----------------------------                        ----------------------------
Name of Prospective Investor                                      Memorandum No.








               WESTERN KENTUCKY LITHOTRIPTERS LIMITED PARTNERSHIP

             A Limited Partnership Formed Under the Laws of Kentucky

                    CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

                                $200,000 in Cash

                         $478,272 in Personal Guaranties

                                    80 Units
                         of Limited Partnership Interest

                            MEDTECH INVESTMENTS, INC.

                              Exclusive Sales Agent
                                2008 Litho Place

                       Fayetteville, North Carolina 28304

                                 1-800-682-7971


<PAGE>



                The Date of this Memorandum is December 15, 1999

               WESTERN KENTUCKY LITHOTRIPTERS LIMITED PARTNERSHIP

              $200,000 in Cash and $478,272 in Personal Guaranties

              80 Units of Limited Partnership Interest at $2,500 in
               Cash and $5,978.40 in Personal Guaranties per Unit

                  Western Kentucky Lithotripters Limited Partnership, a Kentucky
limited partnership (the "Partnership"), organized by its general partner, Prime
Lithotripter  Operations,  Inc., a New York corporation (the "General  Partner")
and a  wholly-owned  subsidiary  of Prime  Medical  Services,  Inc.,  a Delaware
corporation,  hereby  offers on the terms set forth  herein 80 units of  limited
partnership  interest (the "Units").  The  Partnership was formed to acquire and
operate  (i) one new Storz  Modulith(R)  SLX-T model  extracorporeal  shock-wave
lithotripter,  and (ii) one used  Dornier HM-3 model  extracorporeal  shock-wave
lithotripter.  The Storz Modulith SLX-T will be transported from site to site by
a new  mobile  vehicle  and the  Dornier  HM-3 will be  housed in a used  mobile
trailer which will be transported from site to site by a used tractor truck (the
installed  lithotripters  and mobile  vehicles,  collectively,  the "Lithotripsy
Systems") to enable the Partnership to provide lithotripsy services primarily in
the  following  Kentucky  counties  and such other  areas as  determined  by the
General Partner:  Christian County,  Daviess County,  Henderson County,  Hopkins
County,  McCracken County and Warren County (the "Service Area").  See "Proposed
Activities."

                  The  Units are  divided  into 80 Units  offered  at a per Unit
price of $2,500 in cash,  plus a personal  guaranty  of 1% of the  Partnership's
obligations  under the loan of up to $597,840 from  First-Citizens  Bank & Trust
Company (the "Loan") (up to a $5,978.40 principal guaranty obligation per Unit).
See  "Terms of the  Offering."  Each Unit  represents  an  initial  1%  economic
interest  in the  Partnership.  See  "Risk  Factors - Other  Investment  Risks -
Dilution of Limited  Partners'  Interests."  The Units are offered to individual
investors and certain  entities that meet the requirements for investment in the
Partnership as set forth herein. The offering will terminate on January 31, 2000
unless,  in the discretion of the General  Partner,  it is sooner  terminated or
extended  for a period of up to 180 days.  The Unit cash price and the  executed
Guaranties are both due at subscription.

                                                      ---------------
                  Purchase of Units involves  significant  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 (1) the
Partnership has not begun any  revenue-producing  business  operations,  (2) the
health care industry is undergoing  significant  government  regulatory reforms,
and (3) the Partnership  expects to face  increasing  competition in the Service
Area. See "Risk Factors" and "Terms of the Offering - Suitability Standards."

             Cash                                     Net

         Offering Price         Selling               Cash            Amount of

                          Commissions(1)         Proceeds (2)     Guaranties (3)

Per Unit (4)  $ 2,500            $ 250           $ 2,250          $ 5,978.40
Total (5)     $200,000           $20,000         $180,000         $478,272.00


(See Footnotes on Back of Cover Page)

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

(1)      The Units will be sold on a "best efforts" all or none basis by MedTech
         Investments,  Inc., a broker-dealer  registered with the Securities and
         Exchange  Commission  and a  member  of  the  National  Association  of
         Securities Dealers,  Inc. (the "Sales Agent").  MedTech is an Affiliate
         of the General Partner. The Partnership will pay the Sales Agent a $250
         commission  for each Unit sold and will  reimburse  the Sales Agent for
         its out of pocket Offering costs (not to exceed $10,000). No commission
         will be paid with  respect to Units sold to the General  Partner or its
         Affiliates  as provided in note (4) below.  No commission is payable to
         the Sales Agent unless all the Units are sold as provided  herein.  The
         Partnership  has agreed to indemnify  the Sales Agent  against  certain
         liabilities,  including liabilities under the Securities Act. See "Plan
         of Distribution."

(2)  Before deduction of expenses  payable by the Partnership.  See "Sources and
     Applications of Funds" and  "Compensation  and Reimbursement to the General
     Partner and its Affiliates." The cash price per Unit ($2,500) is payable in
     full at subscription. See "Terms of the Offering."

(3)  At subscription,  each Investor must execute and deliver to the Sales Agent
     a guaranty agreement (the "Guaranty") under which he will guarantee payment
     of a  portion  of the  Partnership's  obligations  under  a  loan  of up to
     $597,840 (the "Loan") from First-Citizens Bank & Trust Company (the "Bank")
     which is headquartered in Raleigh,  North Carolina,  and has  approximately
     370 offices throughout the southeastern  United States. The proceeds of the
     Loan  will be used to (i)  acquire  one new  Storz  Modulith(R)SLX-T  model
     extracorporeal  shock-wave  lithotripter  with  accessories  (estimated  at
     $400,000);  (ii) acquire and upfit one new mobile  vehicle to transport the
     new Storz  Modulith(R)SLX-T  lithotripter  (estimated  at  $70,000);  (iii)
     acquire one used Dornier HM-3 model extracorporeal shock-waver lithotripter
     (estimated at $60,000);  (iv) acquire one used trailer to house the Dornier
     HM-3  lithotripter  (estimated  at  $21,500);  (v) acquire one used tractor
     truck to  transport  the  trailer  housing the  Dornier  HM-3  lithotripter
     (estimated  at  $12,500)  and (vi) pay  state  sales  and use  taxes on the
     purchase of the lithotripters,  mobile transport vehicles and tractor truck
     (estimated at $33,840). If necessary,  the Partnership  anticipates using a
     portion of the cash  Offering  proceeds (up to $20,691) to acquire  certain
     service contracts from the General Partner (the "Service  Contracts").  See
     "Proposed Activities - Service Contracts." In addition, the General Partner
     anticipates (subject to the approval of the Partnership's  Medical Advisory
     Board)  that  during  the  first  year  of  Partnership   operations,   the
     Partnership will use a portion of the Partnership's  working capital,  Cash
     Flow and/or  reserves  (estimated  at $60,000)  and  contract  with certain
     service  providers  (including   Affiliates  of  the  General  Partner)  to
     refurbish the used Dornier HM-3 and used trailer.  See "Proposed Activities
     - Acquisition of  Lithotripsy  Systems - Used  Equipment." As a class,  the
     Limited  Partners will guarantee up to $478,272 (80%) of the  Partnership's
     principal  obligations  under the Loan. The $400,000 purchase price for the
     Storz Modulith(R) SLX-T lithotripter represents an approximate 24% discount
     below  the  current  list  price  of  $525,000  due  to  special   discount
     arrangements  between Prime Medical  Services,  Inc. (the General Partner's
     parent)  and Storz  accorded  to  volume  purchasers.  See "Risk  Factors -
     Operating Risks - Partnership Limited Resources and Risks of Leverage." For
     each Unit  purchased,  an Investor  will be required to guarantee 1% of the
     Loan, which represents up to a $5,978.40 principal guaranty  obligation.  A
     Limited  Partner's  liability  under the Guaranty may exceed the  principal
     guaranty per Unit as provided  above  because such  liability  includes not
     only  principal,  but  also  accrued  and  unpaid  interest,  late  payment
     penalties  and legal  costs  incurred by the Bank in  collecting  defaulted
     obligations.   See   "Proposed   Activities   -  Funding  for   Partnership
     Activities."  For a description of the guaranty  requirements and the terms
     of the Guaranties,  see "Terms of the Offering - Guaranty Arrangements" and
     the form of the Guaranty included in the Subscription  Packet  accompanying
     this Memorandum. In its capacity as general partner of the Partnership, the
     General  Partner  will  contribute  cash in an  amount  equal to 20% (up to
     $50,000) of the total cash  contributed to the  Partnership by the Partners
     pursuant to this  Offering.  The General  Partner will guarantee 20% of the
     Loan, which represents up to a $119,568 principal guaranty obligation.  See
     "Terms  of  the  Offering  -  Guaranty   Arrangements,"   "Summary  of  the
     Partnership  Agreement - Capital  Contribution of the General  Partner" and
     "Proposed  Activities - Funding for  Partnership  Activities."  The General
     Partner  will hold a 20%  economic  interest as the general  partner of the
     Partnership.

(4)      Each Investor may purchase no less than one Unit.  The General  Partner
         reserves the right to sell a limited  number of  fractional  Units as a
         minimum  investment and to reject in whole or in part any subscription.
         Purchases  of  fractional  Units  will be in  multiples  of 1/2  Units;
         provided,  that the General  Partner and its  Affiliates  may  purchase
         fractional  Units in increments other than 1/2 Units for a proportional
         purchase price.

(5)      All  subscription  funds  and  Guaranties  will be held in an  interest
         bearing  escrow  account  with  the  Bank,  until  the  Closing  or the
         termination of the Offering.  The Partnership seeks by this Offering to
         sell 80 Units for  $200,000  in cash  ($180,000  net of Sales  Agent 's
         commissions)  and  up  to  $478,272  in  personal   guaranties  of  the
         Partnership's  principal  obligations  under  the  Loan.  In the  event
         complete  subscriptions  for  all 80  Units  are  timely  received  and
         accepted by the General Partner, the subscription funds (plus interest)
         and Guaranties held in escrow will be released to the  Partnership.  If
         complete  subscriptions  for all 80 Units are not timely  received  and
         accepted,  the  Offering  will  be  terminated  and  all  subscriptions
         canceled. In the event of termination, all subscription funds (together
         with  interest),  Guaranties and other  subscription  documents will be
         promptly  returned to the Investors.  The General Partner  reserves the
         right for it or any of its  Affiliates  to  purchase  up to 50 Units in
         order to meet the full  subscription  amount  of 80 Units  required  to
         successfully  close the offering.  The purchase of Units by the General
         Partner or its  Affiliates  will be on the same terms and conditions as
         any other  Investor,  except that (i) their Unit purchase price will be
         reduced  by  the  savings  to  the   Partnership   attributable  to  no
         commissions  being payable to the Sales Agent on the  transaction,  and
         (ii) the General  Partner and its  Affiliates  may purchase  fractional
         Units in  multiples  other  than 1/2 Unit for a  proportional  purchase
         price.  See  "Risk  Factors - Other  Investment  Risks -  Purchases  by
         General Partner and its Affiliates."

--------------------------------------------------------------------------------
o        The  Units  are  being  offered  pursuant  to  an  exemption  from  the
         registration  requirements  of the  Securities Act of 1933, as amended,
         provided  by  Section  4(2)  thereof  and  Rule  506  of  Regulation  D
         promulgated  thereunder,  as  amended,  and  an  exemption  from  state
         registration  requirements  provided by the National Securities Markets
         Improvement  Act of 1996. A  registration  statement  relating to these
         securities  has  not  been  filed  with  the  Securities  and  Exchange
         Commission or any state securities commission.

o        Neither the Securities and Exchange Commission nor any state securities
         commission has approved or disapproved of the Units or determined  that
         this  Memorandum  is truthful or complete.  Any  representation  to the
         contrary is a criminal offense.

o The Units are subject to  restrictions on  transferability  and resale and may
not be  transferred  or resold o Prospective  Investors  should not construe the
contents of this Memorandum or any prior or subsequent o No offering  literature
in whatever form will or may be employed in the offering of Units, except this o
All 80 Units must be sold in order to close the Offering.  Up to 50 Units may be
purchased by the General

         Partner and its  Affiliates,  each of which will  receive in the future
         fees or  compensation  made possibly only if the Offering  successfully
         closes.  Investors  should therefore not expect that the sale of all 80
         Units  indicates  that such sales have been made to Investors that have
         no  financial or other  interest in the Offering or that are  otherwise
         exercising  independent judgment.  The requirement that all 80 Units be
         sold, while necessary to the business operations of the Partnership, is
         not  designed  as a  protection  to  Investors,  i.e.,  the all or none
         requirement is not designed to indicate that an Investor's  decision to
         purchase Units is shared by other unaffiliated Investors.

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


                                TABLE OF CONTENTS

                                                                  Page

                                                             APPENDICES

Appendix A        FINANCIAL PROJECTIONS
Appendix B        AGREEMENT OF LIMITED PARTNERSHIP OF
                      WESTERN KENTUCKY LITHOTRIPTERS LIMITED PARTNERSHIP
Appendix C        LOAN COMMITMENT
Appendix D        FORM OF MANAGEMENT AGREEMENT
Appendix E        FORM OF OPINION OF WOMBLE CARLYLE SANDRIDGE & RICE, A
                      PROFESSIONAL LIMITED LIABILITY COMPANY


                  This  summary  of  certain  provisions  of the  Memorandum  is
intended  for a  quick  reference  and  is  not  complete.  The  Memorandum  and
accompanying  Appendices  must be read  and  understood  in  their  entirety  by
Investors.  See  the  "Glossary"  for  terms  used in  this  Memorandum  and not
otherwise defined.

                  The   Units   and   Subscription   Price.   Western   Kentucky
Lithotripters  Limited Partnership,  a limited partnership formed under the laws
of the State of  Kentucky,  hereby  offers an  aggregate  of 80 Units of limited
partner interest in the Partnership. Each Unit represents an initial 1% economic
interest in the Partnership. Investors should note that their initial Percentage
Interests in the Partnership may be reduced by future  Dilution  Offerings.  See
"Summary of the Partnership  Agreement - Dilution Offerings" and the Partnership
Agreement  attached  hereto as  Appendix B. The price for each Unit is $2,500 in
cash and a 1% personal guaranty of the Partnership's  obligations under the Loan
(up to a $5,978.40  principal  guaranty  obligation per Unit). At  subscription,
each Limited Partner must pay his cash Unit price and execute and deliver to the
Sales Agent a guaranty  agreement (the "Guaranty") under which he will guarantee
payment of a portion of the  Partnership' s obligations  under the Loan of up to
$597,840  from the Bank,  the  proceeds of which will be used to (i) acquire one
new Storz Modulith(R) SLX-T model  extracorporeal  shock-wave  lithotripter with
accessories  (estimated  at  $400,000);  (ii)  acquire  and upfit one new mobile
vehicle to transport the Modulith(R) SLX-T lithotripter  (estimated at $70,000);
(iii) acquire one used Dornier HM-3 Model extracorporeal shock-wave lithotripter
(estimated at $60,000);  (iv) acquire one used trailer to house the Dornier HM-3
lithotripter  (estimated  at  $21,500),  (v) acquire one used  tractor  truck to
transport  the trailer  housing  the Dornier  HM-3  lithotripter  (estimated  at
$12,500)  and  (vi)  pay  state  sales  and use  taxes  on the  purchase  of the
lithotripters,  mobile  transport  vehicles  and  tractor  truck  (estimated  at
$33,840).  See  "Compensation  and  Reimbursement to the General Partner and its
Affiliates."   As  a  class,   Limited   Partners  will  guarantee  80%  of  the
Partnership's  obligations  under the Loan.  For each Unit purchased an Investor
will be  required  to  guarantee  1% of the  Loan (up to a  $5,978.40  principal
guaranty).  Liability  under the Guaranty may exceed the principal  guaranty per
Unit as provided  above  because the guaranty  obligation  per Unit includes not
only principal, but also accrued and unpaid interest, late payment penalties and
legal costs incurred by the Bank in collecting any defaulted  obligations.  Each
Investor may purchase not less than one Unit. However,  the General Partner may,
in its sole  discretion,  permit  the  Partnership  to sell a limited  number of
fractional  Units as a minimum  investment and to reject in whole or in part any
subscription.  Purchases of fractional  Units will be in increments of 1/2 Units
at a price of $1,250 in cash and up to  $2,989.20 in  principal  guaranties  per
each 1/2 Unit (0.5% of the Loan).  The General  Partner and its  Affiliates  may
purchase  fractional  Units in multiples other than 1/2 Units for a proportional
purchase  price.  See "Risk  Factors -  Operating  Risks -  Liability  Under the
Guaranty," "Terms of the Offering - General - The Units and Subscription  Price"
and "Risk Factors - Other  Investment  Risks - Purchases by General  Partner and
its Affiliates."

                  The Offering.  By this Offering the Partnership  seeks to sell
80 Units  for a maximum  of  $200,000  in cash  ($180,000  net of Sales  Agent's
commissions)  and an aggregate of up to $478,272 in personal  guaranties  of the
Partnership's  obligations  under the Loan.  The Units are offered to individual
investors and certain  entities who meet the  requirements for investment in the
Partnership as set forth herein. In the event complete  subscriptions for all 80
Units are received and accepted by the General Partner,  all subscription  funds
(plus  interest)  and  Guaranties  held  in  escrow  will  be  released  to  the
Partnership.  If complete  subscriptions  for all 80 Units are not  received and
accepted  by the end of the  subscription  period as  defined  in  "Subscription
Period"  below,  the Offering  will be  terminated  and all  subscription  funds
(together with interest) and  Guaranties  will be returned to the Investors.  In
order to successfully close the Offering, the General Partner reserves the right
for it or any of its  Affiliates to purchase up to 50 Units in order to meet the
full  subscription  amount of 80 Units.  The  purchase  of Units by the  General
Partner or its Affiliates  will be on the same terms and conditions as any other
Investor,  except  that (i) their  Unit  purchase  price  will be reduced by the
savings to the Partnership  attributable to no commissions  being payable to the
Sales Agent on the transaction,  and (ii) the General Partner and its Affiliates
may  purchase  fractional  units  in  multiples  other  than  1/2  Units  for  a
proportional  purchase  price.  See  "Risk  Factors - Other  Investment  Risks -
Purchases by Affiliates" and "Terms of the Offering - General." All subscription
funds  and  Guaranties  will be held in  escrow by the  Escrow  Agent  until the
Closing or the termination of the Offering.

                  Subscription  Period. The subscription period will commence on
the date hereof and will  terminate  at 5:00 p.m.,  Eastern  time on January 31,
2000 (or earlier, in the discretion of the General Partner, upon the sale of all
80 Units as provided herein), unless sooner terminated by the General Partner or
unless  extended  for an  additional  period up to 180 days.  See  "Terms of the
Offering - General - Subscription  Period," and "Risk Factors - Other Investment
Risks - Purchases by Affiliates."

