights of the Partnership
               in  the   Partnership's   property  for  other  than  Partnership
               purposes;

                    (d)  Admitting  a person as a Limited  Partner  or a General
               Partner except as provided in this Agreement; or

                  (e)  Performing  any act (other  than an act  required by this
         Agreement  or any act  taken  in good  faith  reliance  upon  counsel's
         opinion)  which  would,  at the time  such act  occurred,  subject  any
         Limited Partner to liability as a general partner in any jurisdiction.

                  22.      RESERVES.
                           --------

                  The  General  Partner  may cause the  Partnership  to create a
reserve account to be used exclusively for repairs and acquisition of Additional
Assets and for any other valid Partnership  purpose.  The General Partner shall,
in its sole discretion, determine the amount of payments to such reserve.

                  23.      INDEMNIFICATION AND EXCULPATION OF THE GENERAL

                           PARTNER.

                  23.1 The General  Partner is accountable to the Partnership as
a fiduciary and consequently  must exercise good faith and integrity in handling
Partnership  affairs.  The  General  Partner  and its  Affiliates  shall have no
liability to the  Partnership  which arises out of any action or inaction of the
General Partner or its Affiliates if the General  Partner or its Affiliates,  in
good faith,  determined  that such course of conduct was in the best interest of
the Partnership and such course of conduct did not constitute  gross  negligence
or willful  misconduct  of the General  Partner or its  Affiliates.  The General
Partner and its Affiliates  shall be indemnified by the Partnership  against any
losses, judgments,  liabilities,  expenses and amounts paid in settlement of any
claims sustained by them in connection with the  Partnership,  provided that the
same were not the result of gross  negligence or willful  misconduct on the part
of the General Partner or its Affiliates.

                  23.2 The General Partner shall not be liable for the return of
the Capital Contributions of the Limited Partners, and upon dissolution, Limited
Partners shall look solely to the assets of the Partnership.

                                                       -30-

<PAGE>

                  24.      DISSOLUTION OF THE PARTNERSHIP.
                           ------------------------------

                    24.1 The  Partnership  shall be dissolved and terminated and
               its  business  wound  up upon  the  occurrence  of any one of the
               following events:

                  (a)      The expiration of its term on December 31, 2049;

                  (b) The  filing  by, on  behalf  of, or  against  the  General
         Partner of any  petition or  pleading,  voluntary  or  involuntary,  to
         declare the General  Partner  bankrupt under any bankruptcy law or act,
         or the  commencement  in any  court  of any  proceeding,  voluntary  or
         involuntary,  to declare the General Partner insolvent or unable to pay
         its debts, or the appointment by any court or supervisory  authority of
         a  receiver,  trustee or other  custodian  of the  property,  assets or
         business of the General  Partner or the  assignment by it of all or any
         part of its  property or assets for the benefit of  creditors,  if said
         action,  proceeding  or  appointment  is  not  dismissed,   vacated  or
         otherwise terminated within ninety (90) days of its commencement;

                    (c)  The  determination  of the  General  Partner  that  the
               Partnership should be dissolved;

                  (d) The occurrence of an event described in a plan approved by
         the General Partner and a Majority in Interest of the Limited  Partners
         pursuant  to  Article  17.7   resulting  in  the   dissolution  of  the
         Partnership;

                    (e) The  election  of the General  Partner to  dissolve  the
               Partnership  following the  occurrence  of an event  described in
               Article 18.5;

                  (f) Except as otherwise  provided in any plan  approved by the
         General  Partner and a Majority  in  Interest  of the Limited  Partners
         pursuant to Article 17.7,  the sale,  exchange or other  disposition of
         all or  substantially  all of the property of the  Partnership  without
         making provision for the replacement thereof; and

                  (g)   The   dissolution,   retirement,   resignation,   death,
         disability  or legal  incapacity  of a general  partner,  and any other
         event  resulting in the  dissolution or termination of the  Partnership
         under the laws of the State of  California;  provided,  that the events
         described  in  Sections  15681(c)  and  (d) of the  Act or any  similar
         provisions of any successor  statute,  shall not work a dissolution  of
         the Partnership except as expressly provided in (b) above.

