Name of Prospective Investor Memorandum Number TENNESSEE LITHOTRIPTERS LIMITED PARTNERSHIP I A Limited Partnership Formed Under the Laws of Tennessee CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

Name of Prospective Investor Memorandum Number

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TENNESSEE LITHOTRIPTERS LIMITED PARTNERSHIP I

A Limited Partnership Formed Under the Laws of Tennessee

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

Sale by Lithotripters, Inc.
of

29 Units of Limited Partnership Interest
at $4,502 in Cash per Unit

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THIS MEMORANDUM IS FURNISHED PURSUANT TO A CONFIDENTIALITY AGREEMENT BETWEEN THE
PARTNERSHIP AND THE INVESTOR WHOSE NAME APPEARS ABOVE. THE CONFIDENTIALITY
AGREEMENT PROHIBITS THE DISCLOSURE OF THE CONFIDENTIAL MATERIAL CONTAINED IN
THIS MEMORANDUM, EXCEPT TO THE EXTENT SUCH INVESTOR DEEMS IT NECESSARY TO SHARE
SUCH INFORMATION WITH HIS LEGAL, ACCOUNTING OR OTHER FINANCIAL ADVISORS, WHO
LIKEWISE SHALL BE BOUND BY THE SAME CONFIDENTIALITY RESTRICTIONS SET FORTH IN
THE CONFIDENTIALITY AGREEMENT.

MEDTECH INVESTMENTS, INC.
Exclusive Sales Agent
2008 Litho Place
Fayetteville, North Carolina 28304
▇-▇▇▇-▇▇▇-▇▇▇▇

The Date of this Memorandum is January 14, 1999

TENNESSEE LITHOTRIPTERS LIMITED PARTNERSHIP I

Sale by Lithotripters, Inc.
of
29 Units of Limited Partnership Interest
at $4,502 in Cash per Unit

Lithotripters, Inc. ("Litho" or the "General Partner"), a
North Carolina corporation, and the general partner of Tennessee Lithotripters
Limited Partnership I, a Tennessee limited partnership (the "Partnership"),
hereby offers for sale and assignment on the terms set forth herein, a maximum
of 29 units (the "Units") of limited partnership interest in the Partnership
issued to and held by Litho. Each Unit represents a 0.5% economic interest in
the Partnership, and the Units are offered for assignment at a price of $4,502
per Unit. See "Terms of the Offering." The Partnership owns and operates a
Lithostar(TM) second generation extracorporeal shock-wave lithotripter for the
lithotripsy of kidney stones. The Lithostar(TM) is installed in a self-propelled
Coach (collectively, the Coach with the installed Lithostar(TM) is referred to
herein as the "Mobile Lithotripsy System") enabling the Partnership to provide
lithotripsy services at various locations in western Tennessee and, beginning in
February 2000, in South Haven, Mississippi (the "Service Area").

The cash purchase price is due at subscription; however,
prospective Investors that meet certain requirements may be able to fund a
portion of their Unit purchase price with the proceeds of certain third-party
financing. See "Terms of the Offering - Limited Partner Loans." The Offering
will terminate on February 29, 2000 (or earlier upon the sale of all 29 Units as
provided herein), unless extended at the discretion of Litho for a period not to
exceed 180 days.

Litho owns the Units, therefore Litho (not the Partnership)
will receive any proceeds from the sale of Units.

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Purchase of Units involves risks and is suitable only for persons of
substantial means who have no need for liquidity in this investment. Among other
factors, prospective investors should note that there is substantial current and
anticipated competition in the Service Area and that the health care industry is
undergoing significant government regulatory reforms. See "Risk Factors" and
"Terms of the Offering - Suitability Standards."

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See Glossary for capitalized terms used
herein and not otherwise defined.

TABLE OF CONTENTS

APPENDICES

Appendix A AGREEMENT OF LIMITED PARTNERSHIP OF TENNESSEE LITHOTRIPTERS
LIMITED PARTNERSHIP I

Appendix B FORM OF LOAN COMMITMENT (WITH EXHIBITS)

Appendix C FORM OF OPINION OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇,
A PROFESSIONAL LIMITED LIABILITY COMPANY

Appendix D NOTES TO FINANCIAL STATEMENTS

Prior to subscribing for Units, Investors should carefully
examine this entire Memorandum, including the Appendices hereto, and should give
particular consideration to the general risks attendant to speculative
investments and investments in partnerships generally, and to the other special
operating, tax and other investment risks set forth below.

General Risks of Operations. Although Litho and its personnel
have significant experience in managing lithotripsy enterprises, whether the
Partnership can continue to effectively operate its business cannot be
accurately predicted. The benefits of an investment in the Partnership also
depend on many factors over which the Partnership has no control, including
competition, technological innovations rendering the Mobile Lithotripsy System
less competitive or obsolete, and other matters. The Partnership may be
adversely affected by various changing local factors such as an increase in
local unemployment, a change in general economic conditions, changes in interest
rates and availability of financing, and other matters that may render the
operation of the Mobile Lithotripsy System difficult or unattractive. Other
factors that may adversely affect the operation of the Mobile Lithotripsy System
are unforeseen increased operating expenses, energy shortages and costs
attributable thereto, uninsured losses and the capabilities of the Partnership's
management personnel.

Uncertainties Related to Changing Healthcare Environment. The
healthcare industry has experienced substantial changes in recent years. Managed
care is becoming a major factor in the delivery of lithotripsy services, and
selection of lithotripsy service providers may be shifting from individual
practitioners to health maintenance organizations and commercial insurers. There
is no assurance that the changing healthcare environment will not have a
material adverse effect on the Partnership.

Lack of Diversification. The Partnership's principal purpose
will be to continue to operate the Mobile Lithotripsy System. Because the
Part-ner-ship is dependent on only one line of business and one Mobile
Lithotripsy System, there will be greater risks from unexpected service
interruptions, equipment breakdowns, technological developments, kidney stone
treatment medical breakthroughs, economic problems and similar matters than
would be the case with a more diversified business.

Impact of Insurance Reimbursement. The price the Partnership
is able to charge its patients for the lithotripsy of kidney stones is
significantly dependent upon the amount of reimbursement private health care
insurers would allow for this procedure. Most of the Partnership's patients pay
for services directly from private payment sources, primarily from third-party
insurers such as Blue Cross/Blue Shield and other commercial insurers. Coverage
and payment levels for these private payment sources vary depending upon the
patient's individual insurance policy. The increasing influence of health
maintenance organizations and other managed care companies has resulted in
pressure to reduce the reimbursement available for lithotripsy procedures. Litho
and some of its Affiliates have recently been informed by several hospitals and
commercial insurers that reimbursement rates must be reduced, or the hospitals
and commercial insurers would negotiate with competing lithotripsy services.
Additionally, the Health Care Financing Administration ("HCFA"), which
administers the Medicare program, has proposed rules which would reduce the
reimbursement available for lithotripsy procedures provided at hospitals to
$2,235. See "Regulation - Federal Regulation." In some cases reimbursement rates
payable to Affiliates of Litho by commercial insurers are less than the proposed
HCFA rate. Because of the competitive pressures from managed care companies as
well as threatened reductions in Medicare reimbursement, Litho anticipates that
reimbursement available for the lithotripsy procedure may continue to decrease.
Such decreases could have a material adverse effect on Partnership revenues.
Regarding the professional fees paid to physicians who treat patients on the
Mobile Lithotripsy System, Litho anticipates that similar competitive pressures
may result in lower reimbursement paid to physicians, both by private insurers
and by government programs such as Medicare.

Reliability and Efficacy of the Lithotripter. The
Lithostar(TM) has an eleven year United States operating history, having
received premarket approval from the FDA for renal lithotripsy on September 30,
1988. This approval followed a period of clinical testing beginning in February
1987 at four test sites in the United States, which was preceded by substantial
clinical testing of the Lithostar(TM) at the Urological Clinic of the ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ University of Mainz, West Germany. Litho estimates that more than 400
Lithostar(TM) systems are currently operating in over twenty countries, and
Litho and its Affiliates operate over 30 Lithostars(TM) in other ventures. In
▇▇▇▇▇'s opinion, the Lithostar(TM) has proven to be reliable and dependable
medical equipment; however, downtime periods necessitated for maintenance or
repairs of the Partnership's Mobile Lithotripsy System will adversely affect
Partnership revenues. The Lithostar(TM) operated by the Partnership has been in
operation since 1990 and has not required service other than routine maintenance
and upgrades.

In 1996, the FDA approved a new higher intensity shock--head
system for the Lithostar(TM), which ▇▇▇▇▇ believes has shortened procedure
times. The Partnership's Lithostar(TM) has been upfitted with the new tube
system. Based upon a detailed follow-up study of 86,000 renal and 51,000
ureteral stones treated on the Lithostar(TM) in all of Litho's affiliated
partnerships using both the original and newer shock-head systems, Litho notes
an 86% total success rate with an overall retreatment rate of only 15%. This
retreatment rate included stones of all sizes and locations, including staghorn
calculi which at times required multiple treatments. Based upon this study and
▇▇▇▇▇'s experience in doing well in excess of 150,000 cases over the past ten
and one-half years in its affiliated limited partnerships, Litho is of the
opinion that the Lithostar(TM) is presently a very effective and sound
alternative for the treatment of renal stones.

Investors should note that some studies indicate that
lithotripsy may cause high blood pressure and tissue damage. Litho questions the
reliability of these studies and believes lithotripsy has become a widely
accepted method for the treatment of renal stones.

Technological Obsolescence. The history of lithotripsy of
kidney stones as an accepted treatment procedure is relatively recent, with the
first clinical trials being conducted in West Germany beginning in 1980 and the
first premarket approval for a renal lithotripter in the United States being
granted by the FDA in December 1984. Today, lithotripsy is the treatment
procedure of choice for kidney stone disease, having replaced other treatment
methods. Published reports indicate that certain researchers are attempting to
improve a laser technology to more easily eradicate kidney stones, and
pharmaceutical companies and researchers have attempted to develop a safe drug
that can be used to dissolve kidney stones in all cases. Litho cannot predict
the outcome of ongoing research in these areas, and any one or more developments
could reduce or eliminate lithotripsy as an acceptable procedure or treatment
method of choice for the treatment of kidney stones. In addition, manufacturers
have developed and begun selling a new generation of transportable lithotripters
which are smaller and more mobile than the Mobile Lithotripsy System. Also, the
newer transportable lithotripters cost a fraction of what the Partnership paid
for the Mobile Lithotripsy System in 1990. Physicians in some market areas have
indicated a preference for the newer transportable lithotripters.

Partnership Limited Resources and Risks of Leverage. In the
event of unanticipated expenses, it may be necessary to supplement Partnership
funds with the proceeds of debt financing. Although ▇▇▇▇▇ maintains good
relationships with certain commercial lending institutions, it has not obtained
a loan commitment from any party in any amount on behalf of the Partnership and
whether one would timely be forthcoming on terms acceptable to the Partnership
cannot be assured. Litho and/or its Affiliates may, but are under no obligation
to, make loans to the Partnership, and there is no assurance that they would be
willing or able to do so at the time, in amounts and on terms required by the
Partnership. While ▇▇▇▇▇ does not anticipate that it would cause the Partnership
to incur indebtedness unless cash generated from Partnership operations were at
the time expected to enable repayment of such loan in accordance with its terms,
lower than anticipated revenues and/or greater than anticipated expenses could
result in the Partnership's failure to make payments of principal or interest
when due under such a loan and the Partnership's equity being reduced or
eliminated. In such event, the Limited Partners could lose their entire
investment.

Acquisition of Additional Assets. If in the future Litho
determines that it is in the best interest of the Partnership to acquire an
additional Lithostar or any other assets related to the provision of lithotripsy
services, Litho has the authority (without obtaining the Limited Partners'
consent) to borrow additional funds on behalf of the Partnership to accomplish
such goals, and may use Partnership assets and revenues to secure and repay such
borrowings. The acquisition of additional assets may substantially increase the
Partnership's monthly obligations and result in greater personnel requirements.
See "Risk Factors - Operating Risks - Partnership Limited Resources and Risks of
Leverage." In any event, no Limited Partner would be personally liable on any
additional Partnership indebtedness without such Partner's prior written
consent. There is no assurance that financing would be available to the
Partnership to acquire additional assets or to fund any additional working
capital requirements. Any such borrowing by the Partnership will serve to
increase the risks to the Partnership associated with leverage as provided
above.

Competition. Several competing lithotripters are currently
operating in and near the Service Area in competition with the Mobile
Lithotripsy System, including competitors that are Affiliates of Litho. There is
no assurance that additional parties will not, in the future, operate fixed-site
or mobile lithotripters in and around the Service Area. To Litho's knowledge, no
manufacturers are restricted from selling their lithotripters to other parties
in the Service Area. In addition, except as otherwise provided by law, neither
Litho nor its Affiliates are prohibited from engaging in any business or
arrangement that may compete with the Partnership. Several ventures affiliated
with Litho provide lithotripsy services near the Service Area. See "Prior
Activities" and "Competition." Furthermore, the Partnership will be competing
with facilities and individual medical practitioners who offer conventional
treatment (e.g., surgery) for kidney stones. Limited Partners recently approved
an amendment to the Partnership Agreement that removed the contractual
restrictions on Limited Partners' ability to own interests in competing
equipment or ventures.

Government Regulation . All facets of the healthcare industry
are highly regulated and will become more so in the future. The ability of the
Partnership to operate legally and be profitable may be adversely affected by
changes in governmental regulations, including expected changes in
reimbursement, Medicare and Medicaid certification requirements, federal and
state fraud and abuse laws, including the federal Anti-Kickback Statute, the
federal False Claims Act, federal and state self-referral laws, state
restrictions on fee splitting and other governmental regulation. See
"Regulation." These laws and regulations may adversely affect the economic
viability of the Partnership. The laws are broad in scope, and interpretations
by courts have been limited. Violations of these laws would subject Litho and
all Limited Partners to governmental scrutiny and/or felony prosecution and
punishment in the form of large monetary fines, loss of licensure, imprisonment
and exclusion from Medicare and Medicaid. Certain provisions of Medicare and
Medicaid law limit provider ownership and control over the various health care
services to which physicians may make Medicare and Medicaid referrals. The
primary laws involved are the "▇▇▇▇▇ II" federal statute prohibiting financial
relationships between physicians and certain entities to which they refer
patients, and the Anti-Kickback Statute which prohibits compensation in exchange
for or to induce referrals.

Regarding ▇▇▇▇▇ II, in January, 1998, HCFA published proposed
▇▇▇▇▇ II regulations. Under the proposed regulations, physician Limited Partner
referrals of Medicare and Medicaid patients to contracting hospitals for
lithotripsy services would be prohibited. If HCFA adopts the proposed ▇▇▇▇▇ II
regulations as final, or if a reviewing court were to interpret the ▇▇▇▇▇ II
statute using the proposed regulations as interpretive authority, then the
Partnership and its physician Limited Partners would likely be found in
violation of ▇▇▇▇▇ II. In such instance, the Partnership and/or its physician
Limited Partners may be required to refund any amounts collected from Medicare
and Medicaid patients in violation of the statute, and they may be subject to
civil monetary penalties and/or exclusion from the Medicare and Medicaid
programs.

The Anti-Kickback Statute prohibits paying or receiving any
remuneration in exchange for making a referral for healthcare services which may
be paid for by Medicare, Medicaid or CHAMPUS. The law has been broadly
interpreted to include any payments which may induce or influence a physician to
refer patients. One of the federal agencies that enforces the Anti-Kickback
Statute has issued several "safe harbors" which, if complied with, mean the
payment or transaction will be deemed not to violate the law. This Offering does
not comply with any "safe harbor." There is limited guidance from reviewing
courts regarding the application of the broad language of the Anti-Kickback
Statute to joint ventures similar to the one described in this Offering. In
order to prove violations of the Anti-Kickback law, the government must
establish that one or more parties offered, solicited or paid remuneration to
induce or reward referrals. The government has said that in certain situations
the mere offering of an opportunity to invest in a venture would constitute
illegal remuneration in violation of the Anti-Kickback Statute. Although ▇▇▇▇▇
believes the structure and purpose of the Partnership are in compliance with the
Anti-Kickback Statute, no assurances can be given that government officials or a
reviewing court would agree. Violation of the Anti-Kickback Statute could
subject the Partnership, Litho and the physician Limited Partners to criminal
penalties, imprisonment, fines and/or exclusion from the Medicare and Medicaid
programs.

The federal False Claims Act and similar laws generally
prohibit an individual or entity from knowingly and willfully presenting a claim
(or causing a claim to be presented) for payment from Medicare, Medicaid or
other third party payors that is false and fraudulent. In recent cases, False
Claims Act violations have been based on allegations that ▇▇▇▇▇ II or the
Anti-Kickback Statute have been violated.

In addition to ▇▇▇▇▇ II, the Anti-Kickback Statute and the
False Claims Act, an unfavorable interpretation of other existing laws, or
enactment of future laws or regulations, could potentially adversely affect the
operation of the Partnership.

State laws will affect the operation of the Partnership as
well. The Partnership commenced its extracorporeal lithotripsy services before
Tennessee's certificate of need ("CON") law became effective in 1993, and
accordingly the Partnership was not required to obtain a CON prior to
commencement of its services at the Contract Hospitals. Litho anticipates that a
CON will be issued in Mississippi so that the Partnership can provide service to
Baptist Memorial Hospital - DeSoto in Southaven; however, there is no assurance
that a CON will be timely issued. Various licensure and registration
requirements must be met for the Partnership to provide mobile lithotripsy
services in Tennessee and Mississippi. The Partnership has been endeavoring to
comply and will continue to seek to comply with all applicable statutory and
regulatory requirements. Physicians licensed in Tennessee must treat their own
patients on the Mobile Lithotripsy System. See "Regulation - State Regulation."