                  Proposed  Activities.   Upon  successful  completion  of  this
Offering,  the  Partnership  will close the Loan and from the  proceeds  thereof
purchase (i) one new Storz  Modulith(R)  SLX-T model  extracorporeal  shock-wave
lithotripter  together with  accessories  for an  approximate  purchase price of
$400,000  (ii) one new mobile  vehicle to transport the  Modulith(R)  SLX-T from
site to site for an  approximate  purchase  price  of  $70,000,  (iii)  one used
Dornier HM-3 model  extracorporeal  shock-waver  lithotripter for an approximate
purchase  price of  $60,000;  (iv) one used  trailer to house the  Dornier  HM-3
lithotripter for an approximate  purchase price of $21,500; (v) one used tractor
truck to  transport  the trailer  housing the Dornier HM-3  lithotripter  for an
approximate  purchase price of $12,500;  and (vi) pay applicable state sales and
use taxes on the lithotripters, mobile transport vehicles and tractor truck. The
$400,000 purchase price for the Storz lithotripter represents an approximate 24%
discount  below the  current  list price of  $525,000  due to  special  discount
arrangements  between  Prime  and  Storz  accorded  to  volume  purchasers.  See
"Proposed Activities - Acquisition of the Lithotripsy  Systems." The Partnership
will use the cash  proceeds of this Offering and the General  Partner's  initial
cash  contribution  to fund  syndication,  organization,  start-up  and  working
capital  costs.  The  Partnership  intends to use a portion of the Loan and cash
Offering  proceeds  to acquire  certain  assets  from the  General  Partner.  If
necessary,  the  Partnership  intends to use up to $20,691 of the cash  Offering
proceeds to acquire  from the  General  Partner  certain  Service  Contracts  to
provide lithotripsy  services at various hospitals.  See "Proposed  Activities -
Service Contracts" and "Sources and Applications of Funds." The Partnership will
indemnify the General  Partner  against the future  performance  of  obligations
under the Service Contracts assigned to it.

                  As discussed above, the Partnership will also use a portion of
the Loan  proceeds to acquire  from the General  Partner the used  Dornier  HM-3
lithotripter,  the used  trailer  and the used  tractor  truck for an  aggregate
purchase  price  of  $94,000  payable  upon the  Closing  of the  Offering.  The
Partnership will have to pay the applicable state use tax on the equipment to be
purchased  from the General  Partner  (estimated  at $5,640).  In addition,  the
General  Partner  anticipates  (subject  to the  approval  of the  Partnership's
Medical  Advisory  Board) that during the first year of Partnership  operations,
the Partnership will use a portion of the  Partnership's  working capital,  Cash
Flow and/or  reserves  (estimated at $60,000) and contract with certain  service
providers  (including  Affiliates of the General  Partner) to refurbish the used
Dornier  HM-3 and used  trailer.  See  "Proposed  Activities  -  Acquisition  of
Lithotripsy  Systems," "- Funding for Partnership  Activities,"  "Risk Factors -
Operating  Risks  -  Partnership  Limited  Resources  and  Risks  of  Leverage,"
"Compensation  and  Reimbursement to the General Partner and its Affiliates" and
the Financial Projections attached hereto as Appendix A.

                  The Partnership  will attempt to obtain the Service  Contracts
from the General  Partner by taking  assignment of the existing  contracts or by
causing the termination  thereof and the  negotiation of new contracts  directly
between the  Partnership  and the customer.  See "Proposed  Activities - Service
Contracts."  The Partnership  will also attempt to contract  directly with other
licensed health care facilities in the Service Area to make lithotripsy services
available to their patients. No assurance can be given that the Partnership will
be successful in  negotiating  new  contracts on financial  terms  comparable to
those  in the  existing  Service  Contracts,  or at all.  See  "Risk  Factors  -
Operating  Risks - Competition"  and "Risk Factors - Operating  Risks - Contract
Terms and Termination." The travel itinerary for the Lithotripsy Systems will be
determined by the General Partner after  consultation with the various treatment
facilities to be served by the  Partnership's  Lithotripsy  Systems.  The travel
schedule is expected to be influenced by the number of treating  physicians  and
patients in particular areas and the  Partnership's  arrangements  with licensed
treatment facilities located across the Service Area.

                  The  Partnership   will  enter  into  a  separate   Management
Agreement  with  Lithotripters,  Inc., an Affiliate of the General  Partner (the
"Management Agent").  Pursuant to the Management Agreement, the Management Agent
will generally (i) manage all operations of the Lithotripsy Systems,  (ii) where
necessary, train, or arrange and supervise the training of, interested qualified
physicians (which may include  qualified  physician Limited Partners) in the use
of the  Lithotripsy  Systems  for the  treatment  of their  patients,  and (iii)
conduct  quality  assurance  and  outcome  analysis   programs.   See  "Proposed
Activities  -  Operation  of the  Lithotripsy  Systems,"  and  the  form  of the
Management Agreement attached hereto as Appendix D.

                  Qualified  physicians  desiring to treat  patients with one of
the Partnership's  lithotripters will make appropriate  arrangements with either
the Partnership or the health care facilities  contracting  with the Partnership
(as the case may be) to make a  lithotripter  available for their use. See "Risk
Factors - Tax Risks - Disqualification  of Employee Benefit Plans" and "Proposed
Activities - Operation of the  Lithotripsy  Systems."  Generally,  all qualified
physicians  desiring to treat their own patients on a  Partnership  lithotripter
may do so after they have received any  necessary  training as prescribed by the
rules of the applicable health care facility. 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.  In addition,  the General  Partner  reserves the right to request
that (i) physicians  (or members of their  practice  group) treat only their own
patients with the lithotripter and (ii) that physician Limited Partners disclose
to their patients in writing their financial  interest in the Partnership  prior
to  treatment,  if  it  determines  that  such  practices  are  advisable  under
applicable  law. The former  requirement  is mandatory  under  Kentucky law. See
"Regulation."  The treating  qualified  physicians or the health care facilities
will be solely  responsible  for billing and  collecting on their own behalf the
professional component of the lithotripsy procedure.

                  Subject to certain  limitations  set forth in the  Partnership
Agreement,  in the event the General Partner determines in the future that it is
in the best interest of the  Partnership,  it may cause the  Partnership  (i) to
acquire one or more additional mobile or fixed base lithotripter systems (or any
other urological device or equipment which has received FDA premarket  approval)
in  such  location(s)  as  the  General  Partner  may  determine,  in  its  sole
discretion,  to be in the best interests of the Partnership;  (ii) to acquire an
interest  in any  business  entity,  including,  without  limitation,  a limited
partnership,  limited liability company or corporation, that engages in any such
business activity;  and (iii) to engage in any and all activities  incidental or
related to the  foregoing,  upon and subject to the terms and  conditions of the
Partnership Agreement;  and/or (iv) to engage in Dilution Offerings on behalf of
the  Partnership to accomplish such goals,  and may use  Partnership  assets and
revenues to secure and repay such  borrowings.  As  provided in the  Partnership
Agreement, the General Partner may not incur any single capital expenditure, any
long-term  debt  or  any  single   borrowing  of  the  Partnership   during  any
twelve-month  period in excess  of  $100,000  without  the prior  approval  of a
Majority  in Interest of the Limited  Partners.  In  addition,  the consent of a
Majority  in  Interest  of  the  Limited  Partners  is  required  prior  to  the
Partnership  engaging  in  any  Dilution  Offering  to  raise  capital  for  the
acquisition of additional  assets.  See "Summary of the Partnership  Agreement -
Powers of the General Partner and Limited Partners' Voting Rights."

                  Anticipated  Benefits to Investors.  The primary objectives of
the  Partnership  are  (i) to  improve  the  provision  of  health  care  in the
Partnership's Service Area by taking advantage of the technological  innovations
inherent in the Lithotripsy Systems and the Partnership's  quality assurance and
outcome analysis  programs,  and (ii) to make cash distributions to its Partners
from revenues  generated from the operation of the  Lithotripsy  Systems.  It is
anticipated that cash Distributions may begin in the first  twelve-month  period
after the Partnership begins business operations. There is no assurance that the
Partnership's  cash  distribution  objective  can be  met.  The  amount  of cash
available  for  distribution  will  further  be  limited  by  the  Partnership's
obligation to make certain prepayments under the Loan. See "Proposed  Activities
- Funding  For  Partnership  Activities."  Each Unit  represents  an  initial 1%
interest in Partnership income, loss and cash Distributions. See "Risk Factors -
Other Investment Risks - Dilution of Limited  Partners'  Interests." The General
Partner  represents  that  Investors  should not invest in the  Partnership  for
purposes  of  obtaining  deductions,  losses  or other  tax  benefits,  as it is
anticipated by the General Partner that taxable income will be reportable by the
Limited Partners along with their receipt of cash  Distributions.  To the extent
available, the General Partner will use its best efforts to distribute cash from
operations to enable the Partners to pay their income tax  liabilities  on their
respective shares of Partnership  taxable income. No assurance can be given that
such  will be the  case.  See  "Risk  Factors  - Tax Risks - Income in Excess of
Distributions." The Partnership's projected statements of taxable income (loss),
cash flow,  sources and uses of funds,  and  projected  statements of return per
Unit, are set forth in Appendix A hereto. The Financial Projections are based on
assumptions set forth therein and in this  Memorandum,  and are included for the
information and convenience of Investors and their  professional  advisors.  THE
PROJECTED  DATA  ARE THE  GENERAL  PARTNER'S  ESTIMATE  OF  REASONABLE,  BUT NOT
NECESSARILY  THE  MOST  LIKELY,  RESULTS  OF THE  PARTNERSHIP'S  OPERATIONS  AND
REPRESENT A PREDICTION OF FUTURE EVENTS BASED ON ASSUMPTIONS THAT MAY OR MAY NOT
OCCUR, AND SHOULD NOT BE RELIED UPON TO INDICATE THE ACTUAL RESULTS THAT WILL BE
OBTAINED.  Whether  the  Partnership  will be able to operate  under the Service
Contracts has not been determined.  See "Risk Factors - Other Investment Risks -
Financial  Projections" and "Risk Factors - Operating Risks - Contract Terms and
Termination."

                  Organization   of   the    Partnership.    Western    Kentucky
Lithotripters   Limited   Partnership,   a  Kentucky  limited  partnership  (the
"Partnership"),  was  organized  and created under the Act on November 24, 1999.
The general partner of the Partnership is Prime  Lithotripter  Operations,  Inc.
(the "General Partner"), a New York corporation and a wholly-owned subsidiary of
Prime Medical Services,  Inc., a Delaware corporation.  The General Partner will
hold a 20% interest in the Partnership as general  partner.  The initial Limited
Partner of the Partnership will withdraw from the Partnership upon the admission
of the Limited  Partners to the  Partnership as provided in this  Offering.  The
initial  address  of  the  principal  office  of the  General  Partner  and  the
Partnership is 1301 Capital of Texas Highway,  Suite C-300, Austin, Texas 78746.
The Lithotripsy  Systems will be acquired and operated by the  Partnership.  See
the form of  Partnership  Agreement  attached as Appendix B and  "Summary of the
Partnership Agreement."

                  Limited  Liability.  Other than the purchase price for a Unit,
no capital  assessments will be requested of or imposed on the Limited Partners.
Limited Partners may, however, be called upon to perform under their Guaranties.
See "Risk Factors - Operating Risks - Liability Under the Guaranty."  Provided a
Limited  Partner  does not  participate  in the  management  or  control  of the
Partnership,  he will not incur any liability with respect to obligations of the
Partnership,  except  to the  extent  of his  (i)  capital  contributions,  (ii)
Guaranty of the  Partnership's  obligations under the Loan, and (iii) obligation
to return  certain  Distributions  made to him  constituting a return of capital
contributions  in accordance with the Act. See "Risk Factors - Other  Investment
Risks - Limited Partners' Obligation to Return Certain Distributions." See also,
the form of Opinion of Counsel attached hereto as Appendix E.

                  Optional Purchase of Limited Partner Interests. 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."

                  Investment of the General Partner.  In its capacity as general
partner of the  Partnership,  the General  Partner will  contribute  cash to the
Partnership  in an  amount  equal  to 20%  (up to  $50,000)  of the  total  cash
contributed to the  Partnership by the Partners  pursuant to this Offering.  The
General  Partner will guarantee 20% of the Loan,  which is equivalent to up to a
$119,568  principal guaranty  obligation.  See "Terms of the Offering - Guaranty
Arrangements."  All lithotripsy  operations of the Partnership will be conducted
by the General  Partner and the  Management  Agent.  See "Proposed  Activities -
Funding for Partnership  Activities,"  "Summary of the  Partnership  Agreement -
Capital  Contribution of the General  Partner,"  "General Partner" and "Proposed
Activities - Management and Administration."

                  Compensation and  Reimbursement of the General Partner and its
Affiliates.  Beginning on the Closing Date, the Management  Agent will receive a
monthly  management  fee  throughout  the term of the  Partnership  equal to the
greater  of 7% of  Partnership  Cash  Flow per month or $8,000  per  month.  The
General Partner and its Affiliates will receive  interest on loans, if any, they
make to the Partnership. It is also expected that concurrent with the Closing of
the Offering, or as soon as reasonably possible thereafter, the Partnership will
acquire a Lithotripsy  System and the Service Contracts from the General Partner
for $94,000 and up to $20,691,  respectively.  In addition,  the Partnership may
contract  with the  General  Partner or its  Affiliates  to render  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.  The
General Partner and the Management  Agent will also be entitled to reimbursement
from the Partnership for all costs incurred by each in managing the Partnership.
Upon the successful  completion of this Offering,  the Sales Agent, an Affiliate
of the General Partner, will receive up to $20,000 in sales commissions from the
Partnership  for the sale of Units and may be  reimbursed  for up to  $10,000 in
out-of-pocket  offering  expenses.  The General  Partner and its Affiliates will
receive no development fee or other compensation for organizing or operating the
Partnership  except as otherwise  provided  herein.  See "Proposed  Activities -
Management and  Administration,"  "Proposed Activities - Funding for Partnership
Activities,"  "Plan of  Distribution,"  "Compensation  and  Reimbursement to the
General Partner and its Affiliates" and "Conflicts of Interest."

                  Plan  of  Distribution.   Subscriptions   for  Units  will  be
solicited on a "best  efforts"  all or none basis by the Sales  Agent.  Upon the
successful completion of this Offering, the Partnership will pay the Sales Agent
a $250  commission  for each Unit sold and will  reimburse  the Sales  Agent for
out-of-pocket  expenditures  incurred in  connection  with this Offering (not to
exceed  $10,000).  No commission  will be paid with respect to Units sold to the
General Partner or its Affiliates,  nor will any  compensation be payable to the
Sales  Agent  unless  all  Units  are  sold as  provided  herein.  See  "Plan of
Distribution" and "Conflicts of Interest."

     Eligible  Investors.  Generally,  this  offer  is made  only  to  qualified
investors  acceptable to the Partnership,  and approved by the Bank for purposes
of the  Guaranties.  See "Terms of the  Offering -  Suitability  Standards"  and
"Terms of the Offering - Guaranty Arrangements."




                  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.

                  Lack of Operating  History;  General Risks of Operations.  The
Partnership  was formed  under the laws of the State of Kentucky on November 24,
1999 and has not  engaged  in any  revenue-producing  business  activities.  The
benefits of an investment in the  Partnership  depend on many factors over which
the  Partnership  will have no  control,  including  competition,  technological
innovations rendering the Lithotripsy Systems 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  Lithotripsy  Systems
difficult or unattractive. Other factors that may adversely affect the operation
of the Lithotripsy Systems 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
health care industry has experienced  substantial  changes in recent years.  The
General Partner  anticipates  that managed care programs,  including  capitation
plans,  will play an increasing role in the delivery of lithotripsy  services in
the  Service  Area and that  competition  for  these  services  may  shift  from
individual   practitioners  to  health   maintenance   organizations  and  other
significant  providers  of  managed  care.  No  assurance  can be given that the
changing health care  environment will not have a material adverse effect on the
Partnership.

                  Lack of Diversification.  The Partnership's sole purpose is to
operate the Lithotripsy Systems.  Because the Part-ner-ship will be dependent on
only one line of business and the operation of two Lithotripsy  Systems, it will
have  greater  risks  from  casualties,   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
will  be  able  to  charge  for   lithotripsy   equipment   and/or  services  is
significantly  dependent  upon the amount of  reimbursement  private health care
insurers will reimburse  hospitals and centers contracting with the Partnership.
Most  patients of  treatment  facilities  will 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.  Other important payment sources include  government  programs
such as Medicare and Medicaid.  The increasing  influence of health  maintenance
organizations  and other  managed  care  companies  has  resulted in pressure to
reduce the  reimbursement  available  for  lithotripsy  procedures.  Some of the
General Partner's Affiliates have recently experienced  declining revenues based
on these managed care pressures in other health care markets.  Additionally, the
Health  Care  Financing   Administration  ("HCFA"),  the  federal  agency  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 the General  Partner and other  Affiliates are less than the proposed
HCFA rate.  Because of the competitive  pressures from managed care companies as
well as threatened  reductions in Medicare  reimbursement,  the General  Partner
anticipates that reimbursement available for lithotripsy procedures may continue
to decrease.  Such decreases would have a material adverse effect on Partnership
revenues.  Regarding the professional fees paid to physicians who treat patients
on the  Lithotripsy  Systems,  the  General  Partner  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  Lithotripsy  Systems.  The
Dornier  HM-3  lithotripter  to be  acquired  from  the  General  Partner  is an
extracorporeal  shock-wave  lithotripter  manufactured by Dornier Medizintechnik
GmbH  of  Munich,   Germany  acquired  through  Dornier  Medical  Systems,   the
manufacturer' s U.S.  Affiliate.  The HM-3 has a United States operating history
of  approximately  14 years.  The Dornier  lithotripter is housed in a specially
upfitted trailer manufactured by the Calumet Coach Company and is transported by
a tractor truck requiring special driver licensure to operate. The experience of
the General Partner and its Affiliates,  however, with such unit and the several
other Dornier units operated by the General Partner's Affiliates,  has been very
satisfactory.  Upon the successful completion of this Offering,  the Partnership
intends  to also  acquire a new Storz  Modulith(R)  SLX-T  model  extracorporeal
shock-wave lithotripter. The Modulith (R) SLX-T will be transported from site to
site in a specially  upfitted vehicle and will be wheeled directly into equipped
treatment rooms in prospective  service  locations.  The Modulith(R) SLX-T has a
short United States operating history, having received FDA premarket approval on
March 27, 1997. The  reliability  and efficacy risks inherent in the Modulith(R)
SLX-T are  especially  acute  because it is so new.  Affiliates  of the  General
Partner have limited direct  experience with the use of Storz  lithotripters and
cannot accurately  predict the mechanical and  technological  reliability of the
Modulith(R) SLX-T.