                  24.2  Notwithstanding  the  provisions  of Article  24.1,  the
Partnership   shall  not  be  dissolved  and  terminated  upon  the  retirement,
resignation,  bankruptcy,  assignment for the benefit of creditors, dissolution,
death,  disability or legal  incapacity of a general  partner,  and its business
shall continue  pursuant to the terms and conditions of this  Agreement,  if any
general partner or

                                                       -31-

<PAGE>

general  partners  remain  following  such event;  provided that such  remaining
general  partner or  general  partners  are hereby  obligated  to  continue  the
business of the Partnership.  If no general partner remains after the occurrence
of such event,  the business of the Partnership  shall continue  pursuant to the
terms and  conditions of this  Agreement,  if, within ninety (90) days after the
occurrence of such event,  a Majority in Interest of the Limited  Partners agree
in writing to continue the business of the  Partnership,  and, if necessary,  to
the  appointment  of one or more  persons or entities to be  substituted  as the
general  partner.  In the event the Limited  Partners agree as provided above to
continue the  business of the  Partnership,  the new general  partner or general
partners shall succeed to all of the powers,  privileges and  obligations of the
General Partner,  and the General  Partner's  interest in the Partnership  shall
become a  Limited  Partner's  interest  hereunder.  Furthermore,  in the event a
remaining general partner or the Limited Partners,  as the case may be, agree to
continue the  business of the  Partnership  as provided  herein,  the  remaining
general partner or the newly appointed general partner or general  partners,  as
the case may be, shall take all steps  necessary and  appropriate to prepare and
record an amendment to the  Certificate  of Limited  Partnership  to reflect the
continuation  of the  business of the  Partnership  and the  admission  of a new
general partner or general partners, if any.

                  25.      DISTRIBUTION UPON DISSOLUTION.
                           -----------------------------

                  Upon the dissolution and termination of the  Partnership,  the
General Partner or, if there is none, a representative  of the Limited Partners,
shall  cause  the  cancellation  of the  Partnership's  Certificate  of  Limited
Partnership,  shall liquidate the assets of the Partnership, and shall apply and
distribute the proceeds of such liquidation in the following order of priority:

                    (a) First,  to the payment of the debts and  liabilities  of
               the Partnership, and the expenses of liquidation;

                  (b) Second,  to the creation of any reserves which the General
         Partner  (or such  representatives  of the Limited  Partners)  may deem
         reasonably  necessary  for the payment of any  contingent or unforeseen
         liabilities or obligations of the Partnership or of the General Partner
         arising out of or in connection  with the business and operation of the
         Partnership; and

                  (c) Third,  the balance,  if any,  shall be distributed to the
         Partners in accordance  with the  Partners'  positive  Capital  Account
         balances  after such  Capital  Accounts  are  adjusted  as  provided by
         Article 13, and any other  adjustments  required by the Final  Treasury
         Regulations  under Section 704(b) of the Code. Any general partner with
         a negative  Capital Account  following the  distribution of liquidation
         proceeds or the  liquidation  of its interest  must  contribute  to the
         Partnership  an amount  equal to such  negative  Capital  Account on or
         before the end of the Partnership's  taxable year (or, if later, within
         ninety days after the date of liquidation).  Any capital so contributed
         shall be (i) distributed to those Partners with

                                                       -32-

<PAGE>

         positive  Capital  Accounts until such Capital  Accounts are reduced to
         zero, and/or (ii) used to discharge recourse liabilities.

                  26.      BOOKS OF ACCOUNT, RECORDS AND REPORTS.
                           -------------------------------------

                  26.1 Proper and complete records and books of account shall be
kept by the General  Partner in which shall be entered fully and  accurately all
transactions  and such other matters relating to the  Partnership's  business as
are usually  entered  into  records and books of account  maintained  by persons
engaged  in  businesses  of a like  character.  The  books  and  records  of the
Partnership  shall be prepared  according to the accounting method determined by
the General Partner.  The Partnership's  fiscal year shall be the calendar year.
The books and  records  shall at all times be  maintained  at the  Partnership's
Records Office and shall be open to the reasonable inspection and examination of
the Partners or their duly authorized representatives during reasonable business
hours.

                  26.2 Within  ninety (90) days after the end of each Year,  the
General  Partner shall send to each person who was a Limited Partner at any time
during such year such tax information,  including,  without limitation,  federal
tax Schedule K-1, as shall be reasonably  necessary for the  preparation by such
person of his or her federal  income tax return.  The General  Partner will also
make  available to the Limited  Partners any other  information  required by the
Act.