Contract Terms and Termination. The Partnership provides
lithotripsy services to seven Contract Hospitals in the Memphis area pursuant to
four separate Hospital Contracts. In addition, the Partnership has entered in an
additional Hospital Contract with Baptist Memorial Hospital - DeSoto in
Southaven, Mississippi pursuant to which the Partnership expects to commence
service in February 2000. All but one of the Hospital Contracts grant the
Partnership the exclusive right to provide lithotripsy services at the
particular Contract Hospital. Each of the Hospital Contracts provide for
automatic renewal on a year-to-year basis. All of the Hospital Contracts with
automatic renewal provisions are terminable without cause upon 30 days or, in
some cases 60 or 90 days prior written notice by either party prior to any
renewal date. The Baptist Memorial Hospital - DeSoto contract has a term of
three years, but may be terminated without cause by either party on 180 days
notice. It is expected that most new lithotripsy service contracts, if any,
would have one-year terms and be automatically renewed unless either party
elects to cancel prior to the end of the term. In addition, many of the existing
contracts have, and any new contracts are expected to have, provisions
permitting termination in the event certain laws or regulations are enacted or
applied to the contracting parties' business arrangements in a manner deemed
materially detrimental to either party. See "Government Regulation" above. ▇▇▇▇▇
believes it has a good relationship with the Contract Hospitals and does not
anticipate significant Hospital Contract terminations. There is no assurance,
however, that terminations will either not occur or that the resulting impact to
the Partnership would not have a material adverse effect on Partnership
operations. Litho anticipates that some Contract Hospitals may attempt to
negotiate rate reductions as a condition to renewal. In addition, competing
vendors may attempt to cause certain Contract Hospitals to contract with them
instead of the Partnership. The loss of Contract Hospitals to competition will
adversely affect Partnership revenues and such effect could be material. Thus,
there is no assurance that Partnership operations as conducted on the date of
this Memorandum will continue as herein described or contemplated, and the
cancellation of a significant number of service contracts or the Partnership's
inability to secure new ones could have a material negative impact on the
financial condition and results of the Partnership. See "Business Activities -
Hospital Contracts"and "Risk Factors - Operating Risks -Competition."

Loss on Dissolution and Termination. Upon the dissolution and
termination of the Partnership, the proceeds realized from the liquidation of
its assets, if any, will be distributed to its partners only after satisfaction
of the claims of all creditors. Accordingly, the ability of a Limited Partner to
recover all or any portion of his investment under such circumstances will
depend on the amount of funds so realized and the claims to be satisfied
therefrom. See "Summary of the Partnership Agreement - Optional Purchase of
Limited Partner Interests."

Year 2000 Compliance . The now familiar "Year 2000 Issue"
arose because many existing computer programs use only the last two digits to
refer to a year. Therefore, such computer programs do not properly recognize a
year that begins with "20" instead of "19." If not corrected, many computer
applications could fail or create erroneous results on, before or after January
1, 2000. To date, the Partnership has not experienced any Year 2000
Issue-related problems; however, there is no assurance that Year 2000
Issue-related problems will not adversely affect the Partnership in the future,
including on the date February 29, 2000 as some experts have suggested. The
Partnership has not inquired as to the Year 2000 readiness of any insurance
company, Contract Hospital or other third party it has a relationship with, but
is relying that such parties will be Year 2000 compliant. In the event that any
Year 2000 Issue problems arise, the Partnership could be forced to cease its
operations for an indefinite period of time while the Year 2000 problems are
remedied, at a cost which cannot be accurately predicted at this time. Any such
interruption in Partnership operations would adversely affect Partnership
revenues.

Investors should note that Litho anticipates no significant
tax benefits associated with the operation of the Mobile Lithotripsy System or
the Partnership. No ruling will be sought from the Service on the United States
federal income tax consequences of any of the matters discussed in this
Memorandum or any other tax issues affecting the Partnership or the Limited
Partners. ▇▇▇▇▇ is relying upon an opinion of Counsel with respect to certain
material United States federal income tax issues. Counsel's opinion is not
binding on the Service as to any issue, and there can be no assurance that any
deductions, or the period in which deductions may be claimed, will not be
challenged by the Service. Each Investor should carefully review the following
risk factors and consult his or her own tax advisor with respect to the federal,
state and local income tax consequences of an investment in the Partnership.

THE TAX RISKS SET FORTH IN THIS SECTION ARE NOT INTENDED TO BE
AN EXHAUSTIVE LIST OF THE GENERAL OR SPECIFIC TAX RISKS RELATING TO THE PURCHASE
OF UNITS IN THE PARTNERSHIP. EACH INVESTOR IS DIRECTED TO THE FULL OPINION OF
COUNSEL (APPENDIX C TO THE MEMORANDUM). IT IS STRONGLY RECOMMENDED THAT EACH
INVESTOR IN-DE-PEN-DENT-LY CONSULT HIS OR HER PERSONAL TAX COUNSEL CONCERNING
THE TAX CONSEQUENCES ASSOCIATED WITH HIS OR HER OWNERSHIP OF AN INTEREST IN THE
PARTNERSHIP. THE CONCLUSIONS REACHED IN COUNSEL'S OPINION ARE RENDERED WITHOUT
ASSURANCE THAT SUCH CONCLUSIONS HAVE BEEN OR WILL BE ACCEPTED BY THE SERVICE OR
THE COURTS.

THIS MEMORANDUM AND COUNSEL'S OPINION DO NOT DISCUSS, NOR WILL
COUNSEL BE RENDERING AN OPINION REGARDING, ANY ESTATE AND GIFT TAX OR STATE AND
LOCAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP. FURTHERMORE,
INVESTORS SHOULD NOTE THAT THE ANTICIPATED FEDERAL INCOME TAX CONSEQUENCES OF AN
INVESTMENT IN THE PARTNERSHIP MAY BE ADVERSELY AFFECTED BY FUTURE CHANGES IN THE
FEDERAL INCOME TAX LAWS, WHETHER BY FUTURE ACTS OF CONGRESS OR FUTURE
ADMINISTRATIVE OR JUDICIAL INTERPRETATIONS OF APPLICABLE FEDERAL INCOME TAX
LAWS. ANY OF THE FOREGOING MAY BE GIVEN RETROACTIVE EFFECT.

INVESTORS SHOULD NOTE THAT THE UNITS ARE BEING MARKETED BY
LITHO AS AN ECONOMIC INVESTMENT AND THAT LITHO ANTICIPATES AND INTENDS NO
SIGNIFICANT TAX BENEFITS FROM AN INVESTMENT IN THE UNITS. SEE "PASSIVE INCOME
AND LOSSES" IN THIS SECTION. THE INVESTMENT IN UNITS IS A LONG-TERM INVESTMENT.
INVESTORS SHOULD NOT INVEST IN THE PARTNERSHIP TO ACHIEVE TAX BENEFITS AS LITHO
ANTICIPATES SIGNIFICANT PARTNERSHIP TAXABLE INCOME THROUGHOUT THE TERM OF THE
PARTNERSHIP.

Possible Legislative or Other Actions Affecting Tax
Consequences. The federal income tax treatment of an investment in an
equipment/service oriented limited part-ner-ship such as the Part-ner-ship may
be modified by legislative, judicial or administrative action at any time, and
any such action may retroactively affect investments and commitments previously
made. The rules dealing with federal income taxation of limited partnerships are
constantly under review by the Service, resulting in revisions of its
regulations and revised interpretations of established concepts. In evaluating
an investment in the Part-ner-ship, each Investor should consult with his or her
personal tax advisor with respect to possible legislative, judicial and
administrative developments.

Disqualification of Employee Benefit Plans. Purchase of Units
in the Partnership may cause certain Limited Partners, certain hospitals and
healthcare treatment centers, the Partnership, and employees of the foregoing to
be treated under Section 414(m) of the Code as being employed in the aggregate
by a single employer or "affiliated service group" for purposes of minimum
coverage, participation and other employee benefit plan requirements imposed by
the Code. In contrast, an employer not affiliated under Section 414(m) need only
consider its own employees in determining whether its employee benefit plans
satisfy Code requirements. Aggregation of employees could cause the
disqualification of the retirement plans of certain Limited Partners and related
entities. Aggregation could also require the value of the vested retirement
benefit of a highly compensated employee who is a participant in a disqualified
plan to be included in his or her gross income, regardless of whether the
employee is a Limited Partner. These rules may adversely affect Investors who
are currently involved in a medical practice joint venture, regardless of their
purchase of Units in the Partnership. Litho and Counsel have been informally
advised by officials of the Service that the Service would not likely attempt to
apply the affiliated service group rules to the Partnership, nor has the Service
applied these rules to similar arrangements in the past. Informal discussions
with the Service, however, are not binding on the Service, and there can be no
guarantee that the Service will not apply the affiliated service group rules to
the Partnership.

INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE APPLICABILITY OF THE AFFILIATED SERVICE GROUP RULES DESCRIBED
HEREIN TO THE EMPLOYEE BENEFIT PLANS MAINTAINED BY THEM OR THEIR MEDICAL
PRACTICES.

Partnership Allocations. The Part-ner-ship Agreement contains
certain allocations of profits and losses that could be reallocated by the
Service if it were determined that the allocations did not have "substantial
economic effect." On December 31, 1985, the Treasury Regulations dealing with
the propriety of part-ner-ship allocations were finalized. As a general rule,
allocations of profits and losses must have "substantial economic effect." Based
upon current law, Counsel is of the opinion that, if the question were
litigated, it is more probable than not that the allocation of profits and
losses set forth in the Part-ner-ship Agreement would be sustained for federal
income tax purposes. Investors are cautioned that the foregoing opinion is based
in part upon final Regulations which have not been extensively commented upon or
construed by the courts.

Income in Excess of Distributions. The Partnership Agreement
provides that in each year annual Distributions may be made to the Partners.
Excluded from the definition of cash available for distribution is the amount of
funds necessary to discharge Partnership debts and to maintain certain cash
reserves deemed necessary by Litho. If Partnership cash flow declines, a Limited
Partner could be subject to income taxes payable out of personal funds to the
extent of the Part-ner-ship's income, if any, attributed to him without
receiving from the Part-ner-ship sufficient Distributions to pay the Limited
Partner's tax with respect to such income.

Effect of Classification as Corporation. The Partnership has
not and will not seek a ruling from the Service concerning the tax status of the
Partnership. It is the opinion of Counsel that the Partnership will be treated
as a partnership for federal income tax purposes and not as an association
taxable as a corporation unless the Partnership so elects. The Partnership will
not make an election to be classified as other than a partnership for federal
income tax purposes. Although the Partnership intends to rely on the legal
opinion of Counsel, the Service will not be bound thereby. Moreover, there can
be no assurance that legislative or administrative changes or court decisions
may not in the future result in the Partnership being treated as an association
taxable as a corporation, with a resulting greater tax burden associated with
the purchase of Units.

Counsel's opinion discussed above relies upon recently
promulgated Treasury Regulations. Treasury Regulation Section 301.7701-2
provides that certain domestic eligible entities, including partnerships formed
pursuant to state law, will be taxed as partnerships so long as the entity has
not made an election to be taxed as a corporation. Domestic eligible entities
with at least two members will be classified as a partnership unless they elect
to be classified as a corporation for federal income tax purposes. As the
Partnership will have at least two members and will be formed pursuant to the
Act, the Regulations will treat the Partnership as a domestic eligible entity.
As the Partnership will not elect to be classified as a corporation for federal
income tax purposes, it will be classified as a partnership. Therefore, it is
anticipated that on the Closing Date, Counsel will render its opinion that as
long as the Partnership does not elect otherwise, the Partnership will be
treated for federal income tax purposes as a partnership and not as an
association taxable as a corporation.

If during any taxable year there is a material change in the
law or in the circumstances surrounding the Part-ner-ship, the Part-ner-ship may
be classified as an association taxable as a corporation. If that occurs, the
Part-ner-ship could be taxed on its profits and at rates which may be higher
than those imposed on individuals. Any Part-ner-ship losses would only be
deductible by the Part-ner-ship, rather than being allocated among the Partners
and deductible by Limited Partners on their federal income tax returns. See
"Passive Income and Losses" below. Cash Distributions to Limited Partners would
be treated as dividends to the extent of current and accumulated earnings and
profits of the Part-ner-ship, and Distributions in excess thereof would be
treated as a nontaxable return of capital to the extent of the Limited Partner's
basis in his or her Part-ner-ship Interest, while the remainder would be treated
as capital gain, provided the Limited Partner's interest in the Part-ner-ship is
a capital asset.

▇▇▇▇▇, in order to comply with applicable tax law, will keep
the Partnership's books and records and otherwise compute Profits and Losses
based on the accrual method, and not the cash basis method, of accounting
pursuant to Section 448 of the Code. The accrual method of accounting generally
records income and expenses when they are accrued or economically incurred.

Passive Income and Losses. ▇▇▇▇▇ expects that the Partnership
will continue to realize taxable income and not taxable losses during the
foreseeable future. Nevertheless, if it instead realizes taxable losses, the use
of such losses by the Limited Partners will generally be limited by Code Section
469.

Code Section 469 provides limitations for the use of taxable
losses attributable to "passive activities." Code Section 469 operates generally
to prohibit passive losses from being used against income from active
activities. The passive activity rules are extremely complex and Investors are
urged to consult their own tax advisors as to their applicability, particularly
as they relate to the ability to deduct any losses from the Partnership against
other income of the Investor.

THE PASSIVE ACTIVITY LOSS RULES WILL AFFECT EACH INVESTOR
DIFFERENTLY, DEPENDING ON HIS OR HER OWN TAX SITUATION. EACH INVESTOR SHOULD
CONSULT WITH HIS OR HER OWN TAX ADVISOR TO DETERMINE THE EFFECT OF THESE RULES
ON THE INVESTOR IN LIGHT OF THE INVESTOR'S INDIVIDUAL FACTS AND CIRCUMSTANCES.

Depreciation. The Part-ner-ship uses the Modified Accelerated
Cost Recovery System ("MACRS") to depreciate the cost of any equipment or
improvements hereafter acquired. It is anticipated that any additions or
improvements to the Mobile Lithotripsy System will also be depreciated over a
five year term using the 200% declining balance method of depreciation,
switching to the straight-line method to maximize the depreciation allowance. If
purchases or improvements are made after the beginning of any year, only a
fraction of the depreciation deduction may be claimed in that year.

As under prior law, the 1986 Act provides that the full amount
of depreciation on personal property (such as the Mobile Lithotripsy System) is
recaptured upon disposition (i.e., is taxed as ordinary income) to the extent
gain is realized on the disposition. Investors should note that the 1986 Act
repealed the investment tax credit for all personal property.

Part-ner-ship Elections. The Code permits part-ner-ships to
make elections for the purpose of adjusting the basis of part-ner-ship property
on the distribution of property by a part-ner-ship to a partner and on the
transfer of an interest in a part-ner-ship by sale or exchange or on the death
of a partner. The general effect of such elections is that transferees of
Part-ner-ship Interests will be treated, for the purposes of depreciation and
gain, as though they had a direct interest in the Partnership's assets, and the
difference between their adjusted bases for their Partnership Interests and
their allocable portion of the Part-ner-ship's bases for its assets will be
allocated to such assets based upon the fair market value of the assets at the
times of transfers of the Partnership Interests. Any such election, once made,
cannot be revoked without the consent of the Service. Under the terms of the
Part-ner-ship Agreement, Litho, in its discretion, may make the requisite
election necessary to effect such adjustment in basis and has done so. Thus,
Investors will be treated, for purposes of depreciation and gain, as though they
had a direct interest in the Partnership' s assets, and the difference between
their adjusted bases for their Partnership Interests and their allocable portion
of the Partnership 's bases for its assets will be allocated to such assets
based on the fair market value of the assets at the Closing.

Sale of Partnership Units. ▇▇▇▇ realized on the sale of Units
by a Limited Partner who is not a "dealer" in Units or in limited part-ner-ship
interests will be taxed as capital gain, except that the portion of the sales
price attributable to inventory items and unrealized receivables will be taxed
as ordinary income. "Unrealized receivables" of the Part-ner-ship include the
Limited Partner's share of the ordinary income that the Part-ner-ship would
realize as a result of the recapture of depreciation (as described above) if the
Part-ner-ship had sold Partnership depreciable property immediately before the
Limited Partner sold his or her Partnership Interest. Investors should note that
the IRS Restructuring and Reform Act of 1998 generally imposes a maximum tax
rate of 20% on net long-term capital gains. To the extent the Partnership has
income attributable to depreciation recapture incurred on the sale of a capital
asset, such income will be taxed at a maximum rate of 25%. The Revenue
Reconciliation Act of 1993 imposed a maximum potential individual income tax
rate of 39.6% on ordinary income.

Tax Treatment Of Certain Fees and Expenses Paid By The
Part-ner-ship. Under the Code, a part-ner-ship expenditure will, as a general
rule, fall into one of the following categories: (1) deductible expenses --
expenditures such as interest, taxes, and ordinary and necessary business
expenses which the part-ner-ship is entitled to deduct in full when paid or
incurred; (2) amortizable expenses -- expenditures which the part-ner-ship is
entitled to amortize (i.e., deduct ratably) over a fixed period of time; (3)
capital expenditures -- expenditures which must be added to the amortization or
depreciation base of part-ner-ship property (or part-ner-ship loans) and
deducted over a period of time as the property (or part-ner-ship loan) is
amortized or depreciated; (4) organization expenses -- expenditures related to
the organization of the part-ner-ship, which under Section 709 of the Code are
amortized over a 60-month period, provided an election to do so is made; (5)
syndication expenses -- expenditures paid or incurred in promoting the sale of
interests in the partnership, which under Section 709 of the Code must be
capitalized but may be neither depreciated, amortized, nor otherwise deducted;
(6) part-ner-ship distributions -- payments to partners representing
distributions of part-ner-ship funds, which may be neither capitalized,
amortized nor deducted; (7) start-up expenses -- expenditures incurred by a
part-ner-ship during an initial period, which under Section 195 of the Code may
be amortized over a 60-month period; and (8) guaranteed payments to partners --
payments to partners for services or use of capital which are deductible or
treated in the other categories of expenditures listed above, provided they meet
the applicable requirements.

Several amendments to the Code enacted by the Tax Reform Act
of 1984 alter established tax accounting principles. One or more of these
amendments may affect the federal income tax treatment of fees and expenses,
particularly fees paid or incurred by a part-ner-ship for services. In
particular, new Code Section 461(h) now provides that an expense or fee paid to
a service provider may not be accrued for federal income tax purposes prior to
the time "economic performance" occurs. "Economic performance" occurs as (and no
sooner than) the service provider provides the required services.