                  "Downtime" periods  necessitated by maintenance and repairs of
either  of  the   Partnership's   Lithotripsy   Systems  will  adversely  effect
Partnership  revenues.  It is anticipated  that,  subject to  availability,  the
General  Partner or its Affiliates will rent the Partnership one of its or their
mobile  lithotripters  in  the  event  of  substantial  downtime  problems.  See
"Compensation  and Reimbursement to the General Partner and its Affiliates." The
General Partner estimates that the Dornier HM-3 has a 7-10% overall  retreatment
rate  (however,  the  experience of the General  Partner and its  Affiliates has
shown an average  retreatment rate of 5%).  Preliminary  reports from abroad and
"word of mouth"  anecdotal  evidence  indicate that the Modulith(R)  SLX-T is as
effective as most of the  "portable"  lithotripters  in the market.  The General
Partner is aware that early data from abroad  concerning  one  precursor  to the
Modulith(R)  SLX-T reflected a high  retreatment  rate, and that an Affiliate of
the General Partner experienced electrical and mechanical problems using another
precursor,   the  Modulith(R)  SLX.  However,  the  General  Partner's  and  its
Affiliates'  limited  experience with the  transportable  Modulith(R)  SLX-T has
shown acceptable retreatment rates. A high retreatment rate may adversely affect
the  Partnership.  Investors  should also note that some studies  indicate  that
lithotripsy may cause high blood pressure and tissue damage. The General Partner
questions the reliability of these studies and believes lithotripsy has become a
widely  accepted  method  for the  treatment  of  renal  stones.  See  "Proposed
Activities - Acquisition of the Lithotripsy Systems."

                  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.  The General  Partner
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.

                  Partnership  Limited  Resources  and Risks of Leverage.  It is
anticipated by the General  Partner that all initial costs of the  Partnership's
operations  including,  but not limited to (i) the estimated  $400,000  purchase
price of the new Modulith(R) SLX-T lithotripter together with accessories,  (ii)
the estimated  $70,000 purchase price of the new mobile vehicle to transport the
new  lithotripter,  (iii)  the  estimated  $60,000  purchase  price for the used
Dornier HM-3,  (iv) the estimated  $21,500  purchase  price for the used trailer
housing the Dornier HM-3, (v) the estimated  $12,500 for the used tractor truck,
(vi) the estimated  $33,840 in state sales and use taxes for the purchase of the
lithotripters,  mobile transport  vehicles and tractor truck,  (vii) the maximum
$20,691  cash  purchase  price for the Service  Contracts  to be acquired by the
Partnership upon the successful Closing of the Offering and (viii)  syndication,
organization,  start-up and working capital  expenses,  will be financed through
the Loan, the cash proceeds of this Offering and the General  Partners's initial
cash contribution.  In addition, the General Partner anticipates (subject to the
approval of the Partnership's Medical Advisory Board) that during the first year
of  Partnership   operations,   the  Partnership  will  use  a  portion  of  the
Partnership's  working capital, Cash Flow and/or reserves (estimated at $60,000)
and contract with certain service providers (including Affiliates of the General
Partner) to  refurbish  the used Dornier HM-3 and Used  trailer.  See  "Proposed
Activities - Acquisition of the Lithotripsy  Systems" and "Proposed Activities -
Funding for Partnership  Activities." While the Financial  Projections  indicate
that cash generated  from  operations  will enable the  Partnership to repay the
Loan in accordance with its terms, lower than anticipated revenues, greater than
anticipated  expenses,  or delays in commencing  operations  could result in the
Partnership failing to make payments of principal or interest when due under the
Loan, and the Partnership' s equity being reduced or eliminated.  In such event,
the Limited  Partners  could lose their entire  investment and be called upon to
pay  their  Guaranties.  See  "Proposed  Activities  - Funding  For  Partnership
Activities"  and  the  Financial  Projections  attached  to this  Memorandum  as
Appendix A.

                  Acquisition of Additional Assets. If in the future the General
Partner determines that it is in the best interest of the Partnership to acquire
(i) one or more additional fixed base or mobile Lithotripsy  Systems or (ii) any
other  urological  device or  equipment  so long as such device has received FDA
premarket  approval at the time it is acquired by the Partnership,  and/or (iii)
an  interest  in any  business  entity  that  engages in a  urological  business
described  above,  the  General  Partner has the  authority,  subject to certain
express  limitations  set  forth  in the  Partnership  Agreement,  to  establish
reserves or 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.  As provided in the Partnership  Agreement,  the General Partner may
not incur any  single  capital  expenditure,  any  long-term  debt or any single
borrowing  of the  Partnership  during  any  twelve-month  period  in  excess of
$100,000  without  the prior  approval  of a Majority in Interest of the Limited
Partners.  In  addition,  the  consent of a Majority  in Interest of the Limited
Partners is required prior to the Partnership  engaging in any Dilution Offering
to raise capital for the acquisition of additional  assets.  See "Summary of the
Partnership  Agreement  - Powers of the General  Partner  and Limited  Partners'
Voting Rights." The acquisition of additional assets may substantially  increase
the  Partnership's  monthly  obligations  and may result in increased  personnel
requirements.  See  "Risk  Factors  -  Operating  Risks  -  Partnership  Limited
Resources  and Risks of  Leverage."  The  General  Partner  does not  anticipate
acquiring additional  Partnership assets unless projected  Partnership Cash Flow
or  proceeds   from  a  Dilution   Offering  are   sufficient  to  finance  such
acquisitions.  See "Risk Factors - Other  Investment Risks - Dilution of Limited
Partners'  Interests."  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. The Partnership's ability to incur additional indebtedness
while  the  Loan  is  outstanding  is  restricted.  Any  such  borrowing  by the
Partnership will serve to increase the risks to the Partnership  associated with
leverage as provided in the immediately preceding paragraph.

                  Liability  Under the  Guaranty.  For each Unit  purchased,  an
Investor will be required to execute and deliver to the Bank a Guaranty pursuant
to which the Investor will personally  guarantee 1% of the  Partnership' s total
obligations  under the Loan which is equivalent  to up to a $5,978.40  principal
guaranty per Unit.  Liability  under the Guaranty may exceed  $5,978.40 per Unit
because the  guaranty  obligation  per Unit also  includes 1% of all accrued and
unpaid interest, late payment penalties, and legal costs incurred by the Bank in
collecting any defaulted payments.  An Investor should not purchase a Unit if he
does not have  resources  sufficient  to bear  the loss of this  entire  amount.
Limited  Partners in the  aggregate  will  guarantee  80% of the Loan,  or up to
$478,272. See "Proposed Activities - Acquisition of the Lithotripsy Systems" and
"Proposed  Activities - Funding for Partnership  Activities."  See "Terms of the
Offering - Guaranty  Arrangements - Liability  Under the Guaranty" and "Terms of
the Offering - Suitability Standards."

                  If  Partnership  operations  generate  sufficient  revenues to
enable the  Partnership to make all payments under the Loan when due, no Limited
Partner  will be required to perform  under his  Guaranty.  If a default  occurs
under the Loan, the Bank may, among other remedies,  seek payment  directly from
the Limited  Partners  under the  Guaranties.  The  Guaranties are a guaranty of
payment and not of collection and require the Limited  Partners to waive certain
rights to which they might otherwise be entitled.  As a result, the liability of
the  Limited  Partners  under the  Guaranties  is direct and  immediate  and not
conditioned  or contingent  upon either the pursuit of any remedies  against the
Partnership or any other person  (including any other  guarantor) or foreclosure
of any security  interest or liens  available to the Bank.  The Guaranties are a
continuing  guaranty  that by their terms will  survive  the death,  bankruptcy,
dissolution or disability of a Limited Partner  guarantor.  A Limited  Partner's
liability under the Guaranty continues regardless of whether the Limited Partner
remains a limited  partner in the  Partnership and is not affected or limited by
any claims or offsets the Limited  Partner may have against the  Partnership  or
the General Partner.  Except to the extent of their indirect equity interests in
Partnership  assets,  the Limited Partners will not be personally liable for the
Loan other than  pursuant  to the  Limited  Partner  Guaranties.  See  "Proposed
Activities - Funding for  Partnership  Activities,"  the Loan Commitment and the
form of Guaranty Agreement attached as Appendix C.

                  Competition.   Several   competing   fixed   site  and  mobile
lithotripters  are currently  operating in and around the Service Area in direct
competition with the Partnership's  Lithotripsy Systems,  including  competitors
that  are  Affiliates  of  the  General  Partner.  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  the  General  Partner'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 the General Partner nor its Affiliates are prohibited from engaging
in any business or arrangement  that may compete with the  Partnership.  Several
ventures affiliated with the General Partner 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  Partner   Restrictions.   The  Partnership  Agreement
severely  restricts the Limited  Partners' ability to own interests in competing
equipment or ventures,  other than interests held by the General  Partner or its
Affiliates. The enforceability of these noncompetition agreements is generally a
matter of state law. No assurance can be given that one or more Limited Partners
may  not  successfully  compete  with  the  Partnership.  See  "Summary  of  the
Partnership Agreement - Noncompetition Agreement and Confidential Information."

                  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 the General
Partner  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 "Stark 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 Stark II, in January,  1998, HCFA published proposed
Stark 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 Stark II
regulations  as final,  or if a reviewing  court were to interpret  the Stark II
statute  using the proposed  regulations  as  interpretive  authority,  then the
Partnership  and its  physician  Limited  Partners  would  likely  be  found  in
violation of Stark 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 the
General  Partner  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, the General Partner 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  Stark II or the
Anti-Kickback Statute have been violated.

                  In  addition  to Stark 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.  If this occurs,  the General Partner is obligated
either to purchase or cause the sale of the Partnership  Interests of all of the
Limited Partners or to dissolve the Partnership. See "Summary of the Partnership
Agreement - Optional Purchase of Limited Partner Interests."

                  To the best knowledge of the General  Partner,  no certificate
of need  ("CON")  will be required to operate on a wholesale  basis in Kentucky,
meaning the Partnership will lease the Lithotripsy  Systems to hospitals,  which
will in turn be  responsible  for  providing  the  lithotripsy  services and for
billing.  Various  licensure and registration  requirements  must be met for the
Partnership to provide mobile lithotripsy services in Kentucky.  The Partnership
will seek to comply  with all such  requirements.  Kentucky  law  requires  that
physician  Limited  Partners  must treat their own  patients on the  Lithotripsy
Systems. See "Regulation - State Regulation".

                  Contract  Terms and  Termination.  The  General  Partner  will
attempt to assign to the  Partnership up to six Service  Contracts.  The Service
Contracts require the General Partner to make lithotripsy equipment available at
the Contract Hospitals. The Contract Hospitals generally pay the General Partner
a fee for each lithotripsy procedure performed at that Contract Hospital.  Three
of the Service  Contracts  grant the  General  Partner  the  exclusive  right to
provide lithotripsy  services at the particular Contract Hospital,  however, all
of the Service Contracts have very short-terms ranging from less than a month to
approximately  one  and  one-half  years.  In any  event,  most  of the  Service
Contracts may be terminated  without cause upon 90 days written notice by either
party at anytime.  Two of the Service  Contracts are  presently  continuing on a
month-to-month basis. No assurance can be given that the General Partner will be
successful in negotiating  transfers of the Service Contracts to the Partnership
or procuring  new  agreements  with any  Contract  Hospitals.  In  addition,  no
assurance can be given that current Service Contracts will be renewed upon their
respective  renewal dates or that the resulting  impact to the Partnership  from
any cancellation would not have a materially adverse effect on the Partnership's
operations.  While  the  Partnership  will  seek to  expand  its  operations  by
contracting with additional  health care facilities for the purpose of providing
lithotripsy services,  whether the Partnership will be successful in negotiating
new contracts on financial  terms  comparable  to those in the existing  Service
Contracts,  or at all,  is  uncertain.  See "Risk  Factors -  Operating  Risks -
Competition" and "Proposed  Activities - Service  Contracts." Thus, no assurance
can be  given  that  Partnership  operations  as  planned  on the  date  of this
Memorandum will occur as herein described or  contemplated,  and the termination
of a significant  number of Service Contracts or the Partnership's  inability to
secure new ones could have a severely negative impact on the financial condition
and results of the Partnership.

                  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, including but not limited to the Bank. See "Risk
Factors - Operating  Risks - Liability  Under the  Guaranty."  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, these 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 January 1, 2000.  The extent of the
potential  impact of the Year 2000  Issue is not yet  known,  and if not  timely
corrected,  it could affect the global economy.  The General Partner has made an
assessment of the Partnership's Year 2000 Issue risks and has concluded that the
risks include the  following:  (i) operation of the  Lithotripsy  Systems may be
adversely affected;  (ii) third party payors may be adversely affected resulting
in  delays  in  payment  to the  Partnership;  (iii)  facilities  served  by the
Lithotripsy  Systems may be  adversely  affected  resulting  in a  cessation  of
service  to  the  affected  facilities;  and  (iv)  the  Partnership's  internal
information systems,  including its accounting system, may be adversely affected
resulting in record keeping and accounting  delays.  Storz,  the manufacturer of
the Modulith(R)  SLX-T,  has assured Prime that its  lithotripters  will be Year
2000  compliant,  in all necessary  respects,  i.e.,  that they will continue to
operate  normally after January 1, 2000. The General Partner cannot predict with
certainty  whether  such will be the case or the  effects of  noncompliance.  No
assurances  have been  forthcoming  from Dornier,  the  manufacturer of the HM-3
lithotripter. The General Partner has not inquired as to the Year 2000 readiness
of any other  lithotripter  manufacturer,  insurance company or any facility the
Partnership  intends to serve,  but is relying  that such third  parties will be
Year  2000  compliant.   The  General  Partner  anticipates  that  the  internal
information  systems,  including  accounting  systems,  that  it  will  use  for
Partnership purposes will be Year 2000 compliant by the end of 1999, although no
assurance can be given that such will be the case. The Partnership currently has
no  contingency  plans in the  event  that any of the  above-described  risks is
realized.  In the event that any of the above-described  risks are realized,  or
any other,  unanticipated  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 the General Partner  anticipates no
significant  tax  benefits  associated  with the  operation  of the  Lithotripsy
Systems 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. The Partnership is relying upon an opinion of its 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 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 E TO THE  MEMORANDUM).  IT IS STRONGLY  RECOMMENDED THAT EACH
INVESTOR  IN-DE-PEN-DENT-LY  CONSULT HIS PERSONAL TAX COUNSEL CONCERNING THE TAX
CONSEQUENCES  ASSOCIATED  WITH HIS 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 THE
GENERAL  PARTNER  AS  AN  ECONOMIC  INVESTMENT  AND  THAT  THE  GENERAL  PARTNER
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 THE GENERAL  PARTNER  ANTICIPATES,  AND THE  FINANCIAL
PROJECTIONS FORECAST, 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
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
health care 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 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.  The General Partner 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 the General  Partner.  The  Partnership  will also
incur  significant  up-front  capital  costs that may have to be paid out of the
Partnership's  revenues.   Because  of  the  circumstances  outlined  above,  if
Partnership  cash flow falls  substantially  below the estimates as set forth in
the Financial  Projections,  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 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 may choose to be classified as either a partnership or
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 that may choose  partnership
status for federal income tax purposes. 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." 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  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.

                  The General  Partner,  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.  The  Partnership  expects and the
Financial  Projections forecast that the Partnership will realize taxable income
and  not  taxable  losses  during  its  first  five  full  years  of  operation.
Nevertheless,  if certain  assumptions upon which the Financial  Projections are
based do not  materialize,  there can be no assurance that the Partnership  will
not realize taxable losses, in which event 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 OWN TAX SITUATION.  EACH INVESTOR  SHOULD CONSULT
WITH HIS 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  Financial  Projections  assume  that  the
Part-ner-ship  will use the Modified  Accelerated Cost Recovery System ("MACRS")
to depreciate the cost of any newly acquired equipment.  Further,  the Financial
Projections  assume  that any newly  purchased  equipment  will be  placed  into
service  after  January  1,  2000 but prior to  October  1,  2000,  and that the
mid-year  convention will apply. In such case, the Partnership will claim only a
half year of  depreciation  in its first year of operations.  If the Lithotripsy
Systems are placed in service after October 1, the  mid-quarter  convention  may
apply to the  Lithotripsy  Systems which would require the  Partnership to claim
only  one-eighth of the  depreciation  that would  otherwise be allowable if the
Lithotripsy  Systems  had been in service  during an entire year after its first
year in service.  In addition,  the estimated  $33,840 of Kentucky sales and use
taxes  paid  by the  Partnership  on the  lithotripters,  the  mobile  transport
vehicles and the tractor truck used for such Lithotripsy Systems will be treated
as part of their cost for  depreciation  purposes.  It is  anticipated  that any
additions or  improvements  to the  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.

                  As under prior law, the 1986 Act provides that the full amount
of  depreciation  on  personal  property  (such as the  Lithotripsy  Systems) 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,  the General Partner, in its discretion,  may make the
requisite election necessary to effect such adjustment in basis. The Partnership
Agreement  also grants the  General  Partner  discretion  to make other types of
elections which could affect the Limited Partners.

                  Sale of Partnership  Units. Gain 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 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, the Management Agent and the General
Partner 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.

                  The  General  Partner  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 the General Partner'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.

                  The  Partnership  will incur certain  legal,  accounting,  and
other expenses  related to its formation.  Under current federal income tax law,
no deduction is allowed for expenses relating to the foregoing and such expenses
must be capitalized.  Consequently,  no Partner will be allocated any portion of
such capitalized  expenses.  It is expected that these expenses will be paid out
of the proceeds of the Offering and Partnership Cash Flow.

                  Organizational  and Syndication  Expenses.  Section 709 of the
Code permits  certain costs relating to the  organization of a partnership to be
amortized over a period of not less than 60 months,  but prohibits a partnership
from deducting or amortizing  those costs of forming the partnership that do not
strictly relate to the organization of the partnership,  or that are incurred to
promote the sale of partnership  interests  (i.e.,  syndication  expenses).  The
Regulations provide definitions for organizational  expenses that are deductible
and  syndication   expenses  that  must  be  capitalized  and  explain  how  the
amortization  election is made.  Organizational  expenses include legal fees for
services incident to the organization of a partnership,  such as negotiation and
preparation of a partnership agreement, accounting fees for services incident to
the  organization  of the  partnership  and filing  fees.  Syndication  expenses
include  brokerage fees,  registration  fees, legal fees for securities  advice,
accounting  fees  for  preparation  of  representations  to be  included  in the
offering  materials,   and  printing  costs  of  the  offering  materials.   The
Partnership  intends to treat the entire amount  payable to the Sales Agent as a
sales  commission  for  selling  the Units,  as well as  certain  other fees and
expenses  allocable to the preparation of this Memorandum and to the offering of
the  Units in the  Partnership,  as  nondeductible,  nonamortizable  syndication
expenses.