                  26.3 The General  Partner shall maintain at the  Partnership's
Records  Office  copies of the  Partnership's  original  Certificate  of Limited
Partnership   and  any  certificate  of  amendment,   restated   certificate  or
certificate of cancellation with respect thereto and such other documents as the
Act shall require.  The General Partner will furnish to any Limited Partner upon
request or as  otherwise  required by law a copy of the  Partnership's  original
Certificate of Limited  Partnership and any  certificate of amendment,  restated
certificate, or certificate of cancellation, if any.

                  26.4 The General Partner shall, in its sole  discretion,  make
for the  Partnership  any and all  elections  for  federal,  state and local tax
purposes including, without limitation, any election, if permitted by applicable
law, to adjust the basis of the Partnership's property pursuant to Code Sections
754,  734(b) and  743(b),  or  comparable  provisions  of state or local law, in
connection  with  transfers  of  interests in the  Partnership  and  Partnership
Distributions.

                  26.5 The  General  Partner is  designated  as the Tax  Matters
Partner  (as  defined  in  Section  6231 of the Code) and to act in any  similar
capacity  under  state or local law,  and is  authorized  (at the  Partnership's
expense):   (i)  to  represent  the   Partnership  and  Partners  before  taxing
authorities  or courts of competent  jurisdiction  in tax matters  affecting the
Partnership  or  Partners  in their  capacity  as  Partners;  (ii) to extend the
statute of limitations for assessment of tax deficiencies  against Partners with
respect to adjustments to the Partnership's federal, state or local tax returns;
(iii) to execute any agreements or other documents relating to or affecting such
tax matters, including agreements or other documents that bind the Partners with
respect to such tax matters or  otherwise  affect the rights of the  Partnership
and Partners; and (iv) to expend Partnership funds for professional

                                                       -33-

<PAGE>

services and costs associated  therewith.  The General Partner is authorized and
required  to  notify  the  federal,  state  or  local  tax  authorities  of  the
appointment  of a Tax  Matters  Partner  in  the  manner  provided  in  Treasury
Regulations  Section  301.6231(a)(7)-1,  as modified  from time to time.  In its
capacity  as  Tax  Matters  Partner,  the  General  Partner  shall  oversee  the
Partnership's  tax affairs in the manner which, in its best judgment,  is in the
interests of the Partners.

                  27.      NOTICES.
                           -------

                  All notices under this Agreement shall be in writing and shall
be deemed to have been given when delivered  personally,  or mailed by certified
or registered mail, postage prepaid,  return receipt  requested.  Notices to the
General  Partner  shall be  delivered  at, or mailed to, its  principal  office.
Notices to the  Partnership  shall be delivered  at, or mailed to, its principal
office with a copy to each of its business offices.  Notice to a Limited Partner
shall be  delivered  to such  Limited  Partner,  or mailed  to the last  address
furnished  by him for such  purposes to the General  Partner.  Limited  Partners
shall give  notice of a change of address to the  General  Partner in the manner
provided in this Article.

                  28.      AMENDMENTS.
                           ----------

                  Subject to the  provisions  of Article 28, this  Agreement  is
subject to  amendment  only by  written  consent of the  General  Partner  and a
Majority in Interest of the Limited Partners;  provided, however, the consent of
the Limited Partners shall not be required if such amendments are ministerial in
nature and do not contravene the provisions of Article 29.  Further,  no Limited
Partner  consent shall be required to amend  Schedule A to reflect the admission
of  Partners  as  contemplated  by the  Offering,  any  Dilution  Offering or as
otherwise herein permitted.

                  29.      LIMITATIONS ON AMENDMENTS.
                           -------------------------

                  Notwithstanding  the provisions of Article 28, no amendment to
this Agreement shall:

                  (a)  Enlarge  the   obligations  of  any  Partner  under  this
         Agreement  or convert the  interest in the  Partnership  of any Limited
         Partner  into the  interest of a general  partner or modify the limited
         liability of any Limited Partner, without the consent of such Partner;

                  (b) Amend the  provisions  of Article 13, 14, 16 or 25 without
         the  approval of the General  Partner and a Majority in Interest of the
         Limited Partners;  provided,  however,  that the General Partner may at
         any time  amend  such  Articles  without  the  consent  of the  Limited
         Partners in order to permit the Partnership allocations to be sustained
         for federal  income tax  purposes,  but only if such  amendments do not
         materially  affect  adversely the rights and obligations of the Limited
         Partners, in which case such amendments may only be made as provided in
         this Article 29(b); or

                                                       -34-

<PAGE>

                    (c)  Amend  this  Article  29  without  the  consent  of all
               Partners.