All expenditures of the Part-ner-ship must constitute ordinary
and necessary business expenses in order to be deducted by the Partnership when
paid or incurred, unless the deduction of any such item is otherwise expressly
permitted by the Code (e.g., taxes). Expenditures must also be reasonable in
amount. The Service could challenge a fee deducted by the Part-ner-ship on the
ground that such fee is a capital expenditure, which must either be amortized
over an extended period or indefinitely deferred, rather than deducted as an
ordinary and necessary business expense. The Service could also challenge the
deduction of any fee on the basis that the amount of such fee exceeds the
reasonable value of the services performed, the goods acquired or the other
benefits to the Part-ner-ship.

Under Section 482 of the Code, the Service has broad
discretion to reallocate income, deductions, credits or allowances between
entities with common ownership or control if it is determined that such
reallocation is necessary to prevent the evasion of taxes or to reflect the
income of such entities. The Part-ner-ship and Litho are entities to which
Section 482 applies and it is possible that the Service could contend that
certain items should be reallocated in a manner that would change the
Partnership's proposed tax treatment of such items.

Litho believes the payments to it and its Affiliates are
customary and reasonable payments for the services rendered by them to the
Part-ner-ship; however, these fees were not determined by arm's length
negotiations. Nothing has come to the attention of Counsel which would give
Counsel reasonable cause to question ▇▇▇▇▇'s determination. On audit the Service
may challenge such payments and contend that the amount paid for the services
exceeds the reasonable value of those services. Because of the factual nature of
the question of the reasonableness of any particular fee, Counsel cannot express
an opinion as to the outcome of the reasonableness of the amount of any fee
should the issue be litigated.

Management Fee to General Partner. The Partnership pays Litho
a monthly management fee equal to the greater of $8,000 or 7.5% of Partnership
Cash Flow per month. The management fee is paid to Litho for the time and
attention to be devoted by it for supervising and coordinating the management
and administration of the Partnership's day-to-day operations pursuant to the
terms of the Management Agreement. The Partnership will continue to deduct the
management fee in full in the year paid. Assuming the management fee to be paid
to Litho is ordinary, necessary and reasonable in relation to the services
provided, Counsel is of the opinion that the Partnership may deduct the
management fee in full in the year paid.

State and Local Taxation. Each Investor should consult his or
her own attorney or tax advisor regarding the effect of state and other local
taxes on his or her personal situation.

Ownership of Limited Partner Interests by ▇▇▇▇▇. ▇▇▇▇▇
currently owns a 14.5% limited partner interest in the Partnership. To the
extent that ▇▇▇▇▇ continues to hold a limited partner interest in the
Partnership following the closing of this Offering, ▇▇▇▇▇ may be able to
influence the outcome of matters voted on by the Limited Partners. ▇▇▇▇▇ also
owns a 20% general partner interest in the Partnership.

Conflicts of Interest. The activities of the Part-ner-ship involve numerous
existing and potential conflicts of interest between the Part-ner-ship, Litho
and its Affiliates. See Compensation and Reimbursement to Litho and its
Affiliates," "The General Partner," "Competition" and "Conflicts of Interest."

No Participation in Management. ▇▇▇▇▇ has full authority to
supervise the business and affairs of the Part-ner-ship pursuant to the
Partnership Agreement and the Management Agreement. Limited Partners have no
right to participate in the management or conduct of the Partnership's business
and affairs. Litho, its employees and its Affiliates are not required to devote
their full time to the Part-ner-ship's affairs and intend to continue devoting
substantial time and effort to organizing other ventures throughout the United
States that are similar to the Partnership. Litho will continue to devote such
time to the Partnership's business and affairs as it deems necessary and
appropriate in the exercise of reasonable judgment. The participation by any
Limited Partner in the management or control of the Partnership's affairs could
render him generally liable for the liabilities of the Partnership that could
not be satisfied by assets of the Partnership. See the Form of Legal Opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, a Professional Limited Liability Company,
attached hereto as Appendix C.

Limited Partners' Obligation to Return Certain Distributions.
Except as provided by other applicable law and provided that a Limited Partner
does not participate in the management of the Partnership, he or she will not be
liable for the liabilities of the Partnership in excess of his investment, his
ratable share of undistributed profits and any Distribution received from the
Partnership if the Limited Partner knew at the time of the Distribution that,
after giving effect to the Distribution, all liabilities of the Partnership,
other than liabilities to Partners with respect to their Partnership interests
and liabilities for which the recourse of creditors is limited to specific
property of the limited partnership, exceed the fair value of the assets of the
Partnership, except that the fair value of property that is subject to a
liability for which recourse of creditors is limited shall be included in the
Partnership assets only to the extent that the fair value of such property
excludes such liability.

Liability Under Limited Partner Loan. Investors financing a
portion of their Unit purchase price with the proceeds of a Limited Partner Loan
will be directly obligated to the Bank as provided in the Loan Documents. A
default under the Limited Partner Loan could result in the foreclosure of the
Investor's right to receive any Partnership Distributions as well as the loss of
other personal assets unrelated to his Partnership Interest. Prospective
Investors should review carefully all the provisions contained in the Loan
Commitment and the terms of the Limited Partner Note and Loan and Security
Agreement with their counsel and financial advisors. Neither the Partnership nor
Litho endorses or recommends to the prospective Investors the desirability of
obtaining financing from the Bank nor does the summary of the Loan Documents
provided herein constitute legal advice. A Limited Partner's liability under a
Limited Partner Note continues regardless of whether the Limited Partner remains
a limited partner in the Partnership. As a consequence, such liability cannot be
avoided by claims, defenses or set-offs the Limited Partner may have against the
Partnership, Litho or their Affiliates. In addition to the suitability
requirements discussed below, any prospective Investor applying for a Bank loan
to fund a portion of his Unit purchase must be approved by the Bank for purposes
of his delivery of the Limited Partner Note. The Bank has established its own
criteria for approving the creditworthiness of a prospective Investor and has
not established objective minimum suitability standards. Instead, the Bank is
empowered to accept or reject prospective Investors.

Long-term Investment. Litho anticipates that the Partnership
will continue to operate the Mobile Lithotripsy System for an indefinite period
of time and that the Partnership will not liquidate prior to its intended
termination. Accordingly, Investors should consider their investment in the
Partnership as a long-term investment of indefinite duration.

Limited Transferability and Illiquidity of Units.
Transferability of Units is severely restricted by the Partnership Agreement and
the Assignment Agreement, and the consent of Litho is necessary for any
transfer. No public market for the Units exists and none is expected to develop.
Moreover, the Units generally may not be transferred unless Litho is furnished
with an opinion of counsel, satisfactory to Litho, to the effect that such
assignment or transfer may be effected without registration under the Securities
Act and any state securities laws applicable to the transfer. The Partnership
will be under no obligation to register the Units or otherwise take any action
that would enable the assignment or transfer of a Unit to be in compliance with
applicable federal and state securities laws. Thus, a Limited Partner may not be
able to liquidate an investment in the Partnership in the event of an emergency
and the Units may not be readily accepted as collateral for loans. Moreover, a
sale of a Unit by a Limited Partner may cause adverse tax consequences to the
selling Limited Partner. Accordingly, the purchase of Units must be considered a
long-term and illiquid investment.

Arbitrary Offering Price. The offering price of the Units has
been determined by Litho based upon valuation of the Partnership conducted by an
independent third party based on various assumptions that may or may not occur.
A copy of this valuation will be made available on request. The offering price
of the Units is not, however, necessarily indicative of their value, if any, and
no assurance can be given that the Units, if and when transferable, could be
sold for the offering price or for any amount.

Limitation of General Partner's Liability and Indemnification.
The Partnership Agreement provides that Litho will not be liable to the
Partnership or to any Partner of the Partnership for errors in judgment or other
acts or omissions in connection with the Partnership as long as Litho, in good
faith, determined such course of conduct was in the best interest of the
Partnership, and such course of conduct did not constitute willful misconduct or
gross negligence. Therefore, the Limited Partners may have a more limited right
of action against Litho in the event of its misfeasance or malfeasance than they
would have absent the limitations in the Partnership Agreement. The Partnership
will indemnify Litho and its Affiliates against losses sustained by Litho and
its Affiliates in connection with the Partnership, unless such losses are a
result of the gross negligence or willful misconduct of Litho or its Affiliates.
In the opinion of the SEC, indemnification for liabilities arising out of the
Securities Act is contrary to public policy and therefore is unenforceable.

Insurance. Prime maintains active policies of insurance for
the benefit of itself and certain affiliated entities covering employee crime,
workers' compensation, business and commercial automobile operations,
professional liability, inland marine, business interruption, real property and
commercial liability risks. These policies include the Partnership, and ▇▇▇▇▇
believes that coverage limits of these policies are within acceptable norms for
the extent and nature of the risks covered. The Partnership is responsible for
its share of premium costs. There are certain types of losses, however, that are
either uninsurable or are not economically insurable. For instance, contractual
liability is generally not covered under Prime's policies. Should such losses
occur with respect to Partnership operations, or should losses exceed insurance
coverage limits, the Partnership could suffer a loss of the capital invested in
the Partnership and any anticipated profits from such investment.

Optional Purchase of Limited Partner Interests. As provided in
the Partnership Agreement, Litho and the Limited Partners have, under certain
circumstances, the option to purchase all the interest of a Limited Partner who
(i) dies, (ii) becomes insolvent or (iii) becomes incompetent. In such a case,
the option purchase price is an amount equal to the withdrawing Limited
Partner's share of the Partnership's book value, if any, as reflected by the
Limited Partner's capital account in the Partnership (unadjusted for any
appreciation as reflected in Partnership assets and as reduced by depreciation
deductions claimed by the Partnership for tax purposes). The option purchase
price is likely to be considerably less than the fair market value of a Limited
Partner's interest in the Partnership. Because losses, depreciation deductions
and Distributions reduce capital accounts, and because appreciation in assets is
not reflected in capital accounts, it is the opinion of Litho that the option
purchase price may be nominal in amount. See the copy of the Partnership
Agreement attached hereto as Appendix A and "Summary of the Partnership
Agreement - Optional Purchase of Limited Partner Interests."

Tennessee Lithotripters Limited Partnership I, a Tennessee
limited partnership (the "Partnership") was organized and created under the
Tennessee Uniform Revised Limited Partnership Act (the "Act") on August 6, 1990
and commenced business in December 1990. The general partner of the Partnership
is Lithotripters, Inc., a North Carolina corporation (the "General Partner"),
and a wholly owned subsidiary of Prime Medical Services, Inc. ("Prime"). ▇▇▇▇▇
currently holds a 20% interest in the Partnership in its capacity as the general
partner and the existing limited partners (the "Initial Limited Partners")
currently hold the remaining interest in the Partnership (including a 14.5%
limited partner interest held by ▇▇▇▇▇). The principal address of the
Partnership is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
The telephone number of the Partnership and Litho is (▇▇▇) ▇▇▇-▇▇▇▇.

A prospective assignee who pays his purchase price with a
check upon submission of his Assignment Packet, and whose assignment materials
are received and accepted by ▇▇▇▇▇, will become a Limited Partner in the
Partnership. Acceptance of the assignment by ▇▇▇▇▇ is conditioned on the
satisfaction of the suitability standards for an investor in the Partnership as
set forth below. Upon admission as a Limited Partner, the prospective assignee'
s cash funds (plus interest) will be released from escrow to Litho. If a
prospective assignee finances a portion of his purchase price with the proceeds
of a Limited Partner Note, ▇▇▇▇▇'s decision to sell and assign the Partnership
Interest to such prospective assignee will be further conditioned upon the
Bank's approval of the prospective assignee's Loan Documents and the funding of
the loan contemplated thereby. If the prospective assignee is acceptable to
Litho, after receipt of the Bank's approval of his Loan Documents, ▇▇▇▇▇ will
inform the Escrow Agent that it will assign the Partnership Interest to the
prospective assignee, and the Escrow Agent will release the cash and Loan
Documents, if any, to Litho and the Bank, respectively, and the Bank will pay
the proceeds from the Limited Partner Loan to Litho. The prospective assignee
will then be assigned the Partnership Interest and become a Limited Partner in
the Partnership at the time the Bank releases the proceeds of his Limited
Partner Loan to Litho. In the event an application is not accepted, all cash
funds (without interest) and Loan Documents, if any, held in escrow will be
returned to the rejected applicant. Notice of acceptance of the assignment
materials and admission of a prospective assignee as a Limited Partner in the
Partnership will be furnished promptly after the Closing Date (as defined
below). Upon the Closing Date, the accepted Investors will be entitled to
distributions as Limited Partners beginning on the Closing Date.

Applications for the sale and assignment of Units will be
solicited by MedTech Investments, Inc., a North Carolina corporation and an
Affiliate of Litho and the Partnership (the "Sales Agent"). The Sales Agent has
entered into a Sales Agency Agreement with Litho pursuant to which the Sales
Agent has agreed to act as exclusive agent for the assignment of the Partnership
Interests.

The purchase price for the Units is payable in cash with the
prospective Investor's personal funds alone or in part with such funds and with
the proceeds of a Limited Partner Loan. Financing under the Limited Partner
Loans was arranged by the Partnership with the Bank as provided in the form of
Loan Commitment, attached hereto as Appendix B. If the prospective Investor
wishes to finance a portion of the purchase price of his Units as provided
herein, he or she must deliver to the Sales Agent upon submission of his
Assignment Packet an executed Limited Partner Note payable to the Bank and Note
Addendum, the form of which are attached as Exhibit A to the Loan Commitment, a
Loan and Security Agreement, the form of which is attached as Exhibit B to the
Loan Commitment, a Security Agreement, the form of which is attached as Exhibit
C to the Loan Commitment and two UCC-1's, the forms of which are attached to the
Subscription Packet (collectively, the "Loan Documents"). In no event may the
maximum amount borrowed per Unit exceed $2,002. The Limited Partner Note is
repayable in twelve (12) predetermined installments in the respective amounts
set forth in the Loan Commitment. The installments are payable on each January
15th, April 15th, June 15th and September 15th commencing on June 15, 2000
(assuming the Closing occurs before April 15, 2000), with a thirteenth (13th)
and final installment in an amount equal to the principal balance then owed on
the Limited Partner Note and all accrued, unpaid interest thereon due and
payable on the third anniversary of the first installment date. Interest accrues
at the Bank's "Prime Rate," as the same may change from time to time. The Prime
Rate refers to that rate of interest established by the Bank and identified as
such in literature published and circulated within the Bank's offices. Such term
is used as a means of identifying a rate of interest index and not as a
representation by the Bank that such rate is necessarily the lowest or most
favorable rate of interest offered to borrowers of the Bank generally. A
prospective Investor will have no claim or right of action based on such
premise. See the form of the Limited Partner Note attached as Exhibit A to the
form of Loan Commitment which is attached hereto as Appendix B.

The Limited Partner Note will be secured by the cash flow
distributions payable with respect to the prospective Investor's Partnership
Interest as provided in the Loan and Security Agreement and the Security
Agreement and as evidenced by the UCC-1s. By executing the Loan and Security
Agreement, the prospective Investor requests the Bank to extend the Loan
Commitment to him if he is approved for a Limited Partner Loan. The Loan and
Security Agreement also authorizes (i) the Bank to pay the proceeds of the
Limited Partner Note directly to Litho upon the closing of the Offering and (ii)
the Partnership to remit funds directly to the Bank out of the prospective
Investor's share of any Distributions represented by the prospective Investor's
percentage Partnership Interest to fund installment payments due on the
prospective Investor's Limited Partner Note. See the form of the Loan and
Security Agreement attached as Exhibit B to the form of Loan Commitment which is
attached hereto as Appendix B.

If the prospective Investor is approved by the Bank and is
acceptable to Litho, the Escrow Agent will, upon acceptance of the Investor's
Assignment Packet by Litho, release the Loan Documents to the Bank and the Bank
will pay the proceeds of the Limited Partner Note to Litho. The prospective
Investor will have substantial exposure under the Limited Partner Note.
Regardless of the results of the Partnership's operations, a prospective
Investor will remain liable to the Bank under his Limited Partner Note according
to its terms. The Bank can accelerate the entire principal amount of the Limited
Partner Note in the event the Bank in good faith believes the prospect of timely
payment or performance by the prospective Investor is impaired or the Bank
otherwise in good ▇▇▇▇▇ ▇▇▇▇▇ itself or its collateral insecure and upon certain
other events, including, but not limited to, nonpayment of any installment. The
Bank may also request additional collateral in the event it deems the Limited
Partner Note insufficiently secured. A Limited Partner's liability under a
Limited Partner Note also continues regardless of whether the Limited Partner
remains a limited partner in the Partnership. A Limited Partner's liability
under a Limited Partner Note is directly with the Bank. As a consequence, such
liability cannot be avoided by claims, defenses or set-offs the Limited Partner
may have against the Partnership, Litho or their Affiliates. In addition to the
suitability requirements discussed below, the prospective Investor must be
approved by the Bank for purposes of his delivery of the Limited Partner Note.
The Bank has established its own criteria for approving the creditworthiness of
a prospective Investor and has not estab-lished objective minimum suitability
standards. Instead, the Bank is empowered to accept or reject prospective
Investors. See "Risk Factors - Other Investment Risks - Liability Under Limited
Partner Loan."

The subscription period will commence on the date hereof and
will terminate at 5:00 p.m., Eastern time, on February 29, 2000 (the "Closing
Date"), unless sooner terminated by Litho or unless extended for an additional
period up to 180 days. See "Plan of Distribution."

The Units are being offered and will be sold in reliance on an
exemption from the registration requirements of the Securities Act of 1933, as
amended, provided by Section 4(1) thereof, as amended, and an exemption from the
Tennessee Securities Act of 1980 provided by Section 48-2-103(b)(5) of the
Tennessee Securities Act of 1980. The suitability standards set forth below have
been established in order to comply with the terms of these offering exemptions.