                  The Partnership  intends to amortize,  over a 60-month period,
that portion of the costs of forming the Partnership that is attributable to the
organization of the entity,  pursuant to the  Regulations.  The Service may take
the position  that some  portion or all of these costs  relate to matters  other
than the  organization  of the  Partnership  and fail to qualify as  amortizable
expenses  under  Section 709 and,  therefore,  must be  capitalized  rather than
deducted.  The General  Partner  believes  that the various  expenses  have been
properly  characterized.  Because the  allocation of these expenses is a factual
question,  Counsel  cannot  predict the outcome  should the character of certain
expenses be challenged on audit.

                  Investors   will    economically    bear   their    respective
proportionate  share of organizational  and syndication  expenses as these costs
likely will be paid out of proceeds from the Offering. These costs will be borne
irrespective  of their amount,  timing and ability of the  Partnership to deduct
these costs for tax purposes.

                  Start-Up  Expenditures.  Section 195 of the Code permits costs
relating to the  investigation  and establishment of an active trade or business
to be  amortized  over a period  of not less  than 60  months.  The  Partnership
intends to amortize,  over a 60-month period, that portion of the costs incurred
by the Partnership  prior to the time the business of the Partnership  commences
that are attributable to the  investigation  and establishment of such business.
The Service may take the position that some portion or all of these costs relate
to matters other than the  investigation  and establishment of the Partnership's
business  and fail to qualify as  amortizable  expenses  under  Section 195 and,
therefore,  must be  capitalized  rather  than  deducted.  The  General  Partner
believes that the various expenses have been properly characterized. Because the
allocation of these expenses is a factual  question,  Counsel cannot predict the
outcome should the character of certain expenses be challenged on audit.

                  Investors   will    economically    bear   their    respective
proportionate share of start-up  expenditures as these costs likely will be paid
out of proceeds from the  Offering.  These costs will be borne  irrespective  of
their amount,  timing and ability of the  Partnership  to deduct these costs for
tax purposes.

                  Management Fee to General  Partner.  The Partnership  will pay
the  Management  Agent a monthly  management  fee equal to the  greater of 7% of
Partnership  Cash Flow per month or $8,000 per month. The management fee will be
paid to the Management  Agreement 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 form of which is attached to this  Memorandum as Appendix D. The
Partnership  intends  to deduct  the  management  fee in full in the year  paid.
Assuming  the  management  fee to be paid to the  Management  Agent 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 own
attorney or tax advisor  regarding  the effect of state and other local taxes on
his personal situation.

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

                  Purchases by General Partner and its  Affiliates.  The General
Partner and its  Affiliates  may purchase up to 50 Units.  As holders of limited
partner  interests,  the General  Partner and its  Affiliates are likely to have
interests  which  conflict  with those of other Limited  Partners.  In addition,
substantial  purchases of Units by the General Partner and/or its Affiliates may
limit the  ability of the other  Limited  Partners  to  exercise  voting  rights
granted by the  Partnership  Agreement.  Substantial  purchases  of Units by the
General  Partner  may also limit the  General  Partner's  financial  capacity to
fulfill other financial obligations to or on behalf of the Partnership.

                  No Participation  in Management.  The General Partner has full
authority to supervise the business and affairs of the Part-ner-ship.  Except as
otherwise provided in the Partnership Agreement or the Act, the Limited Partners
will have no right to participate in the  management,  control or conduct of the
Partnership's business and affairs. The General Partner, its employees and their
Affiliates  are not  required to devote  their full time to the  Part-ner-ship's
affairs  and  intend to devote  substantial  time and effort in  organizing  and
operating  partnerships  and other  medical  enterprises  throughout  the United
States that are similar to the Partnership. The General Partner will 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
Counsel, attached hereto as Appendix E.

                  Ability of the General Partner to Effect Fundamental  Changes.
The General  Partner,  with the prior  approval of a Majority in Interest of the
Limited  Partners,  has the authority under the Partnership  Agreement to effect
transactions  that could  result in the  termination  or  reorganization  of the
Partnership,  a total or partial dilution of the Limited Partners'  interests in
the Partnership,  and/or the exchange of interests in another enterprise for the
limited partnership interests held by the Limited Partners.  See "Summary of the
Partnership Agreement - Fundamental Changes."

                  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 or control of the  Partnership,  he will
not  be  liable  for  the  liabilities  of  the  Partnership  in  excess  of his
investment,  his  Guaranty  and his  ratable  share  of  undistributed  profits.
However,   under  Section  362.475  of  the  Kentucky  Revised  Uniform  Limited
Partnership  Act (the "Act"),  a Limited Partner shall be liable for a period of
up to  six  years  to  return  to the  Partnership  any  distributions  (without
interest) received from the Partnership representing a return of any part of his
capital  contribution in violation of the Partnership  Agreement or the Act, but
only to the extent  necessary  to  discharge  Partnership  liabilities  incurred
during the period the  contribution was held by the  Partnership.  Similarly,  a
Limited  Partner  shall  be  liable  for a  period  of one  year  for  any  such
distributions not in violation of the Partnership Agreement or Act. The Act also
restricts  distributions  if, after  giving  effect to such  distributions,  all
liabilities of the Partnership, other than liabilities as to Partners on account
of their  Partnership  Interests,  exceed  the fair  value of the  Partnership's
assets.

                  Dilution of Limited  Partners'  Interests.  The "Net  Tangible
Book Value" of the Units purchased will,  immediately after the Offering and the
funding of the  Partnership by the Limited  Partners,  be less than the price at
which  Units were  offered.  The "Net  Tangible  Book Value" of the Units may be
regarded as the value of the Units after deduction of  organization  expenses of
the  Part-ner-ship,  Offering  expenses  and other  amounts,  other than capital
expenditures,  paid or to be paid by the  Part-ner-ship  out of the  proceeds of
this  Offering.   Accordingly,  if  the  Part-ner-ship  were  to  be  liquidated
immediately  after the Offering and funding,  each Limited Partner would receive
an amount  equal to the amount  paid by him for Units less his pro rata share of
the  organization   and  Offering   expenses  and  other  amounts  paid  by  the
Part-ner-ship out of the Offering  proceeds.  In addition,  the General Partner,
with the prior approval of a Majority in Interest of the Limited  Partners,  has
the authority under the Partnership Agreement to cause the Partnership to issue,
offer  and sell  additional  limited  partnership  interests  in the  future  (a
"Dilution  Offering").  Upon the successful closing of a Dilution Offering,  the
Percentage  Interests of the Limited Partners will be  proportionately  diluted.
See "Summary of the Partnership Agreement - Dilution Offerings."

                  Financial Projections.  The Financial Projections contain data
that are the General  Partner's  estimate of possible,  but not  necessarily the
most  likely,  results  of  the  Part-ner-ship's   operations  and  represent  a
prediction of future events based on  assumptions  that may or may not occur and
should not be relied upon to indicate the actual  results that will be attained.
Whether the Partnership will be able to operate under the Service Contracts, the
results of such  operations  and its  ability to take  advantage  of  additional
treatment  opportunities has not been determined.  Further,  no assurance can be
given that the results of Partnership operations under the Service Contracts, if
any, will favorably  compare to those of the General Partner and the differences
could be materially adverse. The Financial Projections begin on the Closing Date
and reflect five full  twelve-month  tax years;  thus,  they will not accurately
reflect the consequences of the first tax year of operations, which will be less
than a full twelve-month period.  Investors should carefully review the notes to
the  Financial   Projections,   which  contain  various  assumptions  and  other
information  concerning the data therein.  The General Partner believes that the
underlying assumptions provide a reasonable basis for the projections,  but some
assumptions  inevitably  will  not  materialize  and  unanticipated  events  and
circumstances  may occur  subsequent to the date of the  Financial  Projections.
Accordingly,  the actual results achieved during the projected periods will vary
from the Financial Projections and the variations may be material.  Furthermore,
to the extent the Financial Projections reflect taxable income and loss, Service
audit adjustments could adversely affect the timing and the amount of deductions
that the Part-ner-ship  plans to claim. See "Proposed  Activities - Operation of
the  Lithotripsy  Systems"  and the  Financial  Projections  attached  hereto as
Appendix A.

                  Long-term Investment. The General Partner anticipates that the
Partnership  will operate the  Lithotripsy  Systems 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 Part-ner-ship  Agreement
and the  Subscription  Agreement,  and the  consent  of the  General  Partner is
necessary  for any  transfer.  No public market for the Units exists and none is
expected  to  develop.  Moreover,  the Units may not be  transferred  unless the
Part-ner-ship  is  furnished  with an opinion of  counsel,  satisfactory  to the
Part-ner-ship  and the General  Partner,  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  Part-ner-ship  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  Part-ner-ship  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.  See "Risk Factors - Tax Risks -
Sale  of  Partnership  Units."  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  arbitrarily  determined  by the General  Partner  based upon,  among other
things, its expectations  concerning the financial needs for the Part-ner-ship's
anticipated  operations,  the availability of financing,  the cost of organizing
the Part-ner-ship,  the cost of the Lithotripsy  Systems and other matters.  The
offering price of the Units is not necessarily  indicative of their value 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 the General Partner will not be liable
to the  Partnership  or to any  Partner  for errors in judgment or other acts or
omissions in connection with the Partnership, except for those involving willful
misconduct or gross negligence.  Therefore, the Limited Partners may have a more
limited  right  of  action  against  the  General  Partner  in the  event of its
misfeasance  or malfeasance  than they would have absent the  limitations in the
Partnership  Agreement.   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. The Loan documents will require the General Partner
to cause the  Lithotripsy  Systems to be covered by insurance  for losses due to
fire and other casualties under policies  customarily obtained for properties of
this type. Prime Medical Services, Inc. ("Prime"), the indirect sole shareholder
of the General  Partner,  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 will be amended to include the Partnership and
the General  Partner  believes that coverage limits of these policies are within
acceptable norms for the extent and nature of the risks covered. The Partnership
will be  responsible  for its share of premium  costs.  In  addition,  there are
certain  types of losses  that are either  uninsurable  or are not  economically
insurable.  Should  such  losses  occur  with  respect to the  operation  of the
Lithotripsy  Systems,  or should losses exceed insurance  coverage  limits,  the
Part-ner-ship  could  suffer a loss of the capital  invested in the  Lithotripsy
Systems and any anticipated profits from its investment.

                  Optional Purchase of Limited Partner Interests. 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 the interest
of a Limited  Partner  who (i) dies,  (ii)  becomes  the  subject  of a domestic
proceeding,  (iii)  becomes  insolvent,  (iv)  acquires  a  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,  if any.  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  for an amount equal to the lesser of
the fair market  value or book value or (y) dissolve  the  Partnership.  See the
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."

                  Financial  Resources  of  the  General  Partner.  The  General
Partner will guarantee 20% of the Partnership's total obligations under the Loan
(up to a $119,568  principal  guaranty).  In  addition,  if the General  Partner
purchases  Units as allowed by this Offering,  for each Unit the General Partner
purchases the General Partner will be required to guarantee the Loan on the same
terms as any other Unit purchaser. The General Partner was formed under the laws
of the State of New York and has fairly illiquid assets.  See "Prior Activities"
and "General Partner."

                  Lithotripsy  Systems  Location.   The  Management  Agent  will
negotiate  on  behalf of the  Partnership  with  various  licensed  health  care
facilities  located in the Service  Area  regarding  operating  the  Lithotripsy
Systems at their facilities.  There can be no assurance that any such commitment
will be forthcoming on terms acceptable to the Partnership.  After  consultation
with the local Medical Advisory Board and the local Medical  Director  appointed
by the General Partner,  and taking into consideration any obligations under the
Service  Contracts,  the travel  itinerary for the  Lithotripsy  Systems will be
determined by the General Partner.  See "Proposed  Activities - Operation of the
Lithotripsy Systems."

          Certain terms in this Memorandum shall have the following meanings:

     Act. The Act means the Kentucky Revised Uniform 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, or its successor in interest.

     Capital Account.  The Partnership  capital account of a Partner as computed
pursuant to Article XII of 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 to 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.  The admission to the Partnership as Limited Partners of Investors
subscribing for Units.

                  Closing Date.  The date of the Closing,  which is scheduled to
occur on January 31, 2000 (or earlier, in the discretion of the General Partner,
upon the  sale of all 80  Units  as  provided  herein  and the  approval  of the
Liquidation),  unless  extended at the  discretion of the General  Partner for a
period up to 180 days.

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

     Contract  Hospitals.  The hospitals and health care facilities to which the
General Partner provides lithotripsy services pursuant to the Service Contracts.

     Counsel.  Womble Carlyle Sandridge & Rice, a Professional Limited Liability
Company, P.O. Drawer 84, Winston-Salem, North Carolina 27102.

                  Dilution  Offering.  Pursuant to the terms of the  Partnership
Agreement,  the future offering of additional limited  partnership  interests in
the  Partnership  by the  General  Partner.  Any such  offering  generally  will
proportionally  reduce the  existing  Percentage  Interests  of the then current
Partners in the  Partnership;  provided,  however,  that the General Partner may
avoid dilution by either making a proportional  additional capital  contribution
or buying units in a Dilution Offering.

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

     Escrow  Agent.  First  Citizens Bank & Trust  Company,  or its successor in
interest.

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

                  Financial  Projections.  Projections of  Partnership  revenue,
cash flow,  income,  loss,  and  sources and uses of funds,  and of  Partnership
return per Unit,  attached hereto as Appendix A, which have been prepared by the
General Partner based upon the assumptions stated therein.

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

     General Partner. The general partner of the Partnership, Prime Lithotripter
Operations, Inc., a New York corporation and a wholly-owned subsidiary of Prime.

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

     Initial Limited Partner. Joseph Jenkins, M.D., a resident of North Carolina
and an officer of the General Partner.  The Initial Limited Partner is to be the
only limited partner of the Partnership  until such time as the Limited Partners
are admitted to the  Partnership  on the Closing Date, at which time the Initial
Limited Partner will withdraw from the Partnership.

                  Investors.  Potential purchasers of Units of the Partnership.
                  ---------

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

                  Lithotripsy  Systems. The mobile transport vehicles (including
the used trailer) with the installed and operational Storz Modulith(R) SLX-T and
Dornier HM-3 lithotripters.

                  Loan.  The  loan  of up to  $597,840  from  the  Bank  to  the
Partnership.  Loan proceeds will be used by the  Partnership  to (i) acquire one
new lithotripter (estimated at $400,000),  (ii) acquire and upfit one new mobile
vehicle (estimated at $70,000), (iii) acquire one used Dornier HM-3 lithotripter
(estimated at $60,000);  (iv) acquire one used trailer to house the Dornier HM-3
lithotripter  (estimated  at  $21,500);  (v) acquire one used  tractor  truck to
transport  the trailer  housing  the Dornier  HM-3  lithotripter  (estimated  at
$12,500)  and  (vi) pay  state  sales  and use  taxes  on the  purchases  of the
lithotripters,  mobile  transport  vehicles  and  tractor  truck  (estimated  at
$33,840). The Loan will be secured by the Lithotripsy Systems, the Partnership's
accounts  receivable and other Partnership  assets,  the guaranty of the General
Partner, and the Limited Partner Guaranties.

                  Loan  Agreement  . The Future  Advance  Loan  Agreement  to be
entered into between the Partnership and the Bank to evidence the Loan. The form
of the Future Advance Loan Agreement is an exhibit to the Loan Commitment  which
is attached hereto as Appendix C.

     Loan Commitment.  The commitment to the Partnership dated December 13, 1999
attached hereto as Appendix C, pursuant to which the Bank has agreed to fund the
Loan.

                  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.

     Majority  in  Interest.  Limited  Partners  holding  more  than  50% of the
Percentage Interests held by Limited Partners.

     Management Agent. Lithotripters,  Inc., a North Carolina corporation and an
Affiliate of the General Partner.

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

                  Modulith(R) SLX-T. The new Storz Modulith(R) SLX Transportable
("SLX-T") model extracorporeal shock-wave lithotripter manufactured by Storz. It
is  anticipated  that the  Partnership  will acquire one new  Modulith(R)  SLX-T
lithotripter with the proceeds of the Loan.

                  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.

                  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  Sections  1.704-2(b)(3),  1.752-1(a)(2)  and
1.752-2.

                  Offering.  This offering of Units.
                  --------

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

     Partnership. Western Kentucky Lithotripters Limited Partnership, a Kentucky
limited partnership.

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

     Partnership  Interest.  The  interest  of a Partner in the  Partnership  as
defined by the Act and 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 the General  Partner  shall deem
necessary or prudent to set aside for future repairs, improvements, or equipment
replacement or additions, or to meet working capital requirements or foreseen or
unforeseen future liabilities or contingencies of the Partnership.

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

                  Percentage  Interest.  The  interest  of each  Partner  in the
Partnership,  to be determined in the case of a Limited  Partner by reference to
his Unit  ownership  based upon the Limited  Partners  holding an aggregate  80%
Percentage  Interest in the  Partnership,  with each Unit sold  representing  an
initial 1% interest.  The General Partner will own a 20% Percentage  Interest in
the  Partnership.  The Percentage  Interest may be set forth in the  Partnership
Agreement or any other  document or agreement,  as a percentage or a fraction or
on any numerical basis deemed appropriate by the General Partner. The Percentage
Interest of existing  Limited  Partners will be reduced in the event of a future
Dilution  Offering.  The General  Partner may avoid  dilution by either making a
proportional  additional  capital  contribution  or buying  units in a  Dilution
Offering.

     Prime. Prime Medical Services,  Inc., a publicly held Delaware  corporation
and the sole  shareholder  of the General  Partner,  Management  Agent and 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.

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

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

                  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,  and
member of the National  Association of Securities Dealers,  Inc. The Sales Agent
is an Affiliate of the General Partner.

                  SEC.  The United States Securities and Exchange Commission.
                  ---

                  Securities Act.  The Securities Act of 1933, as amended.
                  --------------

                  Service.  The Internal Revenue Service.
                  -------

                  Service  Area.  The  geographic  region  in which  Partnership
operations  are expected to be  conducted  and which is  anticipated  to consist
primarily of the following Kentucky counties:  Christian County, Daviess County,
Henderson  County,  Hopkins  County,  McCracken  County and Warren  County.  The
General Partner has sole discretion to expand the Service Area.