                  30.      MEETINGS, CONSENTS AND VOTING.
                           -----------------------------

                  30.1 A meeting of the  Partnership to consider any matter with
respect to which the  Partners  may vote as set forth in this  Agreement  may be
called  by the  General  Partner  or by  Limited  Partners  who hold  more  than
twenty-five  percent (25%) of the aggregate interests in the Partnership held by
all the Limited Partners.  Upon receipt of a notice requesting a meeting by such
Partner or Partners and stating the purpose of the meeting,  the General Partner
shall, within ten (10) days thereafter, give notice to the Partners of a meeting
of the  Partnership to be held at a time and place  generally  convenient to the
Limited  Partners on a date not earlier than fifteen (15) days after  receipt by
the  General  Partner of the  notice  requesting  a  meeting.  The notice of the
meeting shall set forth the time, date, location and purpose of the meeting.

                    30.2 Any consent of a Partner required by this Agreement may
               be given as follows:

                    (a) By a written consent given by the consenting Partner and
               received by the  General  Partner at or prior to the doing of the
               act or thing for which the consent is solicited, or

                  (b) By the affirmative  vote by the consenting  Partner to the
         doing of the act or thing for which the  consent  is  solicited  at any
         meeting  called  pursuant to this Article to consider the doing of such
         act or thing.

                  30.3 When exercising voting rights expressly granted under the
Articles of this  Agreement,  each Partner shall have that number of votes as is
equal to the  Percentage  Interest  of such  Partner  at the  time of the  vote,
multiplied by 100.

                  31.      SUBMISSIONS TO THE LIMITED PARTNERS.
                           -----------------------------------

                  The General Partner shall give the Limited  Partners notice of
any proposal or other matter  required by any provision of this  Agreement or by
law to be submitted for consideration and approval of the Limited Partners. Such
notice shall include any  information  required by the relevant  provision or by
law.

                  32.      ADDITIONAL DOCUMENTS.
                           --------------------

                  Each  party  hereto  agrees to  execute  and  acknowledge  all
documents and writings which the General Partner may deem necessary or expedient
in the creation of this Partnership and the achievement of its purpose.

                                                       -35-

<PAGE>

                  33.      SURVIVAL OF RIGHTS.
                           ------------------

                  Except as herein  otherwise  provided  to the  contrary,  this
Agreement  shall be binding upon and inure to the benefit of the parties hereto,
their successor and assigns.

                  34.      INTERPRETATION AND GOVERNING LAW.
                           --------------------------------

                  When the  context  in which  words are used in this  Agreement
indicates  that such is the intent,  words in the singular  number shall include
the plural and vise versa; in addition,  the masculine  gender shall include the
feminine and neuter  counterparts.  The Article headings or titles and the table
of  contents  shall not define,  limit,  extend or  interpret  the scope of this
Agreement  or any  particular  Article.  This  Agreement  shall be governed  and
construed in accordance with the laws of the State of California  without giving
effect to the conflicts of laws provisions thereof.

                  35.      SEVERABILITY.
                           ------------

                  If any provision,  sentence,  phrase or word of this Agreement
or the application  thereof to any person or circumstance shall be held invalid,
the remainder of this Agreement, or the application of such provision, sentence,
phrase, or word to persons or circumstances,  other than those as to which it is
held invalid, shall not be affected thereby.

                  36.      AGREEMENT IN COUNTERPARTS.
                           -------------------------

                  This Agreement may be executed in several  counterparts,  each
of which shall be deemed an original,  but all of which shall constitute one and
the same  instrument.  In  addition,  this  Agreement  may contain more than one
counterpart  of the  signature  page and this  Agreement  may be executed by the
affixing of the  signatures  of each of the Partners to one of such  counterpart
signature  pages;  all of such signature  pages shall be read as though one, and
they  shall have the same  force and  effect as though  all of the  signers  had
signed a single signature page.