In addition to the suitability requirements discussed below,
each Investor wishing to obtain a Limited Partner Loan must be approved by the
Bank. The Bank has established its own criteria for approving the
credit-worthiness of Investors and has not established objective minimum
suitability standards. The Bank has sole discretion to accept or reject any
Investor.

An investment in the Partnership involves a high degree of
financial risk and is suitable only for persons of substantial financial means
who have no need for liquidity in their investments and who can afford to lose
all of their investment. See "Risk Factors - Other Investment Risks - Limited
Transferability and Illiquidity of Units." An Investor should not purchase a
Unit if the Investor does not have resources sufficient to bear the loss of the
entire amount of the purchase price, including any portion financed.

Investors must also be at least 21 years old and otherwise
duly qualified to acquire and hold partnership interests. Litho reserves the
right to refuse to sell Units to any person, subject to Federal and applicable
state securities laws.

Each Investor must make an independent judgment, in
consultation with his own counsel, accountant, investment advisor or business
advisor, as to whether an investment in the Units is advisable. The fact that an
Investor meets the foregoing suitability standards should in no way be taken as
an indication that an investment in the Units is advisable for that Investor.

It is anticipated that suitability standards comparable to
those set forth above will be imposed by the Partnership in connection with
resales, if any, of the Units. Transferability of Units is severely restricted
by the Partnership Agreement and the Subscription Agreement. See "Summary of the
Partnership Agreement - Restrictions on Transfer of Partnership Interests."

Investors who meet the qualifications for investment in the
Partnership and who wish to purchase Units may do so by following the
instructions included in the Assignment Packet accompanying this Memorandum. All
information provided by Investors will be kept confidential and not disclosed
except to the Partnership, Litho, the Bank and their respective counsel and
Affiliates and, if required, to governmental and regulatory authorities.

The Units have not been registered under the Securities Act or
under any state securities laws and holders of Units have no right to require
the registration of such Units or to require the Partnership to disclose
publicly information concerning the Partnership. Units can be transferred only
in accordance with the provisions of, and upon satisfaction of, the conditions
set forth in the Partnership Agreement. Among other things, the Partnership
Agreement provides that no assignment of Units may be made if such assignment
could not be effected without registration under the Securities Act or state
securities laws. Moreover, the assignment generally must be made to an
individual approved by ▇▇▇▇▇ who meets the suitability requirements described in
this Memorandum.

Assignors of Units will be required to execute certain
documents, in form and substance satisfactory to Litho, instructing it to effect
the assignment. Assignees of Units may also, in the discretion of Litho, be
required to pay all costs and expenses of the Partnership with respect to the
assignment.

Any assignment of Units or the right to receive Partnership
distributions in respect of Units will not release the assignor from any
liabilities connected with the assigned Units, including liabilities under any
Limited Partner Loan. Such assignment may constitute an event of default under
such loan. An assignee, whether by sale or otherwise, will acquire only the
rights of the assignor in the profits and capital of the Partnership and not the
rights of a Limited Partner, unless such assignee becomes a substituted Limited
Partner. An assignee may not become a substituted Limited Partner without (i)
either the written consent of the assignor and Litho, or the consent of all of
the Limited Partners (except the assignor Limited Partner) and Litho, (ii) the
submission of certain documents and (iii) the payment of expenses incurred by
the Partnership in effecting the substitution. An assignee, regardless of
whether he becomes a substituted Limited Partner, will be subject to and bound
by all the terms and conditions of the Partnership Agreement with respect to the
assigned Units. See "Summary of the Partnership Agreement - Restrictions on
Transfer of Partnership Interests."

Unit purchase offers will be solicited by MedTech Investments,
Inc., the Sales Agent, which is an Affiliate of Litho. The Sales Agent has
entered into a Sales Agency Agreement with Litho pursuant to which the Sales
Agent has agreed to act as exclusive agent for the placement of the Units on a
"best efforts" any or all basis. The Sales Agent is not obligated to purchase
any Units.

The Sales Agent is a North Carolina corporation that was
formed on December 23, 1987, and became a member of the National Association of
Securities Dealers on March 15, 1988. The Sales Agent will be engaged in other
similar offerings on behalf of Litho and its Affiliates during the pendency of
this Offering and in the future. The Sales Agent is a wholly owned subsidiary of
Prime, which also controls Litho. Investors should note the material
relationship between the Sales Agent and ▇▇▇▇▇, and are advised that the
relationship potentially creates conflicts in the Sales Agent's performance of
its due diligence responsibilities under the Federal securities laws. ▇▇▇▇▇ has
agreed to indemnify the Sales Agent against certain liabilities, including
liabilities under the Securities Act.

▇▇▇▇▇ will not pay the fees of any purchaser representative,
financial advisor, attorney, accountant or other agent retained by an Investor
in connection with his or her decision to purchase Units.

The offering period will commence on the date hereof and will
terminate at 5:00 p.m., Eastern time, on February 29, 2000 (or earlier, in the
discretion of Litho), unless extended at the discretion of Litho for an
additional period not to exceed 180 days.

The purchase price funds, and Loan Documents, if any, received
from each Investor will be held in escrow (which, in the case of cash
subscription funds, shall be held in an interest bearing escrow account with the
Bank) until either the Investor's assignment offer is accepted by ▇▇▇▇▇ (and
approved by the Bank in the case of financed purchases of Units), Litho (or, if
applicable, the Bank) rejects the subscription or the Offering is terminated.
Upon the receipt and acceptance of an Investor's subscription by ▇▇▇▇▇ (and, if
applicable, the Bank), the Investor will be admitted to the Partnership as a
Limited Partner. In connection with his admission as a Limited Partner, the
Investor's purchase price funds will be released from escrow to Litho, and the
Loan Documents, if any, will be released to the Bank which will pay the proceeds
from the Limited Partner Note to Litho. In the event an assignment offer is not
accepted, all purchase price funds (without interest), the Loan Documents and
other subscription documents held in escrow will be promptly returned to the
rejected Investor. An assignment offer may be rejected in part, in which case a
portion of the purchase price funds (without interest) and any Limited Partner
Note will be returned to the Investor. The Offering will terminate on February
29, 2000, unless it is sooner terminated by Litho, or unless extended for an
additional period not to exceed 180 days. See "Terms of the Offering -
Subscription Period; Closing."

The Partnership was formed to (i) acquire the Mobile
Lithotripsy System and operate it in western Tennessee, (ii) improve the
provision of health-care in the Partnership's service area by taking advantage
of both the technological innovations inherent in the Lithostar(TM) and the
Partnership's quality assurance and outcome analysis programs, and (iii) make
cash distributions to its partners from revenues generated by the operation of
the Mobile Lithotripsy System. The Partnership owns and operates the Mobile
Lithotripsy System in the Service Area and has contracted with the six Contract
Hospitals to provide lithotripsy services.

Urolithiasis, or kidney stone disease, affects an estimated
600,000 persons per year in the United States. The exact cause of kidney stone
formation is unclear, although it has been attributed to diet, climate,
metabolism and certain medications. Ap-proxi-mately 75% of all urinary stones
pass spontaneously, usually within one to two weeks, and require little or no
clinical or surgical intervention. All other kidney stones, however, require
some form of medical or surgical treatment. A number of methods are currently
used to treat kidney stones. These methods include drug therapy, cystoscopic
procedures, endoscopic procedures, laser procedures, open surgery, percutaneous
lithotripsy and extracorporeal shock wave lithotripsy. The type of treatment a
urologist chooses depends on a number of factors such as the size of the stone,
its location in the urinary system and whether the stone is contributing to
other urinary complications such as blockage or infection. The extracorporeal
shock wave lithotripter, introduced in the United States from West Germany in
1984, has dramatically changed the course of kidney stone disease treatment.
Litho estimates that currently up to 95% of all kidney stones that require
treatment can be treated by lithotripsy. Lithotripsy involves the use of shock
waves to disintegrate kidney stones noninvasively.

The Lithostar(TM) was developed as a cooperative venture
between Siemens and the Urological Clinic at ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ University in
Mainz, West Germany. As a part of this venture, a Lithostar(TM) prototype was
installed in March 1986 at the Urological Clinic at the University of Mainz with
successful results. On November 18, 1987 the Lithostar(TM) was unanimously
recommended for approval by the FDA's advisory panel of experts for urology
devices. On September 30, 1988 the Lithostar(TM) received FDA premarket approval
for use in the United States for renal lithotripsy. On April 18, 1989, the FDA
approved the Lithostar(TM) for mobile lithotripsy. On July 1, 1996, the FDA
approved a new higher intensity shock-head system for the Lithostar(TM) which
has since been installed in the Partnership's Lithostar(TM). Currently, Litho
estimates that more than 400 Lithostar(TM) systems are performing lithotripsy
procedures in over 20 countries throughout the world. All components of the
Lithostar(TM) are manufactured by Siemens, a diversified multinational company.
The Lithostar(TM) owned and operated by the Partnership was new when acquired by
the Partnership in 1990. See "The Partnership."

The Lithostar(TM) was designed with a view towards
substantially improving early lithotripsy technology. See "Business Activities -
Treatment Methods for Kidney Stone Disease." Technological improvements
incorporated into the Lithostar(TM) include an improved work station, a
shock-wave component that has eliminated the need for both water bath treatment
and disposable electrodes, and an excellent stone localization and imaging
system. Based upon its experience with over 30 Lithostars(TM) in its affiliated
lithotripsy ventures, Litho has found that the Lithostar(TM) can fragment most
kidney stones without anesthesia, cystoscopy or the insertion of ureteral
catheters. ▇▇▇▇▇ further believes that Lithostars(TM) upfitted with the higher
intensity shock-head system experience somewhat shorter treatment durations.
Because of ▇▇▇▇▇'s belief in the superior imaging of the Lithostar(TM), ▇▇▇▇▇
believes that lithotripsy with the Lithostar(TM) provides for treatment of lower
ureteral stones, even impacted stones, thereby rendering ureteroscopy
practically obsolete as a treatment of first choice. See "Risk Factors -
Operating Risks - Technological Obsolescence."

The Coach, which houses a Lithostar(TM), was acquired by the
Partnership in 1990. The Coach has been completely upfitted for the
Lithostar(TM) and its clinical operations. Service for the Coach is obtained on
an as-needed basis. Litho estimates that expenditures for maintenance and repair
have been incurred at a rate of approximately $15,000 per year per Unit. As the
Coach ages, higher annual expenditures may be required to maintain it.

If in the future Litho determines that it is in the best
interest of the Partnership to acquire (i) an additional Lithostar(TM) or (ii)
any other assets related to the provision of lithotripsy services, Litho may,
without the consent of the Limited Partners, borrow funds on behalf of the
Partnership to acquire such assets, and may use the Partnership's assets and
revenues to secure and repay such borrowings. See "Risk Factors - Operating
Risks - Acquisition of Additional Assets." Any additional borrowing by the
Partnership will serve to increase the risks associated with leverage. See "Risk
Factors - Operating Risks - Partnership Limited Resource and Risks of Leverage"
and "Risk Factors - Operating Risks - Acquisition of Additional Assets."

The Partnership has entered into four Hospital Contracts to
provide lithotripsy services at seven hospitals ("Contract Hospitals") in
western Tennessee. All the Tennessee Hospital Contracts are in renewal terms.
The Contract Hospitals are:

Baptist Memorial Hospital, Memphis Baptist Memorial
Hospital, ▇▇▇▇▇▇ Methodist Healthcare - Germantown,
Germantown Methodist Hospital, Dyersburg Methodist
Hospital - Central, Memphis Methodist Hospital -
North, Memphis Methodist Hospital - South, Memphis

In addition, the Partnership recently entered into a Hospital Contract with
Baptist Memorial Hospital - DeSoto which is located in Southaven, Mississippi.

All but one of the Hospital Contracts grant the Partnership
the exclusive right to deliver lithotripsy services to the relevant Contract
Hospital. The Hospital Contracts require the Partnership to make a lithotripter
available at the facilities as agreed to by the Contract Hospital and the
Partnership. The Partnership generally also provides a technician and certain
ancillary services such as scheduling and disposable medical products necessary
for the lithotripsy procedure. All of the Hospital Contracts provide that the
Partnership will bill and collect for services rendered to patients of
commercial insurance programs, while the Contract Hospital will bill and collect
for services rendered to patients of the Medicare, Medicaid and CHAMPUS
programs.

Each of the Hospital Contracts, except the Baptist Memorial
Hospital - DeSoto contract, have initial terms of one year and automatically
renew for successive one-year terms. The Baptist Memorial Hospital - DeSoto
contract has a term of three years and is terminable without cause by either
party on 180 days notice. Each of the Hospital Contracts with renewal terms are
terminable upon 30 days or, in some cases, 60 or 90 days prior written notice
prior to any renewal date. The Hospital Contracts also have, and any new
contracts are expected to have, provisions permitting the termination in the
event certain laws or regulations are enacted or applied to the contracting
parties' business arrangements in a manner deemed materially detrimental to
either party. See "Risk Factors - Operating Risks - Contract Terms and
Termination" and "Risk Factors - Operating Risks - Government Regulation." ▇▇▇▇▇
believes it has a good relationship with many of the Contract Hospitals. There
is no assurance, however, that one or more of the Contract Hospitals will not
terminate their agreements with the Partnership in the future. See "Risk Factors
- Operating Risks - Contract Terms and Termination."

▇▇▇▇▇ has negotiated third-party reimbursement agreements with
certain national or local payors. The national agreements are negotiated by
Litho and apply to all the lithotripsy partnerships with which Litho is
affiliated. ▇▇▇▇▇ has also negotiated third-party reimbursement agreements with
local payors in the Service Area, including with Blue Cross and Blue Shield of
Memphis and Cigna/Equicor. Some of the national and local reimbursement
agreements assign a fixed price for the lithotripsy services. For others, ▇▇▇▇▇
has agreed to accepted a specified percentage discount from the normal charges
as payment in full; these discounts range from nine to twenty-five percent off
normal charges. Generally the agreements may be terminated by either party on
ninety days' notice. The national and local reimbursement agreements that have
been negotiated or renegotiated in the past two to four years almost entirely
provide for lower reimbursement rates for lithotripsy services than the older
agreements. In addition, hospitals may negotiate reimbursement agreements with
payors which service providers, including lithotripsy providers, must honor;
these may result in lower reimbursement for lithotripsy services.

It is anticipated that the Partnership will continue to
provide services under the Hospital Contracts and similar arrangements. See
"Business Activities - Hospital Contracts" and "Risk Factors - Operating Risks -
Contract Terms and Termination." Qualified physicians who make appropriate
arrangements with Contract Hospitals receiving lithotripsy services pursuant to
the Hospital Contracts and other lithotripsy service agreements may treat their
own patients using the Mobile Lithotripsy System after they have received any
necessary training required by the rules of such Contract Hospital. The
Partnership may also make arrangements to make the Mobile Lithotripsy System
available to qualified physicians (including but not limited to qualified
physician Limited Partners) desiring to treat their own patients after they have
received any necessary training. In addition, ▇▇▇▇▇ reserves the right to
request that physicians (or members of their practice groups) treat only their
own patients with the Mobile Lithotripsy System if it determines that such
practice is advisable under applicable law. See "Regulation." The treating
qualified physician will be solely responsible for billing and collecting on his
own behalf the professional service component of the treatment procedure. Owning
an interest in the Partnership is not a condition to using a Mobile Lithotripsy
System. Thus, local qualified physicians that are not Limited Partners will be
given the same opportunity to treat their patients using a Mobile Lithotripsy
System as provided above.

The Partnership has entered into a management agreement (the
"Management Agreement") with Litho whereby Litho is obligated to supervise and
coordinate the management and administration of the operation of the Mobile
Lithotripsy System on behalf of the Partnership in exchange for a monthly
management fee equal to the greater of 7.5% of Partnership Cash Flow per month
or $8,000 per month. See "Compensation and Reimbursement to the General Partner
and its Affiliates." Litho's services under the Management Agreement include
making available any necessary training of physicians in the proper use of the
lithotripsy equipment, monitoring technological developments in renal
lithotripsy and advising the Partnership of these developments, arranging
continuing education programs for qualified physicians who use the lithotripsy
equipment and providing advertising, billing, accounts collection, equipment
maintenance, medical supply inventory and other incidental services necessary
for the efficient operation of the Mobile Lithotripsy System. Costs incurred by
▇▇▇▇▇ in performing its duties under the Management Agreement are the
responsibility of the Partnership. ▇▇▇▇▇'s engagement under the Management
Agreement is as an independent contractor, and neither the Partnership nor its
Limited Partners have any authority or control over the method or manner in
which ▇▇▇▇▇ performs its duties under the Management Agreement. The Management
Agreement is in the second five-year renewal term. Thereafter, it will be
automatically renewed for one additional term unless terminated by the
Partnership or Litho. ▇▇▇▇▇ has also appointed a local Medical Director and a
Physician's Advisory Board. Litho consults with the Medical Director and the
Physician's Advisory Board from time to time, as needed, on matters including
the Partnership's Quality Assurance Program, utilization review, outcome
analysis, patient scheduling and certain Partnership expenditures.

The General Partner and Management Agent will endeavor to the
best of their abilities to require that physicians using a Partnership
lithotripter comply with the Partnership's quality assurance and outcome
analysis programs in order to maintain the highest quality of patient care.

The Partnership employs as full time employees a total of two
registered technicians and two registered nurses. All active full-time employees
of the Partnership are eligible to participate in Prime's benefit plans. Prime
provides group medical, dental, long-term disability, accidental death and
dismemberment and life insurance benefits. The Partnership also provides paid
holidays, sick leave, and vacation benefits and other miscellaneous benefits
including bereavement, military reserves, jury duty and educational assistance
benefits.

General. The General Partner of the Partnership is
Lithotripters, Inc., a North Carolina corporation formed in November 1987 for
the purpose of sponsoring medical service limited partnerships. Litho was
founded by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D. and became a wholly owned subsidiary of Prime
Medical Services, Inc. ("Prime") in 1996. See "Conflicts of Interest" and "Prior
Activities." The principal executive office of Litho is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The following table sets forth the names and
respective positions of the individuals serving as executive officers and
directors of Litho, many of whom were a shareholders of Litho prior to its
acquisition by Prime and/or are current shareholders and/or management personnel
of Prime.