                  Service Contracts.  The lithotripsy service agreements entered
into by the  General  Partner  pursuant to which the  General  Partner  provides
lithotripsy services to the Contract Hospitals.

              Storz.  Karl Storz Lithotripsy-America, Inc. and its Affiliates.
                  -----

                  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 distributed
to and completed by Investors in connection with their subscription for Units.

                  Units.   The  80  equal  limited  partner   interests  in  the
Partnership  offered  pursuant to this Memorandum for a price per Unit of $2,500
in cash, plus 1% in guaranties of the  Partnership's  obligations under the Loan
(up to a $5,978.40 principal Loan guaranty per Unit).

                  The  Partnership  was  recently  formed  under the laws of the
State of Kentucky,  has no material  assets or liabilities and has not commenced
operations.  The  General  Partner  of the  Partnership  is  Prime  Lithotripter
Operations, Inc., a New York corporation. See "General Partner." The Partnership
was formed to acquire one new  lithotripter  and one used  lithotripter  for the
lithotripsy of renal stones.  The new lithotripter will be transported from site
to site by a new mobile  vehicle and the used  lithotripter  will be housed in a
used trailer pulled by a used tractor truck to enable the Partnership to provide
lithotripsy  services at various  locations in the Service Area. The Partnership
intends to begin lithotripsy operations as soon as possible after the Closing of
the Offering and the  acquisition  of the  Lithotripsy  Systems.  See  "Proposed
Activities." The initial  principal  executive office of the General Partner and
the  Partnership  is located  at 1301  Capital of Texas  Highway,  Suite  C-300,
Austin, Texas 78746.

                  The   Units   and   Subscription   Price.   Western   Kentucky
Lithotripters  Limited Partnership,  a limited partnership formed under the laws
of the State of  Kentucky,  hereby  offers an  aggregate  of 80 Units of limited
partner interest in the Partnership. Each Unit represents an initial 1% economic
interest in the Partnership. Investors should note that their initial Percentage
Interests in the Partnership may be reduced by future  Dilution  Offerings.  See
"Summary  of the  Partnership  Agreement - Dilution  Offerings"  and the form of
Partnership  Agreement attached hereto as Appendix B. The price for each Unit is
$2,500 in cash and a 1% personal guaranty of the Partnership's obligations under
the Loan (up to a $5,978.40  principal guaranty obligation per Unit). See "Terms
of the Offering - Guaranty Arrangements." At subscription,  each Limited Partner
must pay the cash Unit purchase  price and execute and deliver a Guaranty to the
Sales Agent.  Each  Investor  may  purchase not less than one Unit.  The General
Partner may, in its sole  discretion,  permit the  Partnership to sell a limited
number of fractional Units as a minimum  investment and to reject in whole or in
part any subscription.  Rejected  subscription  funds (without interest) and the
executed Guaranty will be returned promptly to the rejected Investor.  Purchases
of  fractional  Units will be in increments of 1/2 Units at a price of $1,250 in
cash and up to a $2,989.20 Guaranty (0.5% of the Partnership's obligations under
the Loan) per each 1/2 Unit. The General Partner and its Affiliates may purchase
fractional  Units in multiples other than 1/2 Units for a proportional  purchase
price. See "Risk Factors - Operating Risks - Liability Under the Guaranty."

                  The Offering.  By this Offering the Partnership  seeks to sell
in the  aggregate 80 Units for $200,000 in cash  ($180,000  net of Sales Agent's
commissions) and up to $478,272 in personal guaranties of Partnership  principal
obligations  under the Loan.  In the  event  subscriptions  for all 80 Units are
received  and  accepted  by  the  General  Partner  on  the  Closing  Date,  all
subscription  funds  (plus  interest)  and  Guaranties  held in  escrow  will be
released to the Partnership.  If complete subscriptions for all 80 Units are not
received and accepted during the subscription period as defined in "Subscription
Period" below, the Offering will be terminated and all subscription  funds (plus
interest)  and  Guaranties  will be  returned  to the  Investors.  In  order  to
successfully  close the Offering,  the General Partner reserves the right for it
or any of its  Affiliates  to  purchase up to 50 Units in order to meet the full
subscription amount of 80 Units. The purchase of Units by the General Partner or
its Affiliates  will be on the same terms and conditions as any other  Investor,
except that (i) their Unit purchase  price will be reduced by the savings to the
Partnership  attributable to no commissions  being payable to the Sales Agent on
the  transaction,  and (ii) the General  Partner and its Affiliates may purchase
fractional  Units in multiples  other than 1/2 Unit for a proportional  purchase
price.  See "Risk  Factors - Other  Investment  Risks - Purchases by the General
Partner and its Affiliates." All subscription  funds and Guaranties will be held
in an interest  bearing escrow  account until the Closing or the  termination of
the Offering.  See "Risk  Factors" and the Loan  Commitment  attached  hereto as
Appendix C.

                  Subscription  Period. The subscription period will commence on
the date hereof and will  terminate at 5:00 p.m.,  Eastern  time, on January 31,
2000 (or earlier, in the discretion of the General Partner, upon the sale of all
80 Units as provided herein), unless sooner terminated by the General Partner or
unless  extended  for  an  additional  period  up to  180  days.  See  "Plan  of
Distribution."

                  Acceptance  of  Subscriptions.  To  enable  the  Bank  and the
General  Partner  to make  credit  and  investor  decisions,  respectively,  the
prospective  Investor  must  complete  and  deliver  to the  General  Partner  a
Purchaser  Financial  Statement in the form included in the Subscription  Packet
accompanying this Summary, or a substitute  financial  statement  containing the
same information as provided  therein,  and pages one and two of the prospective
Investor's most recently filed Form 1040 U.S.  Individual  Income Tax Return. An
Investor whose  subscription is received and accepted by the General Partner and
by the Bank (for purposes of the Guaranty) will become a Limited  Partner in the
Partnership on the Closing Date. See "Guaranty Arrangements."  Subscriptions may
be rejected in whole or in part by the General  Partner and need not be accepted
in the order  received.  The General  Partner  reserves  the right to reduce any
subscriptions, to accept subscriptions for less than a full Unit in satisfaction
of the minimum investment  requirements,  and to allocate subscriptions received
in the event the Units are  oversubscribed.  To the extent the  General  Partner
reduces an Investor's  subscription as provided above,  the Investor's cash Unit
purchase price and Guaranty will be proportionately refunded and reduced. If the
General  Partner  elects to  terminate  the  Offering or if all 80 Units are not
timely sold as provided above under "The Offering," all subscription funds (plus
interest)  and  Guaranties  will  be  returned  in full  within  30 days of such
termination.  Notice of  acceptance of an  Investor's  subscription  to purchase
Units,  his Percentage  Interest in the  Partnership and his liability under the
Guaranty, will be furnished promptly after the Closing.

                  Closing Date. On the Closing Date,  subscriptions  to purchase
all 80 Units  acceptable to the  Partnership as provided herein will be accepted
and the Investors whose  subscriptions were accepted will be admitted as Limited
Partners to the Partnership,  and the subscription  funds and Guaranties will be
released from escrow to the Partnership.

                  Each Investor will be required to execute a Guaranty as a part
of his subscription.  Each Limited Partner will have substantial  exposure under
his Guaranty.  See "Risk Factors - Liability  Under the Guaranty." The following
summary of certain  provisions of the Guaranty does not constitute legal advice.
The form of the Guaranty is set forth in the  Subscription  Packet  accompanying
this  Memorandum and should be reviewed  carefully by prospective  Investors and
their counsel.

                  Liability  Under the Guaranty.  Each Investor will be required
to  execute  and  deliver  to the  Bank a  Guaranty  pursuant  to  which he will
personally  guarantee  the  payment  by  the  Partnership  of a  portion  of its
obligations to the Bank under the Loan. The Limited  Partners will guarantee 80%
of such  obligations  in the  aggregate,  which  includes a  principal  guaranty
obligation  of up to  $478,272.  For each Unit  purchased,  an Investor  will be
required to guarantee 1% of the Partnership's  total obligations under the Loan,
which is equivalent to up to a $5,978.40 principal obligation guaranty per Unit.
Liability under the Guaranty may exceed  $5,978.40 per Unit because the guaranty
obligation per Unit includes not only principal,  but also 1% of all accrued and
unpaid interest,  late payment penalties and legal costs incurred by the Bank in
collecting  any  defaulted  payments.  See  "Proposed  Activities  - Funding for
Partnership Activities."

                  The  amount  of  the  Limited  Partners'  Guaranties  will  be
proportionately  reduced from time to time to the extent of the payments made by
the Partnership under the Loan. Interest-only will be payable monthly during the
first  six  months  of the  Loan.  At  the  end of the  first  six  months,  the
outstanding  Loan  principal,  plus  accrued  interest,  will be payable over 36
monthly installments as provided below. The amount of each of the first 35 equal
monthly  installments  of principal  and  interest  will be equal to the monthly
payment  resulting from  amortization of the outstanding  Loan principal over 36
months,  assuming a fixed 10% per annum  interest  rate. A final  payment of all
outstanding  principal  and accrued  interest will be payable in the 36th month.
The 10%  interest  rate,  as  provided  above,  is used  only  for  purposes  of
calculating  the  amount of the  equal  monthly  installments  over the 35 month
period.  Loan interest shall  actually  accrue at the Bank' s Prime Rate, as the
same may change  from time to time.  Pursuant to a formula set forth in the Loan
promissory  note,  prepayments  of Loan  principal  must be made annually out of
Partnership  Cash  Flow  until  the Loan is paid in full.  The  General  Partner
anticipates  that Loan principal  prepayments  will reduce the term of the Loan,
and the projections forecast a term of 27 months based on projected  operations.
Assuming the Partnership borrows $597,840 under the Loan Agreement,  the regular
monthly installment  payments of principal and interest for the term of the Loan
after the initial six months will be equal to $19,291 per month.  See  "Proposed
Activities - Funding for Partnership  Activities" and the Financial  Projections
attached hereto as Exhibit A.

                  If  Partnership  operations  generate  sufficient  revenues to
enable the Partnership to make all payments under the Loan to the Bank when due,
such  payments  will be  sufficient to repay the Bank fully over the term of the
Loan, and no Partner will be required to perform under his Guaranty.  However, a
default by the  Partnership,  the General Partner or the Limited  Partners under
the Loan or the Guaranties  will entitle the Bank to exercise one or more of the
following  remedies:  (i) declare all  principal  payments and accrued  interest
immediately  due and payable;  (ii)  foreclose  on its security  interest in the
Partnership 's assets  (including the Lithotripsy  Systems and the Partnership's
accounts  receivable);  and/or  (iii) seek  payment  directly  from the  Limited
Partners under the  Guaranties.  Events of default  include the  following:  (i)
default in the payment or performance of any  obligation,  covenant or liability
contained or referred to in the Loan documents, including the Guaranties, unless
remedied  to the  reasonable  satisfaction  of Bank  within  30  days;  (ii) any
warranty,  representation  or  statement  made or furnished to the Bank by or on
behalf  of the  Partnership  or any of its  guarantors  (including  the  Limited
Partners)  proving  to have  been  false in any  material  respect  when made or
furnished;  (iii)  loss,  theft,  substantial  damage,   destruction,   sale  or
encumbrance to or of any of the collateral,  or the making of any levy,  seizure
or  attachment  thereof or thereon,  which is not removed  within 30 days;  (iv)
dissolution,  termination  of  existence  (or,  in  the  case  of an  individual
guarantor,  death), insolvency,  business failure,  appointment of a receiver of
any part of the property of,  assignment for the benefit of creditors by, or the
commencement  of any proceeding  under any  bankruptcy or insolvency  laws by or
against the  Partnership  or any  guarantor  which is not  favorably  terminated
within 30 days; (v) the Partnership's  failure to maintain its existence in good
standing  unless  remedied  within  30 days of  notice  by the  Bank;  (vi)  the
assertion  or  making  of any  seizure,  vesting  or  intervention  by or  under
authority  of any  government  by which the  management  of the  Partnership  is
displaced of their  authority in the conduct of their business or their business
is curtailed;  (vii) upon the entry of any monetary  judgment or the  assessment
and/or filing of any tax lien against the  Partnership  or any guarantor or upon
the issuance of any writ or garnishment  or attachment  against any property of,
debts due or rights of the Partnership or such guarantor to specifically include
the  commencement of any action or proceeding to seize monies of the Partnership
or such  guarantor on deposit in any bank  account  with the Bank,  which is not
removed or terminated within 30 days. However, any default by any one or more of
the Partnership's guarantors under the above provisions applicable thereto, will
only be an actionable  default if one or more such defaulting  guarantors either
alone or in the  aggregate  guarantees  25% or more of the  Loan,  and  provided
further that the Bank has not,  within twelve  months of the  occurrence of such
guarantor's  default,  received,  accepted and approved a substitute guaranty or
guaranties from a party or parties acceptable to it in an amount greater than or
equal  to  the  amount  of  such  defaulting  guarantor's  guaranties,   or  the
Partnership  has not made a prepayment of the Loan  principal in an amount equal
to the  amount  of the  defaulting  guarantor's  guaranty.  The  Bank  may  also
accelerate the Loan if it should deem itself, or its collateral, insecure or the
payment  or  performance  under  the Loan  impaired  and may  demand  additional
collateral  at any  time it  deems  the Loan to be  insufficiently  secured.  As
discussed below, under the terms of the Guaranties,  Limited Partners will waive
certain rights to which they might otherwise be entitled,  and would be required
to pay their  share of the Bank's  attorneys'  fees and court  costs if the Bank
were  successful in enforcing the  Guaranties  through a lawsuit.  See "Proposed
Activities - Funding for  Partnership  Activities"  and the Loan  Commitment and
form of Loan Agreement attached as Appendix C.

                  The   Guaranties   are  a  guaranty  of  payment  and  not  of
collection.  As a  result,  the  liability  of the  Limited  Partners  under the
Guaranties is direct and immediate and not conditional or contingent upon either
the  pursuit  of any  remedies  against  the  Partnership  or any  other  person
(including any other guarantor) or foreclosure of any security interest or liens
available to the Bank.  The Bank may accept any payment,  plan for adjustment of
debts,  plan  for  reorganization  or  liquidation,  or plan of  composition  or
extension  proposed  by, or on behalf  of,  the  Partnership  without in any way
affecting or discharging the liability of the Limited Partners. Limited Partners
will waive any right to require  that an action  first be  brought  against  the
Partnership, the General Partner, any other guarantor or any other person, or to
require  that  resort be had to any  security  or to any  balance of any deposit
account or credit on the books of Bank in favor of the  Partnership or any other
person. The Guaranty is a continuing guaranty that by its terms will survive the
death,  bankruptcy,  dissolution or disability of a Limited Partner guarantor. A
Limited Partner's liability under a Guaranty continues regardless of whether the
Limited Partner remains a limited partner in the Partnership.

                  Under the terms of the Guaranties,  the Limited  Partners will
expressly  waive:  (i) notice of acceptance of the guaranty and of extensions of
credit to the  Partnership;  (ii)  presentment  and  demand  for  payment of the
Partnership's  promissory  note;  (iii)  protest  and notice of  dishonor  or of
default; (iv) demand for payment under the Guaranty; and (v) all other notice to
which the Limited Partner might otherwise be entitled.

                  The principal liability of an Investor under the Guaranty will
be up to $5,978.40  per Unit,  an amount  greater than the cash price of a Unit.
Accordingly,  each  Investor  should  regard his  exposure  with  respect to his
investment in the Partnership to be his cash subscription ($2,500 per Unit) plus
the amount for which he is personally liable under his Guaranty, up to $5,978.40
per Unit in principal, plus accrued and unpaid interest, as well as late payment
penalties, legal fees and court costs. An Investor should not purchase a Unit if
he does not have  resources  sufficient to bear the loss of this entire  amount.
The Guaranty  generally  provides that within thirty days  following the Bank' s
determination  that the  Partnership is in default under the Loan, the Bank will
send a  notice  to  each  Limited  Partner  (the  "Notice")  setting  forth  the
Partnership's  total Loan obligations as of the date of the Notice (inclusive of
all interest, late payment penalties and legal costs incurred in connection with
the  enforcement  of such  obligation  accrued  but unpaid  through  such date),
together with a statement of the amount which the Limited Partner is responsible
for paying (the "Guaranty Amount").  Failure by the Bank to send the Notice in a
timely fashion will not, however, release the Limited Partner guarantor from any
liability  under his  Guaranty.  The Notice  will  provide  that unless the Bank
receives  payment of the Guaranty  Amount from the Limited  Partner  within five
business  days  following  the date of the Notice,  the Guaranty  Amount will be
increased  by the  Limited  Partner's  pro rata  share  (based on the  number of
guarantors  who did not pay the Guaranty  Amount within five days of the date of
the  notice)  of any  additional  accrued  but  unpaid  interest,  late  payment
penalties  and legal costs  through the date such payment is made.  Because each
Guaranty runs directly from the Limited Partner to the Bank,  claims or defenses
the Limited  Partner may have against the Partnership or the General Partner may
not be used to avoid payment  under the  Guaranty.  See the form of the Guaranty
included in the  Subscription  Packet  accompanying  this  Memorandum.  See also
"Terms of the Offering - Suitability Standards."

                  Approval  of Bank.  In  addition  to meeting  the  suitability
requirements  discussed below under "Suitability  Standards," each Investor must
be approved by the Bank for purposes of their delivery of the Guaranty. The Bank
has  established  its  own  criteria  for  approving  the  credit-worthiness  of
Investors,  either individually or as a group, and has not established objective
minimum  suitability  standards.  Instead,  the Bank is empowered under the Loan
Commitment to accept or reject any Investor. See "Risk Factors - Operating Risks
- Liability Under the Guaranty."

                  The Units are being offered and will be sold in reliance on an
exemption from the  registration  requirements of the Securities Act provided in
Section 4(2) thereof and Rule 506 of  Regulation D  promulgated  thereunder,  as
amended,  and an  exemption  from state  registration  provided by the  National
Securities  Markets  Improvement Act of 1996. Only a limited number of investors
other than accredited  investors,  as such term is defined under Regulation D of
the Securities Act may purchase Units hereunder.  The suitability  standards set
forth  below have been  established  in order to comply  with the terms of these
registration exemptions.