                  37.      THIRD PARTIES.
                           -------------

                  The agreements, covenants and representations contained herein
are for the benefit of the parties  hereto  inter se and are not for the benefit
of any  third  parties  including,  without  limitation,  any  creditors  of the
Partnership.

                  38.      POWER OF ATTORNEY.
                           -----------------

                  Each Limited  Partner hereby makes,  constitutes  and appoints
Stan Johnson and Cheryl  Williams,  severally,  with full power of substitution,
his or her true and lawful  attorneys-in- fact, for him or her and in his or her
name,  place  and  stead  and  for  his or her  use  and  benefit  to  sign  and
acknowledge,  file and record,  any amendments hereto among the Partners for the
further purpose of executing and filing on behalf of each Limited  Partner,  any
and all certificates of limited

                                                       -36-

<PAGE>

partnership or other  documents  necessary to constitute  the  Partnership or to
effect the  continuation  of the  Partnership,  the admission or withdrawal of a
general partner or a limited partner,  the qualification of the Partnership in a
foreign  jurisdiction  (or  amendment to such  qualification),  the admission of
substitute   Limited   Partners  or  the   dissolution  or  termination  of  the
Partnership, provided such continuation,  admission, withdrawal,  qualification,
or  dissolution  and  termination  are in  accordance  with  the  terms  of this
Agreement.

                  The foregoing power of attorney is a special power of attorney
coupled with an interest,  is  irrevocable  and shall  survive the death,  legal
incapacity,  dissolution  or  bankruptcy  of  each  Limited  Partner.  It may be
exercised by any one of said  attorneys  by listing all of the Limited  Partners
executing any instrument over the signature of the  attorney-in-fact  acting for
all of them.  The power of attorney  shall survive the delivery of an assignment
by a Limited  Partner of the whole or any  portion of his or her Unit.  In those
cases in which the assignee of, or the successor to, a Limited  Partner owning a
Unit has been  approved by the Partners for  admission to the  Partnership  as a
substitute  Limited  Partner,  the power of attorney  shall survive for the sole
purpose of enabling  the General  Partner to execute,  acknowledge  and file any
instrument necessary to effect such substitution.

                  This power of attorney shall not be affected by the subsequent
bankruptcy,  dissolution,  incapacity  or  mental  incompetence  of any  Limited
Partner.

                  39.      ARBITRATION.
                           -----------

                  Any  dispute  arising  out  of  or  in  connection  with  this
Agreement or the breach thereof shall be decided by arbitration in Austin, Texas
in  accordance  with  the then  effective  commercial  arbitration  rules of the
American  Arbitration  Association,  and judgment  thereof may be entered in any
court having jurisdiction thereof.

                  40.      CREDITORS.
                           ---------

                  None of the  provisions  of this  Agreement  shall  be for the
benefit of or enforceable by any creditors of the Partnership.

                                             [signature page follows]

                                                       -37-

<PAGE>

                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
of Limited Partnership as of the day and year first above written.

                                        GENERAL PARTNER:

                                     MOBILE KIDNEY STONE CENTERS OF

                                     CALIFORNIA, LTD. I, a California limited
                                       partnership

                           By:      Sun Medical Technologies, Inc., a California
                                      corporation and its sole general partner

                                    By:  /s/ Stan Johnson
                                    ---------------------
                                            Stan Johnson
                                            President

ATTEST:

/s/ James D. Clark                                    [CORPORATE SEAL]
-----------------------
Secretary

                                          INITIAL LIMITED PARTNER:
                                         -----------------------

                                         /s/ Stan Johnson
                                         ----------------
                                         Stan Johnson

                                                       -38-

<PAGE>

STATE OF North Carolina

COUNTY OF Cumberland

                  On this  23  day of August,  1999,  before  me, the
undersigned  Notary Public in and for the County of Cumberland in the State
of  North Carolina,  personally came Stan Johnson, who, being by me
duly sworn,  said that he is President of Sun Medical  Technologies,  Inc.,  the
sole general  partner of Mobile Kidney Stone Centers of California,  Ltd. I, the
sole general  partner of Mobile Kidney Stone Centers of  California  III,  L.P.,
that the seal affixed to the  foregoing  instrument  in writing is the corporate
seal of the corporation,  and that said writing was signed, sworn to, and sealed
by him in behalf of said  corporation by its authority duly given.  And the said
Stan  Johnson,  further  certified  that the facts set forth in said writing are
true and correct,  and  acknowledged  said  instrument to be the act and deed of
said corporation.