Name Office

▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. President, Chief Executive
Officer and Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Director
▇. ▇▇▇▇ ▇▇▇▇▇ Vice President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Vice President and Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D. Vice President
▇▇▇▇ ▇▇▇▇▇▇▇ Vice President
▇▇▇▇▇ ▇▇▇▇, M.D. Vice President
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Secretary and Treasurer
▇▇▇▇▇ ▇. ▇▇▇▇▇ Assistant Secretary

Supervision of the day-to-day management and administration of the
Partnership is the responsibility of Litho. Litho itself is managed by a
three-member Board of Directors composed of ▇▇. ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ and ▇▇.
▇▇▇▇▇▇▇▇. Litho is a wholly-owned subsidiary of Prime.

Descriptions of the background of the executive officers and
directors of Litho appear below.

▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. has been President and Chief Executive Officer of
Prime since April 1996. From May 1990 until December 1991, ▇▇. ▇▇▇▇▇▇▇ was a
Vice President of Litho and previously practiced urology in Washington, North
Carolina. ▇▇. ▇▇▇▇▇▇▇ has been President of Litho since 1992 and was recently
elected to its Board of Directors. He also serves as the Chief Executive Officer
of Litho. ▇▇. ▇▇▇▇▇▇▇ is a board certified urologist and is a founding member,
past-president and currently a Director of the American Lithotripsy Society.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has been Chairman of the Board and a
Director of Prime since October 1989 and was recently elected a Director of
Litho following Prime's acquisition of all of ▇▇▇▇▇'s stock. ▇▇. ▇▇▇▇▇▇▇ also
has served in various capacities with American Physicians Service Group, Inc.
("APS") since February 1985, and is currently Chairman of the Board and Chief
Executive Officer of APS.

▇. ▇▇▇▇ ▇▇▇▇▇ was recently appointed a Vice President of Litho
and served as Chief Financial Officer of Litho from 1991 to 1998. In August,
1986, ▇▇. ▇▇▇▇▇ joined The May Department Stores Company at their corporate
headquarters in St. Louis, where he held several financial management positions
until October, 1987, when he was transferred to one of May's largest divisions,
Caldor, Inc., as Vice President of Finance. He remained in that capacity until
June, 1990, when he became Chief Operating Officer for Litho and served in that
capacity until April 1996.

▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is a Director and Vice President of Litho. ▇▇. ▇▇▇▇▇▇▇▇ has
been Chief Financial Officer, Vice President-Finance and Secretary of Prime
since October 1989. ▇▇. ▇▇▇▇▇▇▇▇ was Controller of ▇▇▇▇▇▇▇▇▇ Aircraft
Corporation from August 1988 to October 1989. From 1985 to 1988, ▇▇. ▇▇▇▇▇▇▇▇
served as the Chief Financial Officer of APS Systems, Inc.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D. was recently appointed a Vice President of Litho.
▇▇. ▇▇▇▇▇▇ is an experienced medical practice consultant and has served as a
director of Southern Medical Imaging, Inc. (1988-1993), First Choice Health
Plan, Inc. (1986-1988) and Tampa Bay Health Plan, Inc. (1985-1986). In addition,
▇▇. ▇▇▇▇▇▇ is an accomplished health care scholar and was a member of the
teaching faculty at Florida Neurological Institute School of EEG Technology from
1980 to 1984. ▇▇. ▇▇▇▇▇▇ received a faculty appointment to the Surgery
department (renal transplant surgery) of the University of Florida College of
Medicine and taught there from 1977 to 1979. ▇▇. ▇▇▇▇▇▇ received a Ph.D. in
Medical/Social Change Theory, Concentration: Ambulatory Medical Delivery Systems
from ▇▇▇▇▇▇ University, Institute for Advanced Studies in Minneapolis, Minnesota
in 1984.

▇▇▇▇ ▇▇▇▇▇▇▇ was recently appointed a Vice President of Litho. ▇▇. ▇▇▇▇▇▇▇
has been a Vice President of Prime and President of Sun Medical Technologies,
Inc., an Affiliate of Litho ("Sun") since November 1995. ▇▇. ▇▇▇▇▇▇▇ was the
Chief Financial Officer of Sun from 1990 to 1995.

▇▇▇▇▇ ▇▇▇▇, M.D. was recently appointed a Vice President of Litho. ▇▇. ▇▇▇▇
received his medical degree in 1984. ▇▇. ▇▇▇▇ developed and operated various
outpatient surgery centers throughout the United States from 1986 to 1995, and
has served as the Regional Vice President of Prime for the Central Region since
February 1997.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ recently became the Secretary and Treasurer of Litho,
having previously served as a Vice President since 1989. ▇▇. ▇▇▇▇▇▇▇ is a
Certified Public Accountant licensed in the state of Pennsylvania. From 1980
through February 1989, ▇▇. ▇▇▇▇▇▇▇ served as Plant Controller for the
Westinghouse Motor Control and Enclosed Control Product Lines. ▇▇. ▇▇▇▇▇▇▇ is
also a Director, the Vice President, the Treasurer and the Secretary of MedTech
Investments, Inc., the Sales Agent.

▇▇▇▇▇ ▇. ▇▇▇▇▇ recently became Assistant Secretary of Litho. ▇▇. ▇▇▇▇▇ has
served as Tax Manager of Prime since January 1998 and is a Certified Public
Accountant in Texas. Prior to joining Prime, ▇▇. ▇▇▇▇▇ was Controller for ERISA
Administrative Services, Inc.

The following summary describes the types and, where
determinable, the estimated amounts of reimbursements, compensation and other
benefits Litho and its Affiliates will receive in connection with the continued
operation and management of the Part-ner-ship and the Mobile Lithotripsy System.
None of such fees, compensation and other benefits has been determined at arm's
length. Except for the items set forth below, Litho does not expect to receive
any distribution, fee, compensation or other remuneration from the
Part-ner-ship. See "Business Activities - Management" and "Plan of
Distribution."

1. Management Fee. Pursuant to the Management Agreement, ▇▇▇▇▇
has contracted with the Partnership to supervise the management and
administration of the day-to-day operations of the Partnership's lithotripsy
business for a monthly fee equal to the greater of $8,000 or 7.5% of Partnership
Cash Flow per month. All costs incurred by ▇▇▇▇▇ in performing its duties under
the Management Agreement are the responsibility of, and are paid directly or
reimbursed by, the Partnership. Litho is the management agent for various
affiliated lithotripsy ventures. As a consequence, many of Litho's employees
provide various management and administrative services for numerous ventures,
including the Partnership. In order to properly allocate the costs of Litho's
employees and other overhead expenses among the entities for which they provide
services, such costs are divided among all the ventures based upon the relative
number of patients treated by each. ▇▇▇▇▇ believes that the sharing of personnel
and overhead costs among various entities results in significant costs savings
for the Partnership. The management fee for any given month is payable on or
before the 30th day of the next succeeding month. The Management Agreement is in
its second five-year renewal term. The Management Agreement will be
automatically renewed for up to one additional successive five-year term unless
it is earlier terminated by the Partnership or Litho. Litho is reimbursed by the
Partnership for all of its out-of-pocket costs associated with the operation of
the Partnership and the Mobile Lithotripsy System. No other fees or compensation
will be payable to Litho or its Affiliates for managing the Partnership other
than the management fee payable to Litho as provided in the Management
Agreement. The Partnership may, however, contract with Litho or its Affiliates
to render other services or provide materials to the Partnership provided that
the compensation is at the then prevailing rate for the type of services and/or
materials provided.

2. Partnership Distributions. In its capacity as general
partner of the Partnership, Litho is entitled its distributable share (20%) of
Partnership Cash Flow, Partnership Sales Proceeds and Partnership Refinancing
Proceeds as provided by the Partnership Agreement. ▇▇▇▇▇ also owns an aggregate
14.5% (prior to this Offering) limited partner interest in the Partnership.
Litho is entitled to Distributions on account of such interest. See "Summary of
the Partnership Agreement - Profits, Losses and Distributions" and the
Partnership Agreement attached as Appendix A. See "Sources and Applications of
Funds."

3. Rental of Loaner Coach. In the event the Mobile Lithotripsy
System experiences significant down time for maintenance or repairs, it is
anticipated that Litho would cause the Partnership to contract with Litho or its
Affiliates to rent a "loaner" Mobile Lithotripsy System during the time the
Partnership's Mobile Lithotripsy System is not available for use by the
Partnership.

4. Loans. Litho or its Affiliates will also receive interest
on loans, if any, made by them to the Partnership. See "Conflicts of Interest."
Neither Litho nor any of its Affiliates are, however, obligated to make loans to
the Partnership. While ▇▇▇▇▇ does not anticipate that it would cause the
Partnership to incur indebtedness unless cash generated from the Partnership's
operations were at the time expected to enable repayment of such loan in
accordance with its terms, lower than anticipated revenues and/or greater than
anticipated expenses could result in the Partnership's failure to make payments
of principal or interest when due under such a loan and the Partnership's equity
being reduced or eliminated. In such event, the Limited Partners could lose
their entire investment.

The operation of the Partnership involves numerous conflicts
of interest between the Part-ner-ship and Litho and its Affiliates. Because the
Part-ner-ship is operated by Litho, such conflicts are not resolved through
arm's length negotiations, but through the exercise of the judgment of Litho
consistent with its fiduciary responsibility to the Limited Partners and the
Part-ner-ship's investment objectives and policies. Litho, its Affiliates and
employees will in good faith continue to attempt to resolve potential conflicts
of interest with the Partnership, and ▇▇▇▇▇ will act in a manner that it
believes to be in or not opposed to the best interests of the Partnership.

Litho will receive management fees in connection with the
business operations of the Part-ner-ship regardless of whether any sums
hereafter are distributed to Limited Partners. Such fees, compensation and
benefits have not been determined by arm's length negotiations. In addition, the
Partnership may contract with Litho or its Affiliates to render other services
or provide materials to the Partnership provided that the compensation is at the
then prevailing rate for the type of services and/or materials provided. Litho
will also receive interest on loans, if any, it makes to the Partnership. See
"Compensation and Reimbursement to the General Partner and its Affiliates."

Litho and its Affiliates will devote as much of their time to
the business of the Part-ner-ship as in their judgment is reasonably required.
Principals of Litho may have conflicts of interest in allocating management
time, services and functions among their various existing and future business
activities in which they are or may become involved. See "Competition" and
"Prior Activities." Litho believes it and its Affiliates, together, have
sufficient resources to be capable of fully discharging Litho's and its
Affiliates' responsibilities to the Part-ner-ship. Litho and its Affiliates may
engage for their own account, or for the account of others, in other business
ventures, related to medical services or otherwise, and neither the
Part-ner-ship nor the holders of any of the Units shall be entitled to any
interest therein. Litho, its Affiliates (including affiliated limited
partnerships) and employees engage in medical service activities for their own
accounts. See "Prior Activities." Litho may serve as a general partner of other
limited partnerships that are similar to the Partnership and does not intend to
devote its entire financial, personnel and other resources to the Partnership.
Except as provided by law, none of such entities or their respective Affiliates
is prohibited from engaging in any business or arrangement that may be in
competition with the Partnership. Litho operates other lithotripsy partnerships
in and around Tennessee and is planning other limited partnership offerings that
would operate lithotripsy businesses in other states. See "Competition."

The Sales Agent is MedTech Investments, Inc., which is an Affiliate of
Litho. Because of the Sales Agent's affiliation with ▇▇▇▇▇, there are potential
conflicts of interest with respect to the Sales Agent's performance of its due
diligence responsibilities under the federal securities laws. See "Plan of
Distribution."

The interests of the Investors have not been separately
represented by independent counsel in the formulation of the transactions
described herein. The attorneys and accountants who have performed and will
perform services for Litho-- were retained by ▇▇▇▇▇, and have in the past
performed and are expected in the future to perform similar services for Litho
and Prime.

▇▇▇▇▇, as General Partner, is accountable to the Part-ner-ship
as a fiduciary and consequently must exercise good faith in handling
Part-ner-ship affairs. This is a rapidly developing and changing area of the law
and Limited Partners who have questions concerning the duties of Litho should
consult with their counsel. Under the Partnership Agreement, Litho and its
Affiliates have no liability to the Part-ner-ship or to any Partner for any loss
suffered by the Partnership that arises out of any action or inaction of Litho
or its Affiliates if Litho or its Affiliates, in good faith, determined that
such course of conduct was in the best interest of the Part-ner-ship and such
course of conduct did not constitute gross negligence or willful misconduct of
Litho or its Affiliates. Accordingly, Limited Partners have a more limited right
of action than they otherwise would absent the limitations set forth in the
Partnership Agreement. Litho and its Affiliates will 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
Part-ner-ship, provided that the same were not the result of gross negligence or
willful misconduct on the part of Litho or its Affiliates. Insofar as
indemnification for liabilities under the Securities Act may be permitted to
persons controlling the Part-ner-ship pursuant to the foregoing provisions, the
Part-ner-ship has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
therefore is unenforceable.

Several competing extracorporeal shock-wave lithotripters are
currently operating in and around the Service Area. The competing lithotripsy
service providers generally have existing contracts with hospitals, or are
operated by hospitals themselves. The following discussion identifies the
existing competitors in and near the Service Area, to the best knowledge of
Litho.

Affiliates of Litho operate several mobile lithotripters in
Tennessee, Arkansas and Kentucky. Such lithotripters do not currently compete
directly with the Partnership, and it is not anticipated that they will in the
future; however, Litho and its Affiliates are not contractually prohibited from
competing with the Partnership. Litho is planning to conduct other limited
partnership offerings that would operate lithotripters in other states.

To the best knowledge of Litho, no lithotripters compete
directly with the Partnership in the metropolitan Memphis area; however,
competitors operate lithotripters at several hospitals in northern Mississippi
and Arkansas and in central Tennessee, including several lithotripters which
operate in the Nashville area.

There may be other existing fixed-base or mobile lithotripsy
services in or near the Service Area which will directly compete with the
Partnership's Mobile Lithotripsy System, but Litho is not familiar with these
other competitors. It is possible that some or all of the Partnership's
competitors are physician-owned or include physicians among their owners. Litho
is generally unfamiliar with the cost of the lithotripsy procedures offered by
the Partnership's competitors. There is no assurance the Partnership can
successfully compete with existing providers, including facilities that offer
traditional methods of treatment for kidney stone disease. See "Business
Activities - Treatment Methods of Kidney Stone Disease."

Other hospitals in and near the Service Area may operate
lithotripters which are not extracorporeal shock-wave lithotripters but rather
use lasers or are electrohydraulic lithotripters. Litho believes these machines
are qualitatively inferior to the Partnership's Mobile Lithotripsy System
because such machines are capable of treating stones only in the ureter and
because anesthesia is generally required prior to treatment. Litho believes the
Mobile Lithotripsy System can be used on stones in locations other than the
ureter and that anesthesia is generally not required. See "Business Activities -
Treatment Methods for Kidney Stone Disease."

The health care market in the Service Area is influenced by
managed care companies such as health maintenance organizations. Managed care
companies generally contract either directly with hospitals or specified
providers for lithotripsy services for beneficiaries of their plans. It is not
uncommon for managed care companies to have contracts already in place with
hospitals or specified providers, and the Partnership will not be able to
provide services to beneficiaries of those plans unless it convinces either the
managed care companies or the hospitals to switch to the Partnership's services.
See "Regulation - State Regulation." No assurances can be given that a
certificate of need would be granted.

There is no assurance that new competing lithotripsy
businesses will not commence operations in the future or that other treatment
methods for kidney stone disease will not make the Mobile Lithotripsy System
competitively obsolete. See "Risk Factors - Operating Risk - Technological
Obsolescence." Other service providers are soliciting physician ownership and
attempting to establish competing ventures in the Service Area. Litho and its
Affiliates are not prohibited from engaging in any business arrangement that may
compete with the Partnership. There is no assurance the Partnership can
successfully compete with existing providers, including facilities that offer
traditional methods of treatment for kidney stone disease. See "Business
Activities - Treatment Methods for Kidney Stone Disease."

The manufacturer of the Mobile Lithotripsy System is under no
obligation to Litho or the Partnership to refrain from selling its lithotripters
to urologists, hospitals or other persons for use in or near the Service Area.
In addition, the availability of lower-priced lithotripters in the United States
could dramatically increase the number of lithotripters in the United States,
increase competition for lithotripsy procedures and create downward pressure on
the prices the Partnership can charge for its services. Many current and
potential competitors of the Partnership, including hospitals and medical
centers, have financial resources, staffs and facilities substantially greater
than those of the Partnership and of Litho.

The Partnership, Litho and the Limited Partners are subject to
regulation at the federal, state and local level. An adverse review or
determination by certain regulatory organizations (federal, state or private)
may result in the Partnership, Litho and the Limited Partners being subject to
imprisonment, loss of reimbursement, fines or exclusion from participation in
Medicare or Medicaid. Adverse reviews of the Partnership's operations at any of
the various regulatory levels may adversely affect the operations and
profitability of the Partnership.

Reimbursement. The Partnership is subject to federal
government oversight as the Partnership seeks reimbursement for its equipment
and services from health care facilities whose patients are beneficiaries of the
Medicare and Medicaid Programs. Medicare reimbursement policies are statutorily
created and are regulated by the federal government. The Balanced Budget Act of
1997 required the Health Care Financing Administration ("HCFA"), the federal
agency that administers the Medicare program, to establish a prospective payment
system for outpatient procedures. One of the goals of the prospective payment
system was to lower medical costs paid by the Medicare program. HCFA issued
proposed regulations in September, 1998 which would reduce the reimbursement
rate currently paid for lithotripsy procedures performed on Medicare patients at
hospitals to a base rate of $2,235. The base rate includes anesthesia and
sedation, equipment and supplies necessary for the procedure, but does not
include the treating physician's professional fee. The base rate is subject to
adjustment for various hospital-specific factors. ▇▇▇▇▇ believes the reduced
reimbursement rate will be implemented in the latter half of the year 2000. In
some cases, reimbursement rates payable to Litho and its Affiliates by
commercial insurers are less than the proposed HCFA rate.