                  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.  For  purposes  of  analyzing  his  investment  in the
Partnership,  each  Investor  should  regard his  exposure  with  respect to his
investment  to be  his  cash  subscription  plus  the  amount  for  which  he is
personally  liable  under his  Guaranty.  See "Terms of the  Offering - Guaranty
Arrangements."  An  Investor  should  not  purchase  a Unit if he does  not have
resources sufficient to bear the loss of this entire amount. The General Partner
anticipates  selling  Units  primarily to  individual  Investors;  however,  the
General  Partner  reserves  the right to sell Units to other  entities,  to sell
Units to its Affiliates and to purchase Units for its own account. See "Terms of
the  Offering  - General - The  Offering."  Because of the risks  involved,  the
General  Partner  anticipates  selling  the Units only to  individual  Investors
residing in Kentucky who it reasonably  believes are  "accredited  investors" as
that term is defined in Rule 501 under the  Securities  Act,  but  reserves  the
right to sell to a limited  number of Investors who do not meet these  criteria.
Certain institutions and the following individuals are "accredited investors":

(1)  An individual  whose net worth (or joint net worth with his spouse) exceeds
     $1,000,000 at the time of subscription;

(2)      An individual who has had an individual income in excess of $200,000 in
         each of the two most recent fiscal years and who reasonably  expects an
         individual income in excess of $200,000 in the current year; or

(3)      An  individual  who has had with his spouse a joint income in excess of
         $300,000 in each of the two most recent fiscal years and who reasonably
         expects a joint income in excess of $300,000 in the current year.

                  Individual  Investors  must  also be at least 21 years old and
otherwise duly qualified to acquire and hold partnership interests.  The General
Partner  reserves  the right to refuse to sell Units to any  person,  subject to
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 Partnership's 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 "Risk Factors"
and  "Summary  of the  Partnership  Agreement  -  Restrictions  on  Transfer  of
Partnership Interests."

                  Investors  who wish to subscribe  for Units must  represent to
the  Partnership  that they  meet the  foregoing  standards  by  completing  and
delivering to the Sales Agent a Purchaser  Questionnaire in the form included in
the  Subscription   Packet   accompanying   this   Memorandum.   Each  Purchaser
Representative,  if any, acting on behalf of an Investor in connection with this
Offering must complete and deliver to the Sales Agent a Purchaser Representative
Questionnaire, which will be made available to an Investor upon request.

                  Investors who meet the  qualifications  for  investment in the
Partnership  and who wish to  subscribe  for  Units may do so by  following  the
instructions  in the  Subscription  Packet  accompanying  this  Memorandum.  All
information  provided by Investors,  including the  information in the Purchaser
Questionnaire and the Purchaser Financial  Statement,  will be kept confidential
and not disclosed except to the Partnership,  the General Partner,  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, in the opinion of
counsel  to  the  Partnership,  an  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 the  General
Partner 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  the  General  Partner,
instructing  it to effect the  assignment.  Assignees of Units may also,  in the
discretion of the General Partner,  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 the
Guaranty.  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 the General  Partner,  or the
consent of a Majority in Interest of the Limited  Partners  (except the assignor
Limited  Partner)  and the  General  Partner,  (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  Interest - Restrictions on Transfer of Partnership
Interests."

                  Subscriptions   for  Units  will  be   solicited   by  MedTech
Investments,  Inc.,  the Sales  Agent.  The Sales Agent is an  Affiliate  of the
General Partner.  The Sales Agent has entered into a Sales Agency Agreement with
the Partnership pursuant to which the Sales Agent has agreed to act as exclusive
agent for the placement of the Units on a "best efforts" all or none 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 may be engaged in other
similar  offerings on behalf of the Affiliates of the General Partner during the
pendency of this Offering and in the future.  Investors should note the material
relationship  between the Sales Agent and the General  Partner,  and are advised
that the relationship  creates conflicts in the Sales Agent's performance of its
due diligence responsibilities under the federal securities laws.

                  As compensation for its services, the Sales Agent will receive
a commission  equal to $250 for each Unit sold.  No commission is payable to the
Sales Agent  unless all 80 Units are sold as provided  herein,  and a successful
Closing has occurred. In addition, no commission will be payable with respect to
Units sold to the General Partner or its Affiliates.  No other  commissions will
be paid in connection  with this Offering.  Subject to the  conditions  provided
above,   the  Sales  Agent  may  be  reimbursed  by  the   Partnership  for  its
out-of-pocket expenses associated with the sale of the Units in an amount not to
exceed $10,000.  The Partnership has agreed to indemnify the Sales Agent against
certain liabilities, including liabilities under the Securities Act.

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

                  The  General  Partner  reserves  the  right  for  it  and  its
Affiliates  (including  the Sales Agent) to acquire Units for their own account,
and the General  Partner and its Affiliates may purchase up to 50 Units in order
to meet the full subscription  amount of 80 Units required to successfully close
the  Offering.  See "Terms of the Offering - General - The  Offering"  and "Risk
Factors  - Other  Investment  Risks  -  Purchases  by  General  Partner  and its
Affiliates."

                  The  subscription  period will commence on the date hereof and
will terminate at 5:00 p.m.,  Eastern time, on January 31, 2000 (or earlier,  in
the discretion of the General Partner, upon the sale of all 80 Units as provided
herein  and  the  consummation  of  the  Liquidation),  unless  extended  at the
discretion  of the General  Partner for an  additional  period not to exceed 180
days.  Investors whose  subscriptions have been accepted will not be admitted as
Limited Partners to the Partnership until all 80 Units are sold.

                  An Investor whose  subscription  is received and accepted will
become a Limited Partner in the  Partnership on the Closing Date.  Subscriptions
may be rejected in whole or in part by the  Partnership and need not be accepted
in the  order  received.  The  Partnership  reserves  the  right to  reduce  any
subscriptions, to accept subscriptions for less than a full Unit in satisfaction
of the minimum investment requirements and to allocate subscriptions received in
the event the Units are  oversubscribed.  See "Terms of the Offering - General -
Acceptance of  Subscriptions."  If the General  Partner  elects to terminate the
Offering,  or all 80 Units are not timely  purchased  as  provided  herein,  all
subscription  funds (plus  interest) and Guaranties  will be returned  within 30
days of such termination.  Notice of acceptance of an Investor's subscription to
purchase  Units,  his Percentage  Interest in the  Partnership and his liability
under the Guaranty will be furnished  promptly after the Closing.  To the extent
the  Partnership  reduces an  Investor's  subscription  as provided  above,  the
Investor's cash Unit purchase price and Guaranty will be proportionally refunded
and reduced.  All subscription  funds and Guaranties will be held in an interest
bearing  escrow  account  with  the  Escrow  Agent  until  the  Closing  or  the
termination of the Offering.

                  The primary purposes of the Partnership are (i) to improve the
provision  of  health-care  in the  Service  Area  by  taking  advantage  of the
technological   innovations   offered  by  the   Lithotripsy   Systems  and  the
Partnership's quality assurance and outcome analysis programs,  and (ii) to make
cash distributions to its Partners from revenues generated from the operation of
the  Lithotripsy  Systems.  No assurance can be given that these efforts will be
successful.  See  "Risk  Factors."  The  Partnership  intends  to  purchase  the
Lithotripsy Systems and begin lithotripsy operations in the Service Area as soon
as possible after the Closing of the Offering.

                  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,  endoscopic and
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.  The General  Partner  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.

                  Upon  the   successful   completion  of  the   Offering,   the
Partnership  will use the Loan  proceeds to acquire (i) a new Storz  Modulith(R)
SLX-T model extracorporeal shock-wave lithotripter (estimated at $400,000), (ii)
a new mobile transport vehicle (estimated at $70,000), (iii) a used Dornier HM-3
model extracorporeal shock-wave lithotripter (estimated at $60,000), (iv) a used
mobile  trailer to house the Dornier HM-3  (estimated at $21,500) and (v) a used
tractor truck to transport the trailer (estimated at $12,500).  The Loan will be
guaranteed  80% by the Limited  Partners in the aggregate and 20% by the General
Partner.  A default by the  Partnership,  the  General  Partner  or the  Limited
Partners under the Loan or their  respective  Guaranties  could result in, among
other things, a foreclosure on the Lithotripsy  Systems and enforcement  against
the  Guaranties.  See  "Terms  of the  Offering  -  Guaranty  Arrangements"  and
"Proposed Activities - Funding for Partnership  Activities" for a description of
the  terms of the  Guaranties  and of the  Loan.  Investors  are urged to review
carefully the Loan Commitment (with exhibits)  attached hereto as Appendix C and
the form of Guaranty Agreement included in the Subscription  Packet accompanying
this Memorandum.

                  Used Equipment.  The  Partnership  will acquire a Dornier HM-3
lithotripter housed in a tractor-trailer configuration from the General Partner.
The  Dornier  HM-3 is  manufactured  by  Dornier  Medizintechnik  GmbH,  Germany
("Dornier").  The  unit  consists  of  a  stainless  steel  water  tub,  patient
positioning  unit,  shock-wave  generator,   radiological  localization  system,
hydraulic  supply  system,  water  treatment  system and  control  cabinet.  The
localization  system,  which employs two image  intensifiers,  allows normal and
high-current  fluoroscopy.  The control cabinet  contains control units for both
image  intensifiers,  TV monitors and video image memory.  After positioning the
patient in the tub, the image  intensifiers  are swung by hand into the centered
position  and are  moved  along  the  cental  beams  by  motor.  The  shock-wave
generation system consists of the capacitor  charging unit, the pulse generator,
shock-wave  generator,  ECG-trigger  unit,  ellipsoid  reflector and  underwater
electrode.  The underwater electrode is mechanically linked to the reflector and
is  positioned in such a way that the electric  energy is discharged  exactly in
the lower focus. The shock-wave  energy,  which can be controlled within defined
limits, is taken from the charging unit and stored in the shock-wave  generator.
The spark pulses are released  synchronously  to the R-waves of the  ECG-signals
via the ECG  triggering  unit.  The spark pulses cause energy  discharges in the
form of arcs between the electrode tips of the underwater  electrode  leading to
explosive  vaporizations  of the  water in the zone of the  arc.  The  resulting
shock-waves  are reflected by the ellipsoid wall and  concentrated  in the upper
focus where the kidney stone is located.  The patient  positioning  unit enables
the exact line-up of the kidney stone in the upper focus of the  reflector.  The
patient is placed on a support which makes  possible the optimum  application of
the  shock-waves in accordance  with the  individual  anatomic  conditions.  The
movement of the  patient  support in the three  coordinates  is  performed  by a
positioning unit, which is guided by a guideway  installed on the ceiling of the
trailer. The positioning procedure is performed hydraulically and controlled via
the control  cabinet.  The HM-3 has been upgraded by the (i)  installation  of a
larger ellipsoid and 40 nanofarad  generator which enables treatment without the
need for general  anesthesia;  (ii)  installation  of a Stryker Frame and manual
gantry controls which enable treatment stones in the distal third of the ureter;
and (iii)  replacement  of all x-ray  glassware.  The  lithotripter  has been in
operation several years, and other than the upgrades described above,  typically
requires only routine  maintenance  and repair.  The General  Partner  currently
contracts with Servicetrends,  Inc. ("Servicetrends") to provide maintenance for
the HM-3 at an annual cost of $33,000, and anticipates that the Partnership will
also contract with Servicetrends for the same services and under the same terms.

                  The trailer is a 1991 Calumet  Coach.  The trailer is upfitted
to house the HM-3  lithotripter and contains a generator and an HVAC system,  is
fully wired and is fitted with expanding  sides to accommodate  operation of the
lithotripter.  During  the first year of  Partnership  operations,  the  General
Partner  anticipates  (subject  to the  approval  of the  Partnership's  Medical
Advisory  Board) that the  Partnership  will use a portion of the  Partnership's
working capital,  Cash Flow and/or reserves  (estimated at $60,000) and contract
with  Servicetrends  and  AK  Associates,  L.L.C.  (or  other  similar  services
providers)  to  refurbish  the  Dornier  HM-3 and  trailer,  respectively.  Such
refurbishments,  if  undertaken,  will only occur  after the  Partnership's  new
Modulith(R)  SLX-T is in service,  and therefore,  the General  Partner does not
expect  that the  Partnership  will need to rent a "loaner"  Lithotripsy  System
during  the time the  Dornier  HM-3 and  trailer  are being  reconditioned.  The
trailer is transported  from site to site by a 1988 Kenworth Tractor Model T-800
truck. The tractor truck is powered by a 350 Cummins engine and an Eaton 9-speed
transmission.  The mileage on the tractor  truck is in excess of 500,000  miles;
however the engine underwent a complete re-build in Spring 1999. The Partnership
will pay for service of the trailer and truck on an as needed basis. The General
Partner  anticipates  that  expenditures  for  maintenance  and  repair  of  the
transport  vehicle (trailer and truck) will be  approximately  $20,000 per year.
See "Compensation and Reimbursement to the General Partner and its Affiliates."

                  New Equipment.  The Partnership  will also acquire a new Storz
Modulith(R) SLX-T model extracorporeal  shock-wave lithotripter and a new mobile
vehicle to transport the lithotripter from site to site. Due to a special volume
discount  arrangement  between Storz and Prime,  Storz has agreed to provide the
Partnership with a Modulith(R) SLX-T lithotripter  together with accessories for
an estimated  purchase price of $400,000,  which price reflects  approximately a
24%  discount  ($125,000)  from  Storz's  current  list price of  $525,000.  The
Modulith(R)  SLX-T  received  FDA  premarket  approval  on March 27,  1997.  The
reliability and efficacy risks  associated with operating the Modulith(R)  SLX-T
are  especially  acute  because  the  Modulith(R)  SLX-T is so new.  The General
Partner  and  its  Affiliates  have  limited  experience  with  the  use  of the
Modulith(R)  SLX-T  lithotripter.  Preliminary  reports from abroad and "word of
mouth" anecdotal  evidence  indicates that the Modulith(R) SLX-T is as effective
as most of the  "portable"  lithotripters  in the  market.  See "Risk  Factors -
Operating Risks - Reliability and Efficacy of the Storz Modulith(R) SLX-T."

                  The Modulith(R) SLX-T was especially adapted for the treatment
of urological stones. In addition to the efficient fragmentation of all types of
urinary tract stones,  the Modulith(R)  SLX-T is suitable for performing a range
of  urological  examinations  including  cystoscopy  and  ureterorenoscopy.  The
Modulith(R) SLX-T consists of a cylindrical pressure wave generator, an OEC 9600
C-arm x-ray system unit and a patient  table.  The Modulith (R) SLX-T  generates
pressure  waves  electromagnetically  from the  cylindrical  energy  source  and
parabolic  reflector.  The pressure wave generator  operates without an acoustic
lens,  thus  avoiding  such  disadvantages  as energy  dissipation  and aperture
limitations.  The  pressure  at the  focal  point  can be varied by means of the
energy control in nine steps from 10 Mpa to 100 Mpa. The energy source is fitted
with an axial and lateral  air-bag.  When  expanded  during  fluoroscopy,  these
air-bags  ensure  optimal  X-ray image  quality  for  monitoring  purposes.  The
pressure wave coupling is dry (water  cushion is used).  The  shock-wave  may be
released at fixed frequencies of 1 Hz, 1.5 Hz or 2 Hz, or may be triggered using
the ECG and/or  respiration.  The mode of  triggering is chosen by the attending
physician.  Standby  readiness and all safety features of the Modulith(R)  SLX-T
are  electronically  monitored and displayed.  The Modulith (R) SLX-T  localizes
stones using an OEC 9600 C-arm X-ray system.  The C-arm  laterally  rotates into
over- and  under-table  positions to allow display of the entire ureter  without
repositioning the patient,  and the pressure generator can be rotated out of the
X-ray path.  The  attending  physician  can choose  between  pa/ap,  lateral and
cranio-caudal  projections  for  fluoroscopy.  Further  localization  and  focus
adjustment is available with reduced radiation exposure using a collimated-field
view  through  the  center  of the  treatment  head.  When  adjusting  for stone
localization  in the vertical  direction,  wide-field  view  fluoroscopy  can be
carried  out at any  angle  between  90(degree)  and +  30(degree)  in a lateral
direction  and,  independently,  between  90(degree)  and +  30(degree)  in  the
cranio-caudal  direction.  Vertical  in situ  fluoroscopy  limits  the  range to
between  0  (degree)  and +  30(degree)  in the  lateral  direction.  The  X-ray
technique employs a continuously adjustable,  elliptical, round, and rectangular
collimator, an image intensifier, cassette film, digital spot imaging capability
and two high  resolution 16" monitors  capable of displaying four stored digital
images.  The patient table can be moved  electronically in all three dimensions,
and a floating  function allows manual  adjustment in the horizontal  direction.
The table is X-ray  transparent and allows  visualization  of the entire urinary
tract. The table includes a patient cradle which provides comfortable and secure
support in the prone, supine and lateral positions.

                  Upon the successful  Closing of the Offering,  the Partnership
will order a Modulith(R) SLX-T from Storz. The General Partner  anticipates that
it  will  take  approximately  90  days  for  delivery  of a  Modulith(R)  SLX-T
lithotripter  after it is  ordered  on behalf  of the  Partnership.  Storz  will
provide the Partnership  with technical  support to facilitate  installation and
testing of the Modulith(R)  SLX-T. The Modulith(R)  SLX-T comes with an eighteen
month limited warranty during which time all maintenance,  repairs, shock tubes,
glassware and capacitors will be provided free of charge.  The Storz maintenance
contract in future  years  covers the same items  listed  above and is currently
quoted at an annual price of $40,000.  The General Partner intends to enter into
this  maintenance  contract  on  behalf of the  Partnership.  Any  expenses  for
maintenance and repairs not covered by the warranty or service  contract will be
obligations of the Partnership.  See "Risk  Factors-Operating  Risks-Partnership
Limited Resources and Risks of Leverage."

                  The  General  Partner  will  also  cause  the  Partnership  to
purchase and upfit a new mobile vehicle to transport the lithotripter  from site
to site. The Partnership will not purchase the manufacturer's,  or seller's,  as
the case may be, service contract. Instead, the Partnership will pay for service
on an as needed basis.  The General Partner  anticipates  that  expenditures for
maintenance and repair of the transport  vehicle will be approximately  $500 per
month ($6,000  annually).  The General Partner  anticipates that the Partnership
will  purchase a Ford 400 Series  truck (or an  equivalent  model  truck from an
alternative manufacturer) which will be customized to include a 14' cargo box to
house the  lithotripter  while it is transported from site to site. The floor of
the truck will be loading dock height so the  lithotripter  can be easily loaded
on and off the truck at each treatment facility. The truck will also be upfitted
with a lift gate with a load  capacity  of 3000  pounds for easy  loading of the
lithotripter  from street  level.  The truck will be modified  for  securing the
lithotripter and its accessories  during transport and for heating the cargo box
during the winter to prevent freezing of the lithotripter and its components.