                  WITNESS my hand and notarial seal.

                                    Notary Public

My commission expires:

May 1, 2004

STATE OF North Carolina

COUNTY OF Cumberland

                  I, Debra J. Scott, a notary public in and for
the State and  County  set forth  above,  do hereby  certify  that Stan  Johnson
personally  appeared  before  me  this  23  day of  August,  1999  and
acknowledged and swore to the due execution of the foregoing Limited Partnership
Agreement in his capacity as the initial limited partner.

                                    /s/ Debra J. Scott
                                    ------------------
                                    Notary Public

My commission expires:

May 1, 2004

                                                       -39-

<PAGE>

                           COUNTERPART SIGNATURE PAGE

                  By signing this  Counterpart  Signature  Page, the undersigned
acknowledges  his or  her  acceptance  of  that  certain  Agreement  of  Limited
Partnership  of Mobile Kidney Stone Centers of California  III, L.P., and his or
her intention to be legally bound thereby.

                  Dated this _________ day of ___________________, 1999.

                                   Signature

                                   Printed Name

STATE OF _______________                    )
                                            )
COUNTY OF _____________                     )

                  BEFORE ME, the undersigned  Notary Public in and for the State
and County set forth  above,  on the  _______ day of  __________________,  1999,
personally appeared ___________________________________,  and, being by me first
duly sworn,  stated that (s)he signed this  Counterpart  Signature  Page for the
purpose set forth above and that the statements contained therein are true.

                           Signature of Notary Public

                           Printed Name of Notary

My Commission Expires:

---------------------------
[SEAL]

                                                       -40-

<PAGE>

                                   SCHEDULE A

                        Schedule of Partnership Interests

               MOBILE KIDNEY STONE CENTERS OF CALIFORNIA III, L.P.
               ---------------------------------------------------

           CONTRIBUTIONS OF CAPITAL TO THE PARTNERSHIP AND PERCENTAGE

                                    INTERESTS

                                   Cash                              Percentage

General Partner                  Contribution      Guaranty(1)        Interest
---------------                 ------------        --------         -----------

Mobile Kidney Stone Centers      $  97,667.00    $194,850.00                40%
of California, Ltd. I
1301 Capital of Texas Highway
Suite C-300
Austin, Texas  78746

Limited Partners

N. Erik Albert, M.D.            $    5,000.00    $  9,742.50                 2%
Gene R. Conley, M.D.                 7,500.00      14,613.75                 3%
Rajendra H. Dwivedi, M.D.           12,500.00      24,356.25                 5%
Barton Gershbein, M.D.              12,500.00      24,356.25                 5%
Tu-Hi Hong, M.D.                    12,500.00      24,356.25                 5%
William W. Kirby, M.D.              12,500.00      24,356.25                 5%
Gregory M. Lomas, M.D.               2,500.00       4,871.25                 1%
Mobile Kidney Stone Centers         31,500.00      68,197.50                14%
     of California, Ltd. I
Robert J. Reiner, M.D.              12,500.00      24,356.25                 5%
Alfonso Richards, M.D.              12,500.00      24,356.25                 5%
Mark A. Silvert, M.D.               12,500.00      24,356.25                 5%
Alan K. Wong, M.D.                  12,500.00      24,356.25                 5%

TOTAL:                            $244,167.00    $487,125.00               100%
                                  ===========    ===========               ====

(1)      Represents the principal portion of each Partner's guaranty obligation,
         as each  Partner's  obligation  under the  Guaranty  includes  not only
         principal,  but also (as provided in the  Guaranty)  accrued and unpaid
         interest,  late payment penalties and all costs incurred by the Bank in
         collecting any defaulted obligations.  The principal amount of the loan
         is up to $487,125.  The General  Partner will guarantee 40% of the Loan
         (up to a $194,850  principal  guaranty) as provided in the  Memorandum.
         The Limited Partners will individually  guarantee 1% of the loan (up to
         a $4,871.25  principal guaranty) for each unit purchased as provided in
         the Memorandum.

                                                       -41-

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