Litho retains the discretion to make the Mobile Lithotripsy
System available at ambulatory surgery centers ("ASCs"). Medicare does not
currently reimburse for lithotripsy procedures provided at ASCs. However, HCFA
issued proposed rules in June, 1998 which would authorize Medicare reimbursement
for lithotripsy procedures provided at ASCs. While the proposed rules had a
target effective date of October 1, 1998, the effective date has been postponed
indefinitely for reasons unrelated to lithotripsy coverage. The June, 1998
proposed rules assign a Medicare reimbursement rate of $2,107 if the lithotripsy
procedure is performed at an ASC. Whether these proposed rules will become
effective to authorize Medicare reimbursement at ASCs and, if they do become
effective, what the reimbursement rate will be, is unknown to Litho.

The Medicare program has historically influenced the setting
of reimbursement standards by commercial insurers. Therefore, reduced rates of
Medicare reimbursement for lithotripsy services may result in reduced payments
by commercial insurers for the same services. As was discussed previously,
competitive pressure from health maintenance organizations and other managed
care companies has in some circumstances already resulted in decreasing
reimbursement rates from commercial insurers. See "Risk Factors - Operating
Risks - Impact of Insurance Reimbursement." No assurances can be given that HCFA
will not seek to reduce its proposed reimbursement rates even more to avoid
paying more than commercial insurers. As a result, hospitals may seek to lower
the fees paid to the Partnership for the use of the Mobile Lithotripsy System.
Litho anticipates that reimbursement for lithotripsy procedures, and therefore
overall Partnership revenues, may continue to decline.

The physician service (Part B) Medicare reimbursement for
renal lithotripsy is determined using Resource Based-Relative Value Scales
("RB-RVS"). The system includes limitations on future physician reimbursement
increases tied to annual expenditure targets legislated annually by Congress or
set based upon recommendation of the Secretary of the U.S. Department of Health
and Human Services. Medicare has in the past, with regard to other Part B
services such as cataract implant surgery, imposed significant reductions in
reimbursement based upon changes in technology. HCFA has produced a lengthy
report whose conclusion is that professional fees for lithotripsy are
overvalued. Thus, potential future decreases in reimbursement must be considered
probable.

The Medicaid programs in Tennessee (TennCare) and in
Mississippi are jointly sponsored by the federal and state governments to
reimburse service providers for medical services provided to Medicaid
recipients, who are primarily the indigent. The TennCare program and the
Mississippi Medicaid program currently provide reimbursement for lithotripsy
services. The federal Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 requires state health plans, such as TennCare and the
Mississippi Medicaid program, to limit Medicaid coverage for certain otherwise
eligible persons. ▇▇▇▇▇ does not believe this legislation will have a
significant impact on the Partnership's revenues. In addition, federal
regulations permit state health plans to limit the provision of services based
upon such criteria as medical necessity or other criteria identified in
utilization or medical review procedures. ▇▇▇▇▇ believes such steps have been
taken in Tennessee with the establishment of the TennCare program; the General
Partner does not know whether the Mississippi Medicaid program has taken or will
in the future take such steps.

Self-Referral Restrictions. Health care entities which seek
reimbursement for services covered by Medicare or Medicaid are subject to
federal regulation restricting referrals by certain physicians or their family
members. Congress has passed legislation prohibiting physician self-referral of
patients for "designated health services," which include inpatient and
outpatient hospital services (42 U.S.C. ss. 1395nn) ("▇▇▇▇▇ II"). Lithotripsy
services were not specifically identified as a designated health service by this
legislation, but the prohibition includes any service which is provided to an
individual who is registered as an inpatient or outpatient of a hospital under
proposed regulations discussed below. Lithotripsy services provided by the
Partnership to Medicare and Medicaid patients are billed by the contracting
hospital in its name and under its Medicare and Medicaid program provider
numbers. Accordingly, these lithotripsy services would likely be considered
inpatient or outpatient services under ▇▇▇▇▇ II.

Following the passage of the ▇▇▇▇▇ II legislation effective
January 1, 1995, ▇▇▇▇▇ determined that the statute would not apply to the type
of lithotripsy services to be provided by the Partnership. ▇▇▇▇▇ II applies only
to ownership interests directly or indirectly in the entity that "furnishes" the
designated health care service. The physician-investors and the Partnership will
not have an ownership interest in any provider hospitals which offer the
lithotripsy services to the patients on an inpatient or outpatient basis. See 42
U.S.C. ss. 1395nn(a)(1)(A). Thus, by referring a patient to a hospital offering
the service, the physician-investors will not be making a referral to an entity
in which they maintain an ownership interest for purposes of the application of
▇▇▇▇▇ II.

This interpretation adopted by ▇▇▇▇▇ was consistent with the
informal view of the General Counsel's Office of the U.S. Department of Health
and Human Services. Based upon this reasonable interpretation of ▇▇▇▇▇ II, by
referring a patient to a hospital furnishing the outpatient lithotripsy services
"under arrangements" with the Partnership, a physician investor in the
Partnership is not making a referral to an entity (the hospital) in which he or
she has an ownership interest.

On January 9, 1998, HCFA published proposed regulations
interpreting the ▇▇▇▇▇ II statute (the "Proposed ▇▇▇▇▇ II Regulations"). The
Proposed ▇▇▇▇▇ II Regulations and HCFA's accompanying commentary would apply the
physician referral prohibitions of ▇▇▇▇▇ II to the Partnership's contracts for
provision of the Mobile Lithotripsy System. Under the Proposed ▇▇▇▇▇ II
Regulations, physician Limited Partner referrals of Medicare and Medicaid
patients to hospitals contracting with the Partnership would be prohibited
because the Partnership is regarded as an entity that "furnishes" inpatient and
outpatient hospital services. Litho cannot predict when final regulations will
be issued or the substance of the final regulations, but the interpretive
provisions of the Proposed ▇▇▇▇▇ II Regulations may be viewed as HCFA's interim
position until final regulations are issued. If the Proposed ▇▇▇▇▇ II
Regulations are adopted as final (or, in the meantime, if a reviewing court
adopted their reasoning as the proper interpretations of the ▇▇▇▇▇ II statute),
then the Partnership's operations would not be in compliance with ▇▇▇▇▇ II, as
Limited Partners would have an ownership interest in an entity to which they
referred patients.

HCFA acknowledges in its commentary to the Proposed ▇▇▇▇▇ II
Regulations that physician overutilization of lithotripsy is unlikely and
specifically solicits comments on whether there should be a regulatory exception
for lithotripsy. HCFA has received a substantial volume of comments in support
of a regulatory exception for lithotripsy. HCFA representatives have informally
acknowledged in published commentary that some form of regulatory relief for
lithotripsy is under consideration and may be forthcoming; however, no
assurances can be made that such will be the case. ▇▇▇▇▇ will continue to work
through the American Lithotripsy Society to encourage the adoption of
legislation supportive of urologists' ability to lawfully maintain ownership
interests in ventures that provide lithotripsy services to all of their
patients. Additionally, ▇▇▇▇▇ will continue to carefully review the Proposed
▇▇▇▇▇ II Regulations and accompanying HCFA commentary, and explore other
alternative plans of operations that would allow the Partnership to operate in
compliance with ▇▇▇▇▇ II and its final regulations.

HCFA's adoption of the current Proposed ▇▇▇▇▇ II Regulations
as final or a reviewing court's interpretation of the ▇▇▇▇▇ II statute in
reliance on the Proposed ▇▇▇▇▇ II Regulations and in a manner adverse to the
Partnership operations would mean that the Partnership and its physician Limited
Partners would likely be found in violation of ▇▇▇▇▇ II. In such circumstance,
it is possible the Partnership may be given the opportunity to restructure its
operations to bring them into compliance. In the event Litho is unable to devise
a plan pursuant to which the Partnership may operate in compliance with ▇▇▇▇▇ II
and its final regulations, Litho is obligated under the Partnership Agreement
either (i) to purchase the Partnership Interests of all the Limited Partners at
the lesser of fair market value or their Capital Account values (including in
certain cases the assumption of their Guaranties) or (ii) to dissolve and
liquidate the Partnership. See "Summary of the Partnership Agreement - Optional
Purchase of Limited Partner Interests." The Partnership and/or the physician
Limited Partners may not be permitted the opportunity to restructure operations
and thereby avoid an obligation to refund any amounts collected from Medicare
and Medicaid patients in violation of the statute. Further, under these
circumstances the Partnership and physician Limited Partners may be assessed
with substantial civil monetary penalties and/or exclusion from providing
services reimbursed by Medicare and Medicaid.

Two bills are currently pending in Congress which would modify
the reach of the ▇▇▇▇▇ II self-referral prohibition. One (H.R. 2650) was
introduced by Representative ▇▇▇▇▇, the other (H.R. 2651) by House Ways and
Means health subcommittee chair Representative ▇▇▇▇ ▇▇▇▇▇▇. The ▇▇▇▇▇ ▇▇▇▇ would
modify, and the ▇▇▇▇▇▇ ▇▇▇▇ would repeal, the ban on physicians who have
compensation arrangements with entities to which they refer patients. However,
neither bill, nor any other bill currently pending in Congress, would
substantively modify the regulation of referrals of physicians with ownership
interests. Thus, neither bill would affect the Partnership's analysis of the
potential impact of ▇▇▇▇▇ II on this Offering discussed above.

▇▇▇▇▇ and Abuse. The provisions of the federal Social Security
Act addressing illegal remuneration (the "Anti-Kickback Statute") prohibit
providers and others from soliciting, receiving, offering or paying, directly or
indirectly, any remuneration in return for either making a referral for a
Medicare, Medicaid or CHAMPUS covered service or ordering, arranging for or
recommending any such covered service. Violations of the Anti-Kickback Statute
may be punished by a fine of up to $25,000 or imprisonment for up to five (5)
years, or both. In addition, violations may be punished by substantial civil
penalties and/or exclusion from the Medicare and Medicaid programs. Regarding
exclusion, the Office of Inspector General ("OIG") of the Department of Health
and Human Services may exclude a provider from participation in the Medicare
program for a 5-year period upon a finding that the Anti-Kickback Statute has
been violated. After OIG establishes a factual basis for excluding a provider
from the program, the burden of proof shifts to the provider to prove the
Anti-Kickback Statute has not been violated.

The Limited Partners are to receive cash Distributions from
the Partnership. Since it is anticipated that some of the Limited Partners will
be physicians or others in a position to refer and perform lithotripsy services
using Partnership equipment and personnel, such Distributions could come under
scrutiny under the Anti-Kickback Statute. The Third Circuit United States Court
of Appeals has held that the Anti-Kickback Statute is violated if one purpose
(as opposed to the primary or sole purpose) of a payment to a provider is to
induce referrals. United States ▇. ▇▇▇▇▇▇, 760 F.2d 68 (1985). The ▇▇▇▇▇▇ case
was followed by the United States Court of Appeals for the Ninth Circuit, United
States ▇. ▇▇▇▇, 871 F.2d 105 (9th Cir. 1989), and cited favorably by the First
Circuit in United States v. Bay State Ambulance and Hospital Rental Service,
Inc., 874 F.2d 20 (1 st Cir. 1989).

The OIG has indicated that it is giving increased scrutiny to
health care joint ventures involving physicians and other referral sources. In
May 1989, it published a Special Fraud Alert that outlined questionable features
of "suspect" joint ventures, including some features which may be common to the
Partnership. While OIG Special Fraud Alerts do not constitute law, they are
informative because they reflect the general views of the OIG as a health care
fraud and abuse investigator and enforcer.

The OIG has published regulations which protect certain
transactions from scrutiny under the Anti-Kickback Statute (the "Safe Harbor"
regulations). A Safe Harbor, if complied with fully, will exempt such activity
from prosecution under the Anti-Kickback Statute. However, the preamble to the
Safe Harbor regulations states that the failure of a particular business
arrangement to comply with the regulations does not determine whether or not the
arrangement violates the Anti-Kickback Statute because the regulations do not
themselves make any particular conduct illegal. This Offering and the business
of the Partnership do not comply with any Safe Harbor.

In the commentary introducing the Safe Harbor regulations, the
OIG recognized the beneficial effect that business investments in small entities
may have on the health care industry. The OIG promulgated a Safe Harbor for
investment interests, including limited partnership ownership interests, in
small entities which are held by persons in a position to make referrals to the
entities so long as eight criteria are met. This Offering does not meet all
eight criteria; however, this Offering does meet some of the criteria.
Specifically, the terms on which Limited Partnership interests are offered to
physicians who treat their patients on the Mobile Lithotripsy System are not
related to the previous or expected volume of referrals or amount of business
generated by the physicians; there is no requirement that any physician make
referrals or be in a position to make referrals as a condition for remaining an
investor; there is no cross-referral arrangement involved with the business of
the Partnership; the Partnership does not loan funds or guarantee loans for
physicians who refer patients for treatment on the Mobile Lithotripsy System;
and the Distributions to physicians who are Limited Partners are directly
proportional to the amount of their capital investment. In order to qualify for
Safe Harbor protection, all eight criteria must be met. Litho can give no
assurance that compliance with some, but not all, of the criteria of the Safe
Harbor would prevent the OIG from finding a potential violation of the
Anti-Kickback Statute by virtue of this Offering.

In November 1999, the OIG issued a Safe Harbor protecting
certain physician investment interests in ASCs. The commentary accompanying the
new Safe Harbor specifically distinguished physician ownership in ASCs from
physician ownership in other facilities, including lithotripsy facilities,
end-stage renal disease facilities, comprehensive outpatient rehabilitation
facilities and others. The OIG concluded that ASCs benefit from favorable public
policy considerations relating to reducing Medicare costs (including through the
impending prospective payment system discussed above); other facilities,
including lithotripsy facilities, do not share the same policy considerations or
reimbursement structures. Therefore, the Safe Harbor status given to certain
physician investments in ASCs cannot be viewed as an indication that physician
investments in other facilities, including lithotripsy facilities, would not be
deemed to violate the Anti-Kickback Statute.

Although a separate Safe Harbor was not adopted, HCFA noted in
its commentary when the Safe Harbor regulations were issued in 1991 that
additional protection may be merited for situations where a physician sees a
patient in his or her own office, makes a referral to an entity in which he or
she has an ownership interest and performs the service for which the referral is
made. In such cases, Medicare makes a payment to the facility for the service it
furnishes, which may result in a profit distribution to the physician. HCFA
noted that, with respect to the physician' s professional fee, such a referral
is simply a referral to oneself, and that in such situations, both the
professional service fee and the profit distribution from the associated
facility fee that are generated from the referral may warrant protection. HCFA
stated that its primary concern regarding the above referral situation was the
investing physician's ability to profit from any diagnostic testing that is
generated from the services he or she performs. ▇▇▇▇▇ believes the potential for
overutilization posed by referrals for diagnostic services is not present to the
same degree with therapeutic services such as lithotripsy where the necessity
for the treatment can be objectively determined; i.e., a renal stone can be
definitely determined before treatment.

The applicability of the Anti-Kickback Statute to physician
investments in health care businesses to which they refer patients and which do
not qualify for a Safe Harbor has not been the focus of many court decisions,
and therefore, judicial guidance is limited. In the only case in which the OIG
has attempted to exercise the civil exclusion remedy in the context of a
physician-owned joint venture, The Hanlester Network, et al. v. Shalala, the
Ninth Circuit for the United States Court of Appeals (the "Court") held that the
Anti-Kickback Statute is violated when a person or entity (a) knows that the
statute prohibits offering or paying remuneration to induce referrals and (b)
engages in prohibited conduct with the specific intent to violate the law.
Although the Court upheld a lower court ruling that the joint venture in
question violated the Anti-Kickback Statute vicariously through the knowing and
willful actions of one of its agents, who was acting outside the parameters of
the joint venture' s offering documents, the Court concluded there was not
sufficient evidence indicating that a return on investment to physicians or
other investors in the joint venture could on its own constitute an "offer or
payment" of remuneration to make referrals. The Court also stated that since
profit distributions in Hanlester were made based on each investor's ownership
share and not on the volume of referrals, the fact that large referrals by
investors would result in potentially high investment returns did not, standing
alone, cause a violation of the Anti-Kickback Statute.

The Health Insurance Portability and Accountability Act of
1996 directed the OIG to respond to requests for advisory opinions regarding the
effect of the Anti-Kickback Statute on proposed business transactions. ▇▇▇▇▇ has
not requested the OIG to review this Offering and, to the best knowledge of
Litho, the OIG has not been asked by anyone to review offerings of this type.

Federal regulatory authorities could take the position in
future advisory opinions that business transactions similar to this Offering are
a means to illegally influence the referral patterns of the prospective
physician Limited Partners. Because there is no legal precedent interpreting
circumstances identical to these facts, it is not possible to predict how this
issue would be resolved if litigated.

Whenever an offering of ownership interests is made available
to persons with the potential to refer patients for services, there is a
possibility that the OIG, HCFA or other government agencies or officials may
question whether the ownership interests are being provided in return for or to
induce referrals by the new owners. Remuneration, which government officials
have said can include the provision of an opportunity to invest in a facility to
which a person refers patients for services, may be challenged by the government
as constituting a violation of the Anti-Kickback Statute. Whether the offering
of ownership interests to investors who may refer patients to the Partnership
might constitute a violation of this law must be determined in each case based
upon the specific facts involved. The various mechanisms in place to avoid
providing a financial benefit to prospective Limited Partners for any referrals
of patients (including the requirement that all distributions of earnings to
Limited Partners be made in proportion to their investment interest), the
Partnership's utilization review and quality assurance programs, the fact that
lithotripsy is a therapeutic treatment the need of which can be objectively
determined, and the existence in Litho's view of valid business reasons to
engage in this transaction, form the basis in part of ▇▇▇▇▇'s belief that this
Offering is appropriate.

Litho of the Partnership intends for all business activities
and operations of the Partnership to conform in all respects with all applicable
anti-kickback statutes (federal or state). ▇▇▇▇▇ does not believe that the
Partnership's proposed operations violate the Anti-Kickback Statute. No
assurance can be given, however, that the proposed activities of the Partnership
will not be reviewed and challenged by regulatory authorities empowered to do
so, or that if challenged, the Partnership will prevail.