                  The General  Partner  currently  provides  mobile  lithotripsy
services in the Service  Area under the name of Tennessee  Valley  Lithotripter.
The General Partner provides such services using a Dornier HM-3 lithotripter and
pursuant to Service  Contracts with various  hospitals  including the following:
Owensboro  Mercy  Medical  Center in  Owensboro;  Lourdes  Hospital  in Paducah;
Regional  Medical  Center  in  Madisonville;  Jennie  Stuart  Medical  Center in
Hopkinsville;  Community United Methodist  Hospital in Henderson;  and Greenview
Hospital in Bowling Green (collectively,  the "Contract Hospitals"). The Service
Contracts require the General Partner to make lithotripsy  services available at
the Contract Hospitals. The Contract Hospitals generally pay the General Partner
a fee for each lithotripsy procedure performed at that Contract Hospital.  Three
of the Service  Contracts  grant the  General  Partner  the  exclusive  right to
provide lithotripsy  services at the particular Contract Hospital,  however, all
of the Services  Contracts  have very short terms ranging from less than a month
to  approximately  one and  one-half  years.  In any event,  most of the Service
Contracts may be terminated without cause upon 90 days notice by either party at
anytime.  The Community  United  Methodist  Hospital  contract and the Owensboro
Mercy Medical Center  contract are  continuing on a  month-to-month  basis.  The
General  Partner has  received a notice of  termination  from  Regional  Medical
Center.

                  As of the date of the Memorandum, the fair market value of the
Service  Contracts as determined by an independent third party valuation firm is
$20,691.  However, due to the short terms of the Service Contracts,  the ability
of the treatment  facilities to terminate a majority of the Service Contracts at
any time upon 90 days notice and other factors noted above,  the valuation  firm
has  also  determined  that  as of the  anticipated  Closing  Date  the  Service
Contracts  will  have  no  aggregate   fair  market  value.   See  "Sources  and
Applications of Funds."

                  The  General  Partner  intends to  negotiate  on behalf of the
Partnership  with the Contract  Hospitals to terminate their existing  contracts
and to enter into new agreements  with the  Partnership  for the  Partnership to
provide lithotripsy services at those facilities.  Alternatively,  to the extent
permissible  under  contract law, the General  Partner may attempt to assign the
existing  Service  Contracts to the  Partnership.  In cases where the  agreement
requires the consent of the other party to the  assignment,  the General Partner
will use reasonable  efforts to obtain such consent.  If the General  Partner is
unable to obtain the  consent  of a  facility  to the  assignment,  the  General
Partner will  continue to provide  lithotripsy  services to the facility for the
remaining  term of the  agreement,  in which case the  General  Partner  will be
competing  directly with the  Partnership at that location.  See  "Competition -
Affiliated Competition." No assurance can be given that the General Partner will
be  successful  in  procuring  new  contracts  with the  Contract  Hospitals  or
assigning the Service Contracts to the Partnership.

                  The  General  Partner  intends  that new  agreements  with the
Contract  Hospitals and other health care  facilities will be on financial terms
substantially  similar to those in the existing Service Contracts.  There can be
no  assurance  that  the  General  Partner  will be  successful  in  negotiating
contracts on financial terms comparable to those in existing Service  Contracts,
or at all. Several of the Service  Contracts have been amended from time to time
to provide for, among other things,  lower payments per procedure to the General
Partner.  It is expected that most  Partnership  lithotripsy  service  contracts
would obligate the  Partnership  to make the  Lithotripsy  Systems  available to
health  care  centers  at  specified  times  in  exchange  for  payments  to the
Partnership  based on the number of  procedures  performed  by the  health  care
center with the  Lithotripsy  Systems.  The  General  Partner  expects  that the
agreements  would have  multi-year  terms and be  automatically  renewed  unless
either party elects to cancel prior to the end of the term.  See "Risk Factors -
Competition."

                  General.  It is anticipated that the Partnership will continue
to  provide  lithotripsy  services  under  the  Service  Contracts  and  similar
arrangements.  See "Proposed Activities - Service Contracts" and "Risk Factors -
Operating Risks - Contract Terms and Termination."  Qualified physicians may use
the Lithotripsy  Systems in accordance  with the rules of the applicable  health
care facility. See "Regulation" and "Risk Factors - Tax Risks - Disqualification
of Employee  Benefit Plans." The Partnership may also make  arrangements to make
the  Partnership's   Lithotripsy  Systems  available  to  qualified   physicians
(including but not limited to qualified  physician Limited Partners) desiring to
treat patients  using the  lithotripters.  It is anticipated  that all qualified
physicians  desiring to treat their own patients using the  lithotripters may do
so after they have  received any  necessary  training.  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. In addition,  the General Partner reserves the right to
request that (i)  physicians  (or members of their  practice  groups) treat only
their own patients with a Partnership  lithotripter,  and (ii) physician Limited
Partners  disclose to their patients in writing their financial  interest in the
Partnership  prior to  treatment,  if it  determines  that  such  practices  are
advisable  under  applicable  law. The former  requirement  is  mandatory  under
Kentucky law. See "Regulation." The treating qualified  physicians or the health
care facilities  will be solely  responsible for billing and collecting on their
own behalf the professional service component of the treatment procedure. Owning
an  interest  in the  Partnership  is not a  condition  to  using a  Partnership
lithotripter. Thus local qualified physicians that are not Limited Partners will
be given the same  opportunity  to treat their own patients  using a Partnership
lithotripter as provided above.

                  New   Services.   After  the  Closing  Date,  in  addition  to
operating, if possible,  under the Service Contracts, the General Partner and/or
the Management Agent will also attempt to negotiate on behalf of the Partnership
with other hospitals and treatment  facilities  located primarily in the Service
Area regarding operating the Lithotripsy Systems at their facilities.  There can
be no  assurance  that  any  such  commitments  will  be  forthcoming  on  terms
acceptable to the Partnership.  The General Partner, in its sole discretion, has
the  authority to expand  Partnership  lithotripsy  operations  throughout,  and
outside of the Service Area. After  consultation with the Partnership's  Medical
Advisory Board and Medical  Director,  the travel  itinerary of the  Lithotripsy
Systems will be determined by the General  Partner.  See "Proposed  Activities -
Management and Administration." The travel schedule is expected to be influenced
by the requirements of the Service Contracts,  the number of treating physicians
and  patients in  particular  areas and  Partnership  arrangements  with various
hospitals  and other  health care  facilities  located  primarily in the Service
Area.  The General  Partner also  expects to consult  with the Limited  Partners
regarding locations for the Lithotripsy Systems. The General Partner anticipates
the Partnership  will be able to obtain new pad site space and utility  hook-ups
from  local  hospitals  and  treatment  centers  at little or no charge  for the
Dornier HM-3. It is further anticipated that the transportable Modulith(R) SLX-T
and its  components  will be moved  into a  surgery  room at the host  treatment
facility. After treatment with the Modulith(R) SLX-T (estimated at 30-60 minutes
in   duration),   the  patient  will  be  moved  from  the  surgery  room  to  a
post-anesthesia recovery area of the treatment facility for recovery,  discharge
instructions  and  discharge at the direction of the treating  physician  and/or
anesthesiologist.  In addition, the General Partner believes the local hospitals
or  treatment  centers  will  also  bear  certain   responsibilities  and  costs
associated  with the  Lithotripsy  Systems,  all in exchange  for such  entities
sharing in Lithotripsy  Systems  revenues through a fee billed by them (or a fee
paid to them by the Partnership) for each lithotripsy procedure.

See "Proposed Activities - Management and Administration."

                  Charges  for  Lithotripsy  Procedures.   Based  on  historical
operating  history regarding the Service Contracts and anticipated new treatment
opportunities,  the Financial  Projections  forecast that when fully operational
the  Partnership  will use the  Lithotripsy  Systems to perform 650  lithotripsy
procedures  per year  and  that the  gross  Partnership  fee per  procedure  for
patients will be at least $2,200. There can be no assurance that the Partnership
will perform at the procedure levels as forecast in the Financial Projections or
as anticipated by the General Partner.  See "Risk Factors." The $2,200 estimated
fee as provided above represents  compensation only for the technical  component
of the lithotripsy  procedure and represents an average  reimbursement level for
all patients to be treated with the  Partnership's  Lithotripsy  Systems.  It is
anticipated that the Management Agent will be responsible for patient scheduling
as well as billing and collection for the technical component of the lithotripsy
procedure. There can be no assurance that lithotripsy procedure fees approaching
those  estimated  by the  General  Partner may be charged or  maintained  by the
Partnership.  The prices that the Partnership  will be able to charge  hospitals
and  other  health  care  centers  for  the  lithotripsy  of  kidney  stones  is
significantly  dependent  upon the amount of  reimbursement  private health care
insurers will allow for this  procedure.  The General Partner  anticipates  that
over  time  reimbursement  amounts  for  both  the  professional  component  and
technical  component of the  lithotripsy  procedure  may continue to decrease as
technological  innovations  continue  to make this  procedure  simpler  and less
costly.  A 2,000 page  report  released by the  federal  Health  Care  Financing
Administration  indicates that the professional  component of Medicare  payments
for  lithotripsy  procedures may soon be greatly reduced because of the relative
simplicity and risk-free nature of the procedure.  See "Risk Factors - Operating
Risks - Impact of Insurance Reimbursement" and "Regulation."

                  General.  The General  Partner  intends that financing for the
Partnership's  acquisition of the Lithotripsy Systems, any costs associated with
the  acquisition  of the  Service  Contracts  and  the  Partnership's  start-up,
syndication, organization and working capital expenses will come from borrowings
under  the  Loan,  the cash  proceeds  of this  Offering  and the  initial  cash
contribution  of  the  General  Partner.  See  "Proposed  Activities  -  Service
Contracts."  In  addition,  the  General  Partner  anticipates  (subject  to the
approval of the Partnership's Medical Advisory Board) that during the first year
of  Partnership   operations,   the  Partnership  will  use  a  portion  of  the
Partnership's  working capital, Cash Flow and/or reserves (estimated at $60,000)
and contract with certain service providers (including Affiliates of the General
Partner) to  refurbish  the used Dornier HM-3 and used  trailer.  See  "Proposed
Activities - Acquisition of Lithotripsy Systems - Used Equipment." Although each
Limited  Partner  remains  liable to the Bank as  provided in his  Guaranty,  no
assessments will otherwise be imposed upon or requested of the Limited Partners.
See "Proposed  Activities - Acquisition of Additional  Assets" for a description
of the General  Partner's  authority to borrow additional funds on behalf of the
Partnership to acquire additional Partnership assets.

                  See the  Loan  Commitment  (with  Exhibits)  and  form of Loan
Agreement attached as Appendix C for a detailed  description of the terms of the
Loan. Investors should note that the Loan Agreement, the promissory note and the
security  agreement are subject to minor  modifications  at or prior to the Loan
closing  to  meet  the   requirements  of  local  counsel  for  purposes  of  an
enforceability opinion. Furthermore, certain amendments to the terms of the Loan
may be made at any time  without the consent of the Limited  Partners.  Outlined
below are a few of the key terms of the Loan.

                  The Partnership  will borrow up to $597,840 to (i) acquire one
new  Storz  Modulith(R)  SLX-T  extracorporeal   shock-wave   lithotripter  with
accessories  (estimated  at  $400,000);  (ii)  acquire  and upfit one new mobile
vehicle  to  transport  the new  lithotripter  from site to site  (estimated  at
$70,000);  (iii)  acquire  one  used  Dornier  HM-3  extracorporeal   shock-wave
lithotripter  (estimated at $60,000); (iv) acquire one used trailer to house the
Dornier HM-3 lithotripter  (estimated at $21,500);  (v) acquire one used tractor
truck to transport the trailer housing the Dornier HM-3 lithotripter  (estimated
at  $12,500);  and (vi) pay state  sales and use  taxes on the  purchase  of the
Lithotripsy  Systems  (estimated  at  $33,840).   See  "Proposed   Activities  -
Acquisition of the Lithotripsy Systems."

                  Interest-only  will be  payable  monthly  during the first six
months of the Loan.  At the end of the first six months,  the  outstanding  Loan
principal,  plus accrued interest,  will be payable over 36 monthly installments
as provided below. The amount of each of the first 35 equal monthly installments
of principal and interest will be equal to the monthly  payment  resulting  from
the  amortization of the outstanding  Loan principal over 36 months,  assuming a
fixed 10% per annum interest rate. A final payment of all outstanding  principal
and accrued  interest will be payable in the 36th month.  The 10% interest rate,
as provided  above,  is used only for purposes of calculating  the amount of the
equal monthly  installments  over the 35 month period.  Interest  shall actually
accrue during the entire 42 month term of the Loan at the variable rate provided
above. The Bank also imposes an additional charge of 4% of the unpaid balance of
any payment past due for 15 days or more. The Partnership is required to make an
annual principal  prepayment  determined pursuant to the following formula: CF -
PTL - MRP = Prepayment.  In this formula,  (i) CF, cash flow of the Partnership,
is defined as the excess of gross  income  from all sources  over all  operating
expenses (excluding depreciation), less capital expenditures permitted under the
Loan and regularly  scheduled  principal  payments on Partnership  indebtedness;
(ii) PTL is the tax  liability  of the  Partners  to pay taxes on their share of
Partnership taxable income,  assuming a combined federal and state tax liability
of 40% and treating the General Partner as an individual partner for purposes of
this determination;  and (iii) MRP, the minimum return to Partners, is an amount
equal to 25% of cash flow as defined above. The General Partner anticipates that
Loan principal  prepayments  will reduce the term of the Loan, and the Financial
Projections forecast a term of 27 months based on projected operations. Assuming
the Partnership  borrows $597,840 under the Loan Agreement,  the regular monthly
installment  payments of  principal  and interest for the term after the initial
six months will be equal to $19,291  per month.  See the  Financial  Projections
attached hereto as Exhibit A.

                  Additional  prepayments  of principal and interest can be made
without penalty.  Moreover, the Partnership will be required to furnish the Bank
with annual and monthly financial  statements each year, and maintain liability,
hazard and other insurance acceptable to the Bank.

                  Borrowings under the Loan Agreement will be secured 80% by the
Limited  Partner  Guaranties  and by a first and prior lien on all  existing and
after acquired assets of the Partnership,  including the Lithotripsy Systems and
the Partnership's  accounts receivable.  The Loan will also be guaranteed 20% by
the General  Partner.  Except to the extent of their  interests  in  Partnership
assets,  the Limited  Partners will not be personally  liable for the Loan other
than pursuant to their Limited Partner Guaranties.  See "Terms of the Offering -
Guaranty  Arrangements."  The Loan Agreement will prohibit,  among other things,
(i) the creation of  additional  liens on the  Lithotripsy  Systems and (ii) the
sale or transfer of the  Lithotripsy  Systems without the written consent of the
Bank.

                  A default  by the  Partnership,  the  General  Partner  or the
Limited  Partners under the Loan or the Guaranties (or the guaranty given by the
General  Partner)  will  entitle  the  Bank to  exercise  any one or more of the
following  remedies:  (i) declare all  principal  payments and accrued  interest
immediately  due and payable;  (ii)  foreclose  on its security  interest in the
Partnership's  assets  (including the Lithotripsy  System and the  Partnership's
accounts  receivable);  and/or  (iii) seek  payment  directly  from the  Limited
Partners under the Guaranties.  Events of default include but are not limited to
the  following:  (i) default in the payment or  performance  of any  obligation,
covenant or liability contained or referred to in the Loan documents,  including
the  Guaranties,  unless  remedied to the  reasonable  satisfaction  of the Bank
within 30 days; (ii) any warranty, representation or statement made or furnished
to the  Bank  by or on  behalf  of  the  Partnership  or  any of its  guarantors
(including the Limited Partners,  and the General Partners) proving to have been
false in any  material  respect  when  made or  furnished;  (iii)  loss,  theft,
substantial  damage,  destruction,  sale  or  encumbrance  to or of  any  of the
collateral, or the making of any levy, seizure or attachment thereof or thereon,
which is not removed within 30 days; (iv) dissolution,  termination of existence
(or,  in the  case of an  individual  guarantor,  death),  insolvency,  business
failure,  appointment  of a receiver of any part of the property of,  assignment
for the benefit of creditors by, or the  commencement  of any  proceeding  under
bankruptcy or  insolvency  laws by or against the  Partnership  or any guarantor
which is not favorably terminated within 30 days; (v) the Partnership's  failure
to maintain its existence in good  standing  unless  remedied  within 30 days of
notice by the Bank;  (vi) the  assertion  or making of any  seizure,  vesting or
intervention  by or under authority of any government by which the management of
the Partnership is displaced of their authority in the conduct of their business
or their  business  is  curtailed;  and  (vii)  upon the  entry of any  monetary
judgment or the assessment and/or filing of any tax lien against the Partnership
or any guarantor or upon the issuance of any writ or  garnishment  or attachment
against  any  property  of,  debts  due or  rights  of the  Partnership  or such
guarantor to specifically  include the  commencement of any action or proceeding
to seize  monies of the  Partnership  or such  guarantor  on deposit in any bank
account with Bank, which is not removed or terminated  within 30 days.  However,
any default by any one or more of the  Partnership's  guarantors under the above
provisions,  will be an actionable  default only if one or more such  defaulting
guarantors either alone or in the aggregate  guarantees 25% or more of the Loan,
and  provided  further,  that  the Bank has not,  within  twelve  months  of the
occurrence  of such  guarantor's  default,  received,  accepted  and  approved a
substitute guaranty or guaranties from a party or parties acceptable to it in an
amount  greater  than or  equal to the  amount  of such  defaulting  guarantor's
guaranties,  or the  Partnership has not made a prepayment of the Loan principal
in an amount equal to the amount of the  defaulting  guarantor's  Guaranty.  The
Bank may also  accelerate the Loan if it should deem itself,  or its collateral,
insecure,  or the payment or performance  under the Loan impaired and may demand
additional  collateral  at any  time it  deems  the  Loan  to be  insufficiently
secured.  See the Loan  Commitment  attached as Appendix C, the form of Guaranty
Agreement  attached  as an  exhibit  to the Loan  Commitment,  and "Terms of the
Offering - Guaranty Arrangements."

                  Other Borrowings.  Subject to certain limitations set forth in
the  Loan  documents  and/or  the  Partnership  Agreement,  the  Partnership  is
permitted to incur  indebtedness  for any purpose and such  indebtedness  may be
secured by Partnership assets.  Additional indebtedness will be incurred only if
the General  Partner  expects that  Partnership  revenues will be sufficient for
repayment. See "Proposed Activities - Acquisition of Additional Assets."