If the activities of the Partnership were determined to
violate these provisions, the Partnership, Litho, officers and directors of
Litho, and each Limited Partner could be subject, individually, to substantial
monetary liability, felony prison sentences and/or exclusion from participation
in Medicare, Medicaid and CHAMPUS. A prospective Limited Partner with questions
concerning these matters should seek advice from his own independent counsel.

False Claims Statutes. Federal laws governing reimbursement
for medical services generally prohibit an individual or entity from knowingly
and willfully presenting a claim (or causing a claim to be presented) for
payment from Medicare, Medicaid or other third party payors that is false or
fraudulent. The standard for "knowing and willful" includes conduct that amounts
to a reckless disregard for whether accurate information is presented by claims
processors. Penalties under these statutes include substantial civil and
criminal fines, exclusion from the Medicare program and imprisonment. One of the
most prominent of these laws is the federal False Claims Act, which may be
enforced by the federal government directly, or by a qui tam private plaintiff
on the government's behalf. Under the federal False Claims Act, both the
government and the private plaintiff, if successful, are permitted to recover
substantial monetary penalties and judgments, as well as an amount equal to
three times actual damages. In recent cases, some qui tam plaintiffs have taken
the position that violations of the Anti-Kickback Statute (discussed above) and
▇▇▇▇▇ II (discussed above) should also be prosecuted as violations of the
federal False Claims Act. The Partnership cannot assure that the government, or
a reviewing court, would not take the position that billing errors, employee
misconduct or violations of other federal statutes, should they occur, are
violations of the federal False Claims Act or similar statutes.

Some federal courts have recently taken the position that qui
tam lawsuits by private plaintiffs are unconstitutional. Most notably, a panel
of judges on the Fifth Circuit Court of Appeals took this position in a decision
issued in November 1999. That decision is being reviewed by all the judges on
the Fifth Circuit. The panel's decision was a minority view; most courts have
concluded that qui tam lawsuits are constitutional. In another case, the U.S.
Supreme Court may review this issue. Unless and until the Supreme Court decides
the issue, prospective Limited Partners should consider the ramifications of the
False Claims Act issues discussed in the preceding paragraph.

New Legislation. Two bills currently pending in Congress which
would amend or repeal the compensation provisions of the ▇▇▇▇▇ II law were
discussed above in the disclosures related to self-referral restrictions. Litho
is not aware of any other bill currently before Congress which, if enacted into
law, would have an adverse effect on the Partnership's operations in a fashion
similar to the ▇▇▇▇▇ II and the Anti-Kickback laws discussed above. In the event
that legislation is enacted which, in the opinion of ▇▇▇▇▇, would adversely
affect the operation of the Partnership's business, Litho is obligated either to
purchase the Partnership Interests of all the Limited Partners or to dissolve
the Partnership. See "Summary of the Partnership Agreement - Optional Purchase
of Limited Partner Interests."

FTC Investigation. Issues relating to physician-owned health
care facilities have been investigated by the Federal Trade Commission ("FTC"),
which investigated two lithotripsy limited partnerships affiliated with Litho,
to determine whether they posed an unreasonable threat to competition in the
health care field. Litho and the limited partnerships were advised in 1996 that
the FTC's investigation was terminated without any formal action taken by the
FTC or any restrictions being placed on the activities of the limited
partnerships. However, ▇▇▇▇▇ cannot assure that the FTC will not investigate
issues arising from physician-owned health care facilities in the future with
respect to Litho or any Affiliate, including the Partnership.

Ethical Considerations. The American Medical Association's
Code of Medical Ethics states that physicians should not refer patients to
facilities in which they have an ownership interest unless such physician
directly provides care or services to such patient at the facility. Because
physician investors will be providing lithotripsy services, ▇▇▇▇▇ believes that
an investment by a physician will not be in violation of the American Medical
Association's Code of Medical Ethics. In the event that the American Medical
Association changes its ethical code to preclude such referrals by physicians
and such ethical requirements are applied to facilities or services which, at
the time of adoption, are owned in whole or in part by referring physicians, the
Partnership and the interests of the Limited Partners may be adversely affected.

Tennessee. Tennessee requires a certificate of need ("CON") to
initiate extracorporeal lithotripsy services. This CON requirement became
effective in 1993, after the Partnership commenced its services at the Contract
Hospitals. Accordingly, no CON was necessary to initiate the Partnership's
services.

To the best knowledge of Litho, the Mobile Lithotripsy System
does not require licensure as health care institutions; rather, services are
deemed to be hospital services which are regulated under the contracting
hospital's license. Tennessee requires registration of x-ray machines.

Tennessee bars referrals of patients to entities in which the
referring physician has an ownership interest unless the referring physician
performs health care services at the entity. To ensure compliance with this law,
patients referred by physician Limited Partners for treatment on the
Partnership's Mobile Lithotripsy System must be treated by the referring
physician. Tennessee requires that physicians disclose their ownership interests
in health care facilities or equipment in which they have ownership interests.
The Partnership will require Limited Partners to comply with this requirement.

Mississippi. Mississippi requires a certificate of need, among
other things, to offer extracorporeal shockwave lithotripsy services if the
services have not been provided by the proposed provider of such services within
the previous year. The hospital is deemed to be the provider and must obtain the
CON. To the best knowledge of Litho, Baptist Memorial Hospital - DeSoto has
applied for a CON to offer extracorporeal shockwave lithotripsy services. The
Partnership cannot commence providing the Mobile Lithotripsy System at Baptist
Memorial Hospital - DeSoto until a CON has been issued; to the best knowledge of
Litho, the Partnership will be able to provide the Mobile Lithotripsy System at
Baptist Memorial Hospital - DeSoto on and after February 10, 2000. However, if a
CON is not issued or is successfully challenged by a competitor, the Partnership
will not be able to provide the Mobile Lithotripsy System at Baptist Memorial
Hospital - DeSoto.

To the best knowledge of Litho, no licensure of the Mobile
Lithotripsy System is necessary as a health care facility in Mississippi.
Mississippi requires registration of x-ray machines.

The Mississippi Board of Medical Licensure has adopted a
policy regarding the corporate practice of medicine. The policy states that
physicians shall not receive compensation as an inducement for the referral of
patients. As the Partnership's Distributions to Limited Partners will be based
solely on ownership of equity interest, and not on referrals, ▇▇▇▇▇ believes
this policy will not be violated. The same policy also prohibits physicians from
violating the federal Anti-Kickback Statute. The Mississippi Medicaid statutes
forbid paying or receiving kickbacks or bribes related to the furnishing of
goods or services for which payment may be made in whole or in part pursuant to
the Medicaid program. For the reasons explained above with respect to the
federal Anti-Kickback Statutes, the Litho does not believe this Offering or the
business of the Partnership would violate the Mississippi Board of Medical
Licensure's policy or the state Medicaid law.

The Partnership has been endeavoring to comply and will
continue to seek to comply with all applicable statutory and regulatory
requirements. Further regulations may be imposed in Tennessee or Mississippi at
any time in the future. Predictions as to the form or content of such potential
regulations would be highly speculative. They could apply to the operation of
the Mobile Lithotripsy System or to the physicians who invest in the
Partnership. Such restrictive regulations could materially adversely affect the
ability of the Partnership to conduct its business.

LITHO AND THE PARTNERSHIP BELIEVE LITHOTRIPSY SERVICES WILL
CONTINUE TO BE SUBJECT TO INTENSE GOVERNMENTAL REGULATION AT THE FEDERAL AND
STATE LEVELS AND, THEREFORE, CANNOT PREDICT THE SCOPE AND EFFECT THEREOF.

PROSPECTIVE LIMITED PARTNERS SHOULD CONSULT WITH THEIR LEGAL
COUNSEL AS TO THE IMPLICATIONS OF FEDERAL AND STATE LAWS AND PROFESSIONAL
ETHICAL CODES DEALING WITH PHYSICIAN OWNERSHIP OF MEDICAL EQUIPMENT AND
FACILITIES BEFORE PURCHASING UNITS.

Prime, the indirect sole shareholder of Litho, is the largest
and fastest growing provider of lithotripsy services in the United States,
providing lithotripsy services at approximately 450 hospitals and surgery
centers in 34 states, as well as delivering non-medical services related to the
operation of the lithotripters, including scheduling, staffing, training,
quality assurance, maintenance and contracting with payors, hospitals and
surgery centers, while medical care is rendered by urologists utilizing the
lithotripters. Prime has an economic interest in 61 mobile and seven fixed site
lithotripters, all but two of which are operated by Prime, Litho and their
Affiliates. Prime began providing lithotripsy services with an acquisition in
1992 and has grown rapidly since that time through a total of twelve
acquisitions with interests in 63 lithotripters and development of five
lithotripters. Prime lithotripters performed approximately 37,000, or
approximately 19.5%, of the estimated 190,000 lithotripsy procedures performed
in the United States in 1998. Approximately 2,300 urologists utilized Prime
lithotripters in 1998, representing approximately 30% of the estimated 7,700
active urologists in the United States.

Prime manages the operations of 63 of its 68 lithotripters.
All of its lithotripters are operated in connection with hospitals or surgery
centers. Prime operates its lithotripters primarily through subsidiaries which
act as the general partner of a limited partnership. Prime provides a full range
of management and other non-medical support services to the lithotripsy
operations, while medical care is provided by urologists utilizing the
facilities and certain medical support services are provided by the hospital or
surgery center. Urologists are investors in 49 of its 68 operations.

Prime's lithotripters range in age from one to twelve years.
Of its 68 lithotripters, 61 are mobile units mounted in tractor-trailers or
self-contained coaches serving locations in 34 states. Prime also operates seven
fixed site lithotripters in five states. All of Prime's fixed lithotripsy units
are located and operated in conjunction with a hospital or surgery center. Most
of these locations are in major metropolitan markets where the population can
support such an operation. Fixed site lithotripters generally cannot be
economically justified in other locations.

Prime and Litho believe that they maintain the most
comprehensive quality outcomes database and information system in the
lithotripsy services industry. Prime has detailed information on over 150,000
procedures covering patient demographic information and medical condition prior
to treatment, the clinical and technical parameters of the procedure and
resulting outcomes. Information is collected before, during and up to three
months after the procedure through internal data collection by doctors, nurses
and technicians and through patient questionnaires.

For numerous reasons, including differences in financial
structure, program size, equipment, economic conditions and distribution
policies, the success of ▇▇▇▇▇'s Affiliates in the lithotripsy field should not
be considered as indicative of the operating results obtainable by the
Partnership.

Set forth on the following pages are the Partnership's
internally prepared accrual based (i) Income Statements for the years ended
December 31, 1997 and December 31, 1998 and the period ended November 30, 1999,
(ii) Balance Sheets as of December 31, 1997, December 31, 1998 and November 30,
1999, (iii) Cash Flow Statements for the years ended December 31, 1997, December
31, 1998 and the period ended November 30, 1999 and (iv) Statements of Partner's
Equity for the years ended December 31, 1997, December 31, 1998 and the period
ended November 30, 1999.

Past financial performance is not necessarily indicative of
future performance. There is no assurance that the Partnership will be able to
maintain its current revenues or earnings.

Revenues. Total revenues increased $17,647 (1%) for the eleven
months ended November 30, 1999 compared to the same period in 1998 due to a 9%
increase in the number of procedures performed, and a 13% decrease in revenue
per case.

Operating Expenses. Operating expenses decreased by $75,220
(8%) for the eleven months ended November 30, 1999 compared to the same period
in 1998 primarily due to decreases of $25,674 in property taxes, $10,431 in
legal and accounting fees, $21,918 in employee benefit costs and $12,186 in
repairs and maintenance costs.

Other Income (Expense). Total other income (expense), net decreased by
$6,636 (26%) due to a decrease in interest income.

Revenues. Total revenues increased $6,563 (0%) for the year
ended December 31, 1998 compared to the same period in 1997 due to a 12%
increase in the number of procedures performed, and a 10% decrease in revenue
per case.

Operating Expenses. Operating expenses decreased by $6,229 (1%) for the
year ended December 31, 1998 compared to the same period in 1997.

Other Income (Expense). Total other income (expense), net increased by $831
(3%) due to the decrease in interest income.

Revenues. Total revenues decreased $550,395 (15%) for the year
ended December 31, 1997 compared to the same period in 1996 related to a 2%
increase in the number of procedures performed, and a 16% decrease in revenue
per case.

Operating Expenses. Operating expenses decreased by $102,755
(10%) for the year ended December 31, 1997 compared to the same period in 1996,
primarily due to a decrease of $49,683 in management fees due to lower revenues
and collections, a decrease of $15,687 in repairs and maintenance costs, and a
decrease of $22,647 in legal fees.

Other Income (Expense). Total other income (expense), net decreased by
$9,617 (25%) due to the decrease in interest income.

The Partnership Agreement sets forth the powers and purposes
of the Partnership and the respective rights and obligations of the Litho and
the Limited Partners. The following is only a summary of certain provisions of
the Partnership Agreement, and does not purport to be a complete statement of
the various rights and obligations set forth therein. A complete copy of the
Partnership Agreement is set forth as Appendix A to this Memorandum, and
Investors are urged to read the Partnership Agreement in its entirety and to
review it with their counsel and advisors.

The Investors will acquire their interests in the Partnership
in the form of Units. Each Unit costs $4,502. The entire Unit purchase price is
due in cash upon submission of the Assignment Packet; however, certain qualified
Investors may finance a portion of the purchase price through Limited Partner
Loans. See "Terms of the Offering - Limited Partner Loans." No Limited Partner
will have any liability for the debts and obligations of the Partnership by
reason of being a Limited Partner except to the extent of (i) his or her Unit
purchase price and liability under a Limited Partner Loan, if any, (ii) his or
her proportionate share of the undistributed profits of the Partnership, and
(iii) the amount of certain Distributions as provided by the Act or other
applicable law. See "Risk Factors - Other Investment Risks - Limited Partners'
Obligation to Return Certain Distributions." See also Form of Legal Opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, a Professional Limited Liability Company,
attached hereto as Appendix C.

The following is a Summary of certain provisions of the
Partnership Agreement relating to the allocation and distribution of the
Profits, Losses, Partnership Cash Flow, Partnership Refinancing Proceeds,
Partnership Sales Proceeds, and cash upon dissolution of the Partnership.
Because an understanding of the defined financial terms is essential to an
evaluation of the information presented below, Investors should carefully review
the definitions of the terms appearing in the Glossary.

1. Allocations of Profits and Losses.

(a) General. Generally, Profits and Losses, if any, for each
Year of the Partnership will be allocated proportionately among the Partners
based on their respective Percentage Interests in the Partnership; provided that
New Limited Partners will be allocated a portion of the Partnership's Profits
and Losses based on their varying Percentage Interests during the year. The
Profits and Losses shall be apportioned on the basis of the number in such year
each New Limited Partner was a holder of the Units transferred without regard to
the specific income and losses of the Partnership before or after the transfer.

(b) Allocations. Net gains and net losses from Capital
Transactions (a part of Profits and Losses), if any, shall be allocated first.
Each Partner will receive his pro rata share of Profits and Losses based upon
the number of days such Partner was a member of the Partnership during the Year
of the Partnership. Notwithstanding the foregoing, the Partnership's "allocable
cash basis items," as that term is used in Section 706(d)(2)(B) of the Code,
will be allocated as required by Section 706(d)(2) of the Code and the treasury
regulations promulgated thereunder.

(c) Qualified Income Offset. If any Limited Partner
unexpectedly receives an adjustment, allocation or distribution as described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4) through (6) that causes such
Limited Partner to have a deficit Capital Account balance, such Limited Partner
will be allocated items of income and gain in an amount and manner sufficient to
eliminate such deficit balance as quickly as possible. This provision is
intended to be a "qualified income offset" as defined in Regulation Section
1.704-1(b)(2)(ii)(d).

2. Distributions.

(a) Non-liquidation Distributions. Partnership Cash Flow for
each Year of the Partnership, to the extent available, will be distributed
within 60 days after the end of each Year of the Partnership, or earlier in the
discretion of Litho, proportionately among the Partners based on their
respective Percentage Interests in the Partnership at the time of distribution.
Partnership Sales Proceeds and Partnership Refinancing Proceeds will be
distributed within 60 days of the Capital Transaction giving rise to such
proceeds, or earlier in the discretion of Litho, proportionately among the
Partners based on their respective Percentage Interests in the Partnership as of
the date of the Capital Transaction giving rise to such proceeds. The New
Limited Partners have no rights to receive any distributions in the future that
are made out of the Initial Limited Partners' and ▇▇▇▇▇'s accrued but
undistributed Partnership Cash Flow as of the date the New Limited Partners are
admitted to the Partnership. New Limited Partners will be entitled only to
Partnership Cash Flow that accrues after the date of their admission to the
Partnership as Limited Partners

(b) Distribution Upon Dissolution. Upon the dissolution and
termination of the Partnership, Litho or, if there is none, a representative of
the Limited Partners, will liquidate the assets of the Partnership. The proceeds
of such liquidation will be applied and distributed 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 Litho or the representative of the Limited Partners may deem
reasonably necessary for the payment of any contingent or unforeseen liabilities
or obligations of the Partnership or of Litho arising out of or in connection
with the business and operation of the Partnership; and (c) third, the balance,
if any, will be distributed to the Partners in accordance with the Partners'
positive capital account balances. 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 positive capital
accounts until such capital accounts are reduced to zero, and/or (ii) used to
discharge recourse liabilities.

(c) Tax and Other Withholding. The Partnership is 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 income tax or revenue laws of any
taxing authority. In addition, the Loan Documents authorize the Partnership to
remit certain Distributions otherwise payable to a Limited Partner party to a
Limited Partner Note directly to the Bank. See "Terms of the Offering - Limited
Partner Loans." To the extent the Partnership pays any such amounts that it may
be required to pay on behalf of a Partner, such amounts will be treated as a
cash Distribution to such Partner and will reduce the amount otherwise
distributable to him.

Litho, in its capacity as General Partner, has the sole right
to manage the business of the Partnership and at all times is required to
exercise its responsibilities in a fiduciary capacity. The consent of the
Limited Partners is not required for any sale or refinancing of the Mobile
Lithotripsy System, the purchase of additional Mobile Lithotripsy Systems or the
purchase of other new Partnership assets. ▇▇▇▇▇ will continue oversee the
day-to-day affairs of the Partnership pursuant to the Management Agreement. See
"Business Activities - Management."

Under the Partnership Agreement, if Litho is adjudged by a
court of competent jurisdiction to be liable to the Limited Partners or the
Partnership for acts of gross negligence or willful misconduct in the
performance of its duties under the terms of the Partnership Agreement, Litho
may be removed and another substituted with the consent of all of the Limited
Partners. Litho may transfer all or a portion of its Partnership Interest only
if, in the opinion of the Partnership's accountant, the new general partner has
sufficient net worth and meets other requirements to assure that the Partnership
will continue to be treated as a partnership for Federal tax purposes. Both the
admission of any new shareholder and the withdrawal of any shareholder from
Litho may be done without the approval of the Limited Partners.

1. General. Litho may, in its absolute discretion, borrow
money, acquire, encumber, hold title to, pledge, sell, release or otherwise
dispose of, all or any part of the Partnership's assets, when and upon such
terms as it determines to be in the best interest of the Partnership, employ
such persons as it deems necessary for the operation of the Partnership and
deposit, withdraw, invest, pay, retain (including the establishment of reserves)
and distribute the Partnership's funds. Litho, however, is expressly prohibited
from, among other things: (i) possessing Partnership assets or assigning the
rights of the Partnership in Partnership assets for other than Partnership
purposes; (ii) admitting Limited Partners except as provided in the Partnership
Agreement; (iii) performing any act (other than an act required by the
Partnership 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; and (iv) performing any
act in contravention of the Partnership Agreement or which would make it
impossible to carry on the ordinary business of the Partnership.

2. Tax Matters.

(i) Elections. Litho will, 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. ▇▇▇▇▇ has made a an election pursuant to Code Section
754. See "Risk Factors- Tax Risks- Partnership Elections."

(ii) Tax Matters Partner. The Partnership Agreement
designates Litho as the Tax Matters Partner (as defined in Section 6231
of the Code) and authorizes it to act in any similar capacity under
state or local law. As the Tax Matters Partner, Litho 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 services and costs associated therewith. In its capacity
as Tax Matters Partner, ▇▇▇▇▇ shall oversee the Partnership tax affairs
in the manner which, in its best judgment, are in the interests of the
Partners. Moreover, Litho will, in its sole discretion, not make an
election pursuant to Treasury Regulation 301.7701.3 to be treated as an
association taxable as a corporation.

The Limited Partners do not have any right to participate in
the management of the business of the Partnership and will not transact business
for the Partnership. Limited Partners are not required to make any capital
contributions to the Partnership except amounts agreed by them to be paid, or
pay or be personally liable for, any expense, liability or obligation of the
Partnership, except to the extent (i) his or her Capital Contribution and
liability under a Limited Partner Loan, if any, (ii) his or her proportionate
share of the undistributed profits of the Partnership, and (iii) his or her
obligation to return certain Distributions made to them as provided by the Act.
See "Risk Factors - Other Investment Risks - Limited Partners' Obligation to
Return Certain Distributions."

After acquisition of Units by Investors, no Partnership
Interest nor any Units may be transferred without the prior written consent of
Litho, which approval may be granted or denied in the sole discretion of Litho,
and subject to the satisfaction of certain other conditions set forth in the
Partnership Agreement. The Partnership Agreement contains additional limitations
on transfer, including provisions prohibiting transfer that would cause the
termination of the Partnership, would violate federal or state securities laws,
would prevent the Partnership from being entitled to use any method of
depreciation which the Partnership might otherwise be entitled to use, or would
adversely affect the status of the Partnership as a partnership for Federal
income tax purposes. In addition, the Partnership Agreement prohibits the
holding or transfer of the Partnership Interest by or to a "tax exempt entity"
(as defined in Code Section 168(h)) which would affect the method or manner in
which the Partnership may depreciate Partnership assets. No transferee of the
Units will automatically become a Limited Partner. Admission of a transferee to
the Partnership as a Limited Partner requires the fulfillment of other
obligations enumerated in the Partnership Agreement, including either the
approval of all the Limited Partners (except the assignor Limited Partner) and
Litho, or the approval of the assignor Limited Partner and Litho. Any transferee
of the Partnership Interest who has not been admitted to the Partnership as a
Partner will not be entitled to any of the rights, powers or privileges of his
transferor except the right to receive and be credited or debited with his
proportionate share of Partnership income, gains, profits, losses, deductions,
credits or distributions. A transferor Limited Partner will not be released from
his or her personal liability under the Limited Partner Loans, unless otherwise
specifically agreed by the Bank, and the sale of his or her Limited Partnership
Interest may constitute an event of default under any outstanding Limited
Partner Loan.

The Partnership will dissolve and terminate for any of the
following reasons:

1. The sale, exchange or disposition of all or substantially all of the
property of the Partnership without making provision for the replacement
thereof;

2. The expiration of its term on December 31, 2040;

3. The bankruptcy or occurrence of certain other events with respect to
Litho;

4. The election to dissolve the Partnership made by ▇▇▇▇▇ and a Majority in
Interest of the Limited Partners; or

5. Any other reason which under the laws of the State of Tennessee would
cause a dissolution.

The retirement, resignation, bankruptcy, assignment for the
benefit of creditors, dissolution, death, disability or legal incapacity of a
general partner will not, however, result in a termination of the Partnership if
the remaining general partner or general partners, if any, elect to continue the
business of the Partnership, or if no general partner remains, if within 90 days
of the occurrence of one of such events, all of the Limited Partners elect in
writing to continue the Partnership and, if necessary, designate a new general
partner.

Upon dissolution, Litho or, if there is none, a representative
of the Limited Partners, will liquidate the Partnership's assets and distribute
the proceeds thereof in accordance with the priorities set forth in the
Partnership Agreement. See "Profits, Losses and Distributions - Distributions -
Distribution upon Dissolution" above and "Optional Purchase of Limited Partner
Interests" below.

As provided in the Partnership Agreement, the General Partner
has the option (which it may assign to the Partnership in its sole discretion)
to purchase all of the interest of a Limited Partner who (i) dies, (ii) becomes
the subject of a domestic proceeding, (iii) becomes insolvent, (iv) acquires
direct or indirect ownership of an interest in a competing venture (including
the lease or sublease of competing technology), or (v) defaults on his
obligations under the Guaranty. Except in the case of the death of a Limited
Partner, the option purchase price is an amount equal to the lesser of (a) the
fair market value of the Partnership Interest to be purchased or (b) the Limited
Partner's share of the Partnership's book value, if any, as reflected by the
Limited Partner's capital account in the Partnership (unadjusted for any
appreciation in Partnership assets or amounts due and payable to the Partnership
as account receivables, and as reduced by depreciation deductions claimed by the
Partnership for tax purposes) and, in certain cases, the assumption of the
Limited Partner's Guaranty. Although it is anticipated that the Partnership will
use the accrual method of accounting, the cash method will be used for
determining the capital account value option purchase price discussed herein.
Because losses, depreciation deductions and Distributions reduce capital
accounts, and because appreciation in assets is not reflected in capital
accounts, it is the opinion of the General Partner that the capital account
value option purchase price may be nominal in amount. In addition, in the event
existing or newly enacted laws or regulations or any other legal developments
adversely affect (or potentially adversely affect) the operation of the
Partnership or the business of the Partnership (e.g., any prohibitions on
provider ownership), the General Partner, in its sole discretion, is obligated
to either (x) purchase the Partnership Interests of all of the Limited Partners
at the option purchase price provided above or (y) dissolve the Partnership. See
the form of Partnership Agreement attached hereto as Appendix B, "Summary of the
Partnership Agreement - Optional Purchase of Limited Partner Interests," and
"Risk Factors - Operating Risks - Liability Under the Guaranty."

The Partnership Agreement provides that disputes arising
thereunder shall be resolved by submission to arbitration in Memphis, Tennessee.

Each Investor, by executing the Subscription Agreement,
irrevocably appoints ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to act as attorneys-in-fact to execute
the Partnership Agreement, any amendments thereto and any certificate of limited
partnership filed by ▇▇▇▇▇. The Partnership Agreement, in turn, contains
provisions by which each Limited Partner irrevocably appoints ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇, to act as his or her attorney-in-fact to make, execute, swear to and
file any documents necessary to the conduct of the Partnership's business, such
as deeds of conveyance of real or personal property as well as any amendment to
the Partnership Agreement or to any certificate of limited partnership which
accurately reflects actions properly taken by the Partners.

Within 90 days after the end of each Year of the Partnership,
▇▇▇▇▇ will 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 will be reasonably necessary for the preparation by such person of his
federal income tax return, and such other financial information as may be
required by the Act.

Proper and complete records and books of account are kept by
▇▇▇▇▇ in which are entered fully and accurately all transactions and other
matters relative 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 Partnership books and records are kept according to the
accrual method of accounting. The Partnership's fiscal year is the calendar
year. The books and records are located at the office of Litho, and are open to
the reasonable inspection and examination of the Limited Partners or their duly
authorized representatives during normal business hours.

On the Closing Date, it is expected that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, a Professional Limited Liability Company, of Winston-Salem,
North Carolina, will render an opinion as to the formation and existence of the
Partnership, the status of Investors as limited partners and certain federal tax
matters, the form of which is attached as Appendix C to this Memorandum. See
"Risk Factors - Tax Risks."

The Partnership will make available to you the opportunity to
ask questions of its management and to obtain information to the extent it
possesses such information or can acquire it without an unreasonable effort or
expense, which is necessary to verify the accuracy of the information contained
herein or which you or your professional advisors desire in evaluating the
merits and risks of an investment in the Partnership. Copies of certain Hospital
Contracts and insurance reimbursement agreements may not, however, be available
due to confidentiality restrictions contained therein.

[Remainder of page
intentionally left blank.]

Certain terms in this Memorandum shall have the following meanings:

Act. The Act means the Tennessee Uniform Revised Limited Partnership Act,
as in effect on the date hereof.

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 interests 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.

Bank. First-Citizens Bank & Trust Company.
----

Capital Account. The Partnership capital account of a Partner as computed
pursuant to the Partnership Agreement.

Capital Contributions. All capital contributions made by a
Partner or his predecessor in interest which shall include, without limitation,
contributions made pursuant Article VII of the Partnership Agreement.

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

Closing Date. 5:00 p.m., Eastern Time, on February 29, 2000 (or earlier) in
the discretion of Litho. The Closing Date may be extended for a period of up to
180 days in the discretion of Litho.

Coach. The self-propelled mobile vehicle manufactured by the Calumet Coach
Company, Calumet City, Illinois, upfitted to house a Lithostar(TM).

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

Contract Hospitals. The eight hospitals and medical centers to which the
Partnership provides lithotripsy services pursuant to five separate Hospital
Contracts.

Counsel. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, a Professional Limited Liability
Company, P.O. Drawer 84, Winston-Salem, North Carolina 27102.

Distributions. Cash or other property, from any source, distributed to
Partners.

Escrow Agent. First-Citizens Bank & Trust Company.
------------

FDA. The United States Food and Drug Administration.
---

Financial Statement. The Purchaser Financial Statement,
included in the Subscription Packet accompanying this Memorandum, to be
furnished by the Investors for review by ▇▇▇▇▇ and the Bank in connection with
their decision to accept or reject a subscription.

General Partner. The general partner of the Partnership, Lithotripters,
Inc., a North Carolina corporation.

Hospital Contracts. The five separate lithotripsy services agreements the
Partnership has entered into with the Contract Hospitals.

Initial Limited Partners. The Individuals who were Limited Partners in the
Partnership prior to the commencement of this Offering.

Investors. Potential purchasers of Units.
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Limited Partner Loan. The loan to be made by the Bank to certain qualified
Investors that wish to finance a portion of the Unit purchase price.

Limited Partner Note. The promissory note from an Investor
financing a portion of the Unit purchase price to the Bank in the principal
amount of up to $2,002 per Unit, the proceeds of which will be paid directly to
the Partnership. The form of the Limited Partner Note (including the Note
Addendum attached thereto) is attached as Exhibit A to the Form of Loan
Commitment which is attached hereto as Appendix B.

Limited Partners. The Limited Partners are the Initial Limited Partners.

Litho. Lithotripters, Inc., a North Carolina corporation, and a wholly
owned subsidiary of Prime Medical Services, Inc. ▇▇▇▇▇ is the General Partner of
the Partnership.

Lithostar(TM). The Lithostar(TM)model extracorporeal shock wave
lithotripter manufactured by Siemens which the Partnership owns and operates.

Loan and Security Agreement. The agreement to be executed in
conjunction with the Limited Partner Note by an Investor who finances a portion
of the Unit purchase price through a Limited Partner Loan. The form of the Loan
and Security Agreement is attached as Exhibit B to the Loan Commitment which is
attached hereto as Appendix B.

Loan Documents. The Loan Commitment, the Limited Partner Note, the Loan and
Security Agreement, the Security Agreement and UCC-1, collectively.

Loss. The net loss (including capital losses and excluding Net
Gains from Capital Transactions) of the Partnership for each year as determined
by the Partnership for federal income tax purposes.

Memorandum. This Confidential Private Placement Memorandum, including all
Appendices hereto, and any amendment or supplement hereto.

Mobile Lithotripsy System. The Coach with the installed and
operational Lithostar(TM) owned and operated by the Partnership and any other
additional or replacement lithotripter and transport vehicle.

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.

New Limited Partners . Any Investor admitted to the
Partnership as a Limited Partner.

Nonrecourse Deductions. A deduction as set forth in Treasury
Regulations Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a
given Year equals the excess, if any, of the net increase, if any, in the amount
of Partnership Minimum Gain during such Year over the aggregate amount of any
Distributions during such Year of proceeds of a Nonrecourse Liability that are
allocable to an increase in Partnership Minimum Gain, determined according to
the provisions of Treasury Regulations Section 1.704-2(h).

Nonrecourse Liability. Any partnership liability (or portion
thereof) for which no Partner bears the "economic risk of loss," within the
meaning of Treasury Regulations Section 1.704-2(i).

Offering. The offering of Units pursuant to this Memorandum.
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Partner Minimum Gain. An amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i).

Partner Nonrecourse Debt. Any nonrecourse debt (for the
purposes of Treasury Regulations Section 1.1001-2) of the Partnership for which
any Partner bears the "economic risk of loss," within the meaning of Treasury
Regulations Section 1.752-2.

Partner Nonrecourse Deductions. Deductions as described in
Treasury Regulations Section 1.704-2(i)(2). The amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for any Year equals the
excess, if any, of the net increase, if any, in the amount of Partner Minimum
Gain attributable to such Partner Nonrecourse Debt during such Year over the
aggregate amount of any Distributions during that Year to the Partner that bears
the economic risk of loss for such Partner Nonrecourse Debt to the extent such
Distributions are from the proceeds of such Partner Nonrecourse Debt and are
allocable to an increase in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i).

Partners. Litho and the Limited Partners, collectively, when no distinction
is required by the context in which the term is used herein.

Partnership. Tennessee Lithotripters Limited Partnership I, a Tennessee
limited partnership, which owns and operates the Mobile Lithotripsy System.

Partnership Agreement. The Partnership's Agreement of Limited Partnership,
a copy of which is attached as Exhibit A, as such may be amended from time to
time.

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 the 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 such period, (ii) the amount of all payments of principal on
loans to such Partnership, (iii) capital expenditures of the Partnership, and
(iv) such reasonable reserves as Litho 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
Litho.

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

Partnership Minimum Gain. Gain as defined in Treasury Regulations Section
1.704-2(d).

Partnership Refinancing Proceeds. The cash realized from the
re-financing 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 Litho 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 Litho 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 in the case of each Investor by reference to the
percentage oppositive his or her name set forth in Exhibit A to the Partnership
Agreement. Each Unit sold pursuant to this Offering represents an initial 1%
economic interest in the Partnership. The Percentage Interest will be set forth
in Exhibit A to the Partnership Agreement or any other document or agreement, as
a percentage or a fraction or on any numerical basis deemed appropriate by
Litho.

Prime. Prime Medical Services, Inc. a publicly held Delaware corporation
and parent of Litho and the Sales Agent.

Prime Rate. The rate of interest periodically established by the Bank and
identified as such in literature published and circulated within the Bank's
offices.

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

Profit. The net income of the Partnership for each year as determined by
the Partnership for federal income tax purposes.

Qualified Income Offset Item. An adjustment, allocation or
distribution described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) unexpectedly received by a
Partner.

Sales Agent. MedTech Investments, Inc., a registered broker-dealer, member
of the National Association of Securities Dealers, Inc. and an Affiliate of
Litho.

SEC. The United States Securities and Exchange Commission.
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Securities Act. The Securities Act of 1933, as amended.
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Security Agreement. The agreement to be executed in
conjunction with the Limited Partner Note by an Investor who finances the
purchase price of his Units as provided herein. The form of the Security
Agreement is attached as Exhibit C to the Form of Loan Commitment which is
attached hereto as Appendix B.

Service. The Internal Revenue Service.
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Service Area. Western Tennessee and northern Mississippi. Litho has sole
discretion to expand the Service Area.

Siemens. Siemens Medical Systems, Inc. and its Affiliates.
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Subscription Agreement. The Subscription Agreement, included
in the Subscription Packet accompanying this Memorandum, to be executed by the
Limited Partners in connection with their purchase of Units.

Subscription Packet. The packet of subscription materials to be completed
by Investors in connection with their subscription for Units.

UCC-1. The Uniform Commercial Code Financing Statement, two
copies of which are attached to the Subscription Packet and are to be executed
in conjunction with the Limited Partner Note by an Investor who finances a
portion of the Unit purchase price through a Limited Partner Loan. The UCC-1
will be used by the Bank to perfect its security interest in such Investor's
share of Distributions.

Units. The 29 equal limited partner interests in the Partnership offered by
▇▇▇▇▇ pursuant to this Memorandum for a price per Unit of $4,502 in cash.

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

Name of Prospective Investor Memorandum Number TENNESSEE LITHOTRIPTERS LIMITED PARTNERSHIP I A Limited Partnership Formed Under the Laws of Tennessee CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

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