                  It is expected that additional  Partnership  indebtedness,  if
any, will consist  primarily of borrowings from commercial  banks,  and advances
from suppliers and other  companies.  Although it is not expected to occur,  the
General Partner or any of its Affiliates may also make loans to the Partnership.
In such event,  neither the General Partner nor any such Affiliate will make any
loans to the  Partnership on terms and conditions less favorable than those that
the Partnership  could obtain from  unaffiliated  third parties or banks for the
same purposes (without reference to the General Partner's financial  abilities).
Any advances made by the General  Partner,  or an Affiliate,  to the Partnership
will not obligate the General Partner, any such Affiliate or any other Affiliate
of the  General  Partner,  to  make  future  advances  to the  Partnership.  The
Partnership  may not make loans to the General Partner or any of its Affiliates.
Borrowings  by the  Partnership  must be used  solely  for  the  benefit  of the
Partnership. See "Conflicts of Interest."

                  There can be no assurance that the Partnership will be able to
borrow  funds  (other  than  under  the  Loan)  on  terms  satisfactory  to  the
Partnership.  The  Partnership's  ability to borrow will depend in large part on
the success of its activities. Neither the General Partner nor its Affiliates is
obligated to guarantee or otherwise provide security for Partnership borrowings,
or lend funds directly to the Partnership, however, the General Partner reserves
the right to take such actions in order to provide  financing for the benefit of
the  Partnership.   Partnership  borrowings  will  be  repaid  from  Partnership
revenues,  thereby reducing the amounts available for Distributions and creating
the  risk  that  a  Limited   Partner's  tax  liability  on  his  share  of  the
Partnership's taxable income may be greater than the amounts distributed to him.
See "Risk Factors - Operating Risks - Partnership Limited Resources and Risks of
Leverage"  and "Risk  Factors - Tax Risks - Income in Excess of  Distributions."
While  the  General  Partner  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.  See  "Proposed  Activities - Funding For  Partnership
Activities"  and  the  Financial  Projections  attached  to this  Memorandum  as
Appendix A.

                  If in the future the General Partner  determines that it is in
the best  interest of the  Partnership  to acquire (i) one or more fixed base or
mobile Lithotripsy  Systems,  (ii) any other urological device or equipment,  so
long as such device has FDA premarket approval at the time it is acquired by the
Partnership,  and/or (iii) an interest in any business  entity that engages in a
urological  business  described  above,  the General  Partner has the  authority
(subject  to certain  limitations  set forth in the  Partnership  Agreement)  to
establish  reserves  or,  subject to certain  restrictions  in the Loan,  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.  As
provided in the  Partnership  Agreement,  the General  Partner may not incur any
single capital  expenditure,  any long-term debt or any single  borrowing of the
Partnership  during any  twelve-month  period in excess of $100,000  without the
prior approval of a Majority in Interest of the Limited  Partners.  In addition,
the consent of a Majority in Interest of the Limited  Partners is required prior
to the  Partnership  engaging in any Dilution  Offering to raise capital for the
acquisition of additional  assets.  See "Summary of the Partnership  Agreement -
Powers of the General Partner and Limited Partners' Voting Rights." See also the
form of Partnership  Agreement attached hereto as Appendix B. The acquisition of
such assets likely would result in higher  operating costs for the  Partnership.
The General Partner does not anticipate acquiring additional  Partnership assets
unless projected  Partnership Cash Flow or proceeds from a Dilution Offering are
sufficient  to  finance  such  acquisitions.  See  "Summary  of the  Partnership
Agreement - Dilution  Offerings." No Limited Partner would be personally  liable
on any  additional  Partnership  indebtedness  (other  than under his  Guaranty)
without such Limited Partner's prior written consent. There is no assurance that
additional financing would be available to the Partnership to acquire additional
assets or to fund any additional  working capital  requirements.  Any additional
borrowing by the Partnership will serve to increase the risks to the Partnership
associated  with  leverage,  as well as to  increase  the  risks  that cash from
operations will be  insufficient to fund the obligations  secured by the Limited
Partners' Guaranties.  Further, a default under any such loan could severely and
negatively  impact  the  Partnership.  See  "Risk  Factors -  Operating  Risks -
Partnership  Limited  Resources  and  Risks of  Leverage"  and  "Risk  Factors -
Operating Risks - Liability Under the Guaranty."

                  Management  Fee . Pursuant to the  Management  Agreement,  the
Management  Agent will contract with the Partnership to supervise and coordinate
the  management  and   administration  of  the  day-to-day   operations  of  the
Lithotripsy  Systems for a monthly fee equal to the greater of 7% of Partnership
Cash Flow per month or $8,000 per month  (beginning as of the Closing Date). See
"Compensation  and Reimbursement to the General Partner and its Affiliates." The
Management  Agent may, upon the approval of the General  Partner,  engage at the
Partnership's   expense  one  or  more  local   Medical   Directors  to  provide
consultation  regarding  patient needs and treatment.  All costs incurred by the
Management  Agent in performing  its duties under the  Management  Agreement and
costs under related  contracts will be the  responsibility  of, and will be paid
directly or reimbursed to it by, the  Partnership.  The Management  Agent is the
management  agent  for  various  affiliated   lithotripsy   enterprises.   As  a
consequence, many of the Management Agent's employees provide various management
and administrative services for numerous entities, including the Partnership. In
order to  properly  allocate  the costs of such  employees  and  other  overhead
expenses among the entities for which they provide services,  such costs will be
divided  among all the  entities  based  upon the  relative  number of  patients
treated by each. The General Partner  believes that the sharing of personnel and
other costs among various  entities  results in significant cost savings for the
Partnership.

                  Management Duties of the Management Agent. Investors are urged
to review  carefully  the  Management  Agreement,  the form of which is attached
hereto as Appendix  D. The  Management  Agent's  services  under the  Management
Agreement  generally  will  include  the  supervision  and  coordination  of any
necessary  lithotripsy training of the qualified  physicians,  arranging for the
continuing education of the qualified physicians in lithotripsy techniques,  the
provision of lithotripsy  related  services,  housekeeping,  laundry,  equipment
maintenance,  medical and office supply inventory and other incidental  services
necessary for efficient  operation of the  Lithotripsy  Systems.  The Management
Agent will also be responsible for implementing and overseeing the Partnership's
quality  assurance  and  outcome  analysis  programs.  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.  Except as otherwise  provided  below,  the  Management
Agent  will  also  employ  on behalf  of the  Partnership  certain  nonphysician
personnel  reasonably  necessary to staff and operate the  Lithotripsy  Systems,
including,    without    limitation,     drivers,    lithotripsy    technicians,
secretary/receptionists  and office  managers.  All such  personnel  will at all
times remain employees and the financial responsibility of the Partnership,  and
the  Management  Agent  may  increase  or  decrease  each  Lithotripsy  System's
personnel  to the  extent  the  Management  Agent  deems  it would  benefit  the
Partnership's  operations.  See  "Proposed  Activities - Employees and Benefits"
below.  The General Partner may contract to have the center or hospital  provide
most  of  the  necessary   nonphysician  personnel  to  staff  and  operate  the
Lithotripsy   Systems,   in  which  case  such   personnel   would   remain  the
responsibility of the treatment center or hospital.  The Financial  Projections,
attached  hereto as  Appendix A,  assume  that the  Partnership  will engage two
drivers and two  technicians  and that the hospitals  will provide all supplies.
The Management  Agent  generally  will also be  responsible  for the billing and
collection of amounts owed to the  Partnership,  the  scheduling of patients and
coordinating   professional   urological   services   for   treatments   on  the
Partnership's lithotripters.

                  The Management Agent's engagement by the Partnership under the
Management  Agreement  will be as an  independent  contractor,  and  neither the
Partnership  nor its Limited  Partners will have any authority or control of the
method or manner in which the General  Partner  performs its duties  pursuant to
the Management Agreement. The Management Agreement vests in the Management Agent
full operational  control of all aspects of management and administration of the
Lithotripsy Systems. The term of the Management Agreement is for five years, and
will be automatically  renewed for up to three successive five-year terms unless
terminated by the Partnership or the Management Agent.

                  The  Management   Agent,  upon  consulting  with  the  General
Partner,  may  appoint  one or more  local  Medical  Director(s)  and a  Medical
Advisory Board made up of  representative  local physicians.  If appointed,  the
Management  Agent will consult with the Medical Advisory Board from time to time
on  such  matters  as  instituting  its  detailed  quality  assurance   program,
utilization review, outcome analysis and patient scheduling.

                  Except as otherwise  provided below, the Management Agent will
be responsible for  maintaining on behalf of the Partnership  complete books and
records  for the  management  of the  Lithotripsy  Systems.  If the  Lithotripsy
Systems  are  located at a hospital or other  health  care  center,  the General
Partner may  contract to have such  hospital  or center be  responsible  for the
Lithotripsy  Systems'  books and records and to provide  billing and  collection
services.  There can be no assurance that the  Management  Agent will be able to
contract with such entities in the manner as outlined above.

                  The Management  Agreement provides that all funds furnished by
the Partnership as working capital  together with all Partnership  revenues will
be accounted  for  separately.  Such funds will be  disbursed by the  Management
Agent on behalf  of the  Partnership  to pay all  expenses  associated  with the
operation  of  the  Lithotripsy  Systems,  including,  without  limitation,  the
management  fee payable to the Management  Agent under the Management  Agreement
and  reimbursements to the Management Agent for all of its  out-of-pocket  costs
incurred in the operation of the Lithotripsy  Systems.  The Management Agent and
its Affiliates will receive no compensation under the Management Agreement other
than its management fee and reimbursement for its out-of-pocket  costs in-curred
in ful-filling its re-spon-si-bilities under the Management Agreement.

                  Consultation   and  Education.   Pursuant  to  the  Management
Agreement, personnel of the Management Agent will provide on-site supervision at
the  Lithotripsy  Systems  in an  advisory  capacity  until  such  time  as  the
Management Agent determines that they are no longer required.  The local Medical
Director will communicate  regularly with officers of the Management  Agent, who
will remain  available for consultation by phone and who plan to regularly visit
the Lithotripsy Systems.

                  To ensure that the  Partnership  remains advised of the latest
technological  developments  in the field of lithotripsy,  the Management  Agent
(pursuant to the Management  Agreement) will arrange for continuing education of
the  qualified  physicians  who use the  lithotripters  to treat  patients.  The
Management Agent will continually monitor progress in technological developments
in renal  lithotripsy and advise the  Partnership  regarding the nature of these
developments and its recommended course of action.

                  Employees and Benefits.  All active full-time employees of the
Partnership are eligible to participate in Prime's benefit plans. At the cost of
the Partnership,  Prime provides group medical,  dental,  long-term  disability,
accidental death and dismemberment and life insurance benefits.  The Partnership
likely will also provide paid holidays,  sick leave,  and vacation  benefits and
other miscellaneous benefits including bereavement, military reserves, jury duty
and educational assistance benefits.

                  Investors  are urged to review the Financial  Projections  and
assumptions  thereto attached as Appendix A. The Financial  Projections  contain
data  supplied by the General  Partner that is based upon the General  Partner's
estimate  of  reasonable,  but not  necessarily  the  most  likely,  results  of
Partnership  operations.  The data in the  Financial  Projections  includes  the
General  Partner's  estimate  of  projected  Lithotripsy  Systems  expenses  and
revenues,  and also assumptions  regarding the anticipated number of lithotripsy
procedures  that will be  performed  with the  Lithotripsy  Systems  each  year.
Because the Financial  Projections represent a prediction of future events based
on certain  assumptions that may or may not occur,  Investors should not rely on
the Financial  Projections  as an indication of the actual  results that will be
attained.  Some  assumptions  inevitably will not materialize and  unanticipated
events  and  circumstances  may occur  subsequent  to the date of the  Financial
Projections.  The actual  results  achieved  during  the  period  covered by the
Financial  Projections will vary from the projected results and these variations
may be  material.  See  "Risk  Factors  - Other  Investment  Risks  -  Financial
Projections" and the Financial  Projections (with  accompanying  assumptions and
notes) attached hereto as Appendix A.

                  The  following  table  sets  forth  the funds  expected  to be
available to the  Partnership  from this  Offering  and other  sources and their
anticipated and estimated uses.

Sources of Funds

Limited Partners Contribution (1)..................$200,000           (23.59%)
General Partner Contribution (1)                     50,000            (5.90%)
Loan (2)                                            597,840           (70.51%)
                                                    -------           --------
         TOTAL SOURCES            ..................$847,840          (100.00%)
                                                    ========          =========
Application of Funds

One Modulith(R)SLX-T with Accessories (2)...........$400,000           (47.18%)



Notes to Sources and Applications of Funds Table

(1) Assumes 80 Units are  purchased by qualified  Investors.  In its capacity as
general partner of the Partnership,  the General Partner will contribute cash to
the  Partnership in an amount equal to 20% of the total cash  contributed to the
Partnership  by the Partners (up to  $50,000).  See "Summary of the  Partnership
Agreement - Capital Contribution of the General Partner."

                  (2)   Represents  the  proceeds   available   under  the  Loan
Commitment  to  acquire  (i)  one new  Storz  Modulith(R)  SLX-T  extracorporeal
shock-wave  lithotripter and accessories  (estimated at $400,000),  (ii) one new
mobile  transport  vehicle  (estimated at $70,000),  (iii) one used Dornier HM-3
Model extracorporeal  shock-wave  lithotripter  (estimated at $60,000), (iv) one
used trailer to house the Dornier HM-3 lithotripter  (estimated at $21,500), (v)
one used  tractor  truck to  transport  the trailer  housing  the  Dornier  HM-3
lithotripter  (estimated  at $12,500)  and (vi)  applicable  state sales and use
taxes on such  equipment  (estimated  at $33,840).  See  "Proposed  Activities -
Acquisition of the Lithotripsy Systems."

                  (3)  Upon  the  Closing  of  the  Offering,   the  Partnership
anticipates  purchasing  from the General  Partner a used Dornier HM-3,  Calumet
Coach  trailer and  tractor  truck.  Servicetrends,  Inc.  ("Servicetrends"),  a
lithotripter   service  company  and  an  experienced  dealer  of  used  medical
technology  and  equipment,  has valued the  Dornier  HM-3 to be acquired by the
Partnership at $60,000. AK Associates,  L.L.C. ("AK Associates"), a manufacturer
and  refurbisher  of medical  transport  vehicles,  has appraised the trailer at
$21,500,  and Ronnie Burns Ford, Inc., a tractor truck vendor, has appraised the
General  Partner's  tractor  truck  at  $12,500.   Investors  should  note  that
Servicetrends,  AK  Associates  and the  tractor  truck  dealer  are not  expert
appraisers.  Servicetrends  provides  maintenance  to many  medical  enterprises
affiliated  with the General  Partner and AK  Associates  is an Affiliate of the
General Partner, factors which may undermine their independence. Based upon such
estimates and the General Partner's own experience, the General Partner believes
that $94,000 is the fair value of the Dornier HM-3, trailer,  and tractor-truck;
however, there has been no formal valuation, and there is no assurance that such
$94,000 price accurately reflects the value of such equipment. See "Compensation
and Reimbursement to the General Partner and its Affiliates."

                  (4) As of the date of this  Memorandum,  the State of Kentucky
has a maximum 6.0% sales and use tax on the purchases of equipment including the
Lithotripsy  Systems.  The  total  amount  of the  tax on  the  purchase  of the
Lithotripsy  Systems  (estimated at $33,840) will be paid out of the proceeds of
the Loan.

                  (5) Represents the fair market value of the Service  Contracts
as of the date of the  Memorandum as determined  by an  independent  third party
valuation firm; provided, however, on the anticipated Closing Date, such Service
Contracts  will have no aggregate  fair market value as  determined  by the same
independent  third party  valuation  firm.  See  "Proposed  Activities - Service
Contracts."

                  (6) This amount  includes  the General  Partner 's estimate of
(i) legal and accounting  costs  associated  with  organizing  the  Partnership,
preparing  the  Partnership  Agreement,   the  Management  Agreement  and  other
ancillary Partnership documents, and (ii) all out-of-pocket expenses incurred by
the General Partner and its Affiliates  associated with the initial  start-up of
the Partnership's operations.

                  (7) Includes $20,000 in commissions payable to the Sales Agent
(assuming 80 Units are sold to purchasers  other than the General Partner or its
Affiliates),  reimbursement  of  $10,000  to the Sales  Agent for  out-of-pocket
expenses incurred in selling the Units and $21,000 in legal and accounting costs
associated with the preparation of this Memorandum (including costs attributable
to the valuation of the Service Contracts as discussed in note (5) above).

                  (8) The amount of working  capital and reserve  primarily will
be a function of the amount of funds remaining after all other expenses,  listed
immediately  above, are paid. The reserve may be used to fund any  unanticipated
start-up  cost  overruns.  It is  anticipated  (subject  to the  approval of the
Partnership's  Medical  Advisory  Board) that as soon as practicable  during the
first year of  Partnership  operations,  the  Partnership  will use a portion of
Partnership  working capital,  Cash Flow and/or reserves  (estimated at $60,000)
and contract with  Servicetrends and AK Associates to refurbish the used Dornier
HM-3 and used Calumet Coach trailer, respectively. Such refurbishments,  if any,
will only occur after the Partnership's  Modulith(R) SLX-T is placed in service,
and therefore, the General Partner does not anticipate that the Partnership will
need to rent a "loaner"  Lithotripsy System during the time the Dornier HM-3 and
trailer are being refurbished.

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

                  1.  Organizational  Expenses.  The  General  Partner  will  be
reimbursed by the Partnership for all its  out-of-pocket  costs  associated with
the organization of the Partnership and all expenses of this Offering.  No other
fees or  compensation  will be payable to the General Partner or its Affiliates,
except for the Management Fee and related reimbursements  (described below), for
managing the Partnership.

                  2. Management Fee. Pursuant to the Management  Agreement,  the
Management  Agent will contract 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 7% of  Partnership  Cash Flow
per month or $8,000 per month.  All costs  incurred by the  Management  Agent in
performing its duties under the Management  Agreement will be the responsibility
of, and will be paid directly by, the  Partnership.  The Management Agent is the
management agent for various affiliated  lithotripsy entities. As a consequence,
many  of  the  Management  Agent's  employees  provide  various  management  and
administrative  services for numerous  entities,  including the Partnership.  In
order to properly  allocate the costs of such employees and other overhead among
the entities for which it provides  services,  such costs will be divided  among
all the  entities  based upon the  relative  number of patients  treated by each
entity.  The General  Partner  believes that the sharing of personnel  costs and
other overhead  expenses  among various  entities  results in significant  costs
savings  for the  Partnership.  Investors  are  urged to  review  carefully  the
Management  Agreement,  the form of which is attached  hereto as Appendix D. The
management  fee for any given month will be payable on or before the 30th day of
the next  succeeding  month and will begin to accrue  immediately  following the
Closing Date. The term of the Management  Agreement is for five years,  and will
be  automatically  renewed for up to three  successive  five-year  terms  unless
terminated by the Partnership or the Management  Agent. The Management Agent and
the General  Partner  will be  reimbursed  by the  Partnership  for all of their
out-of-pocket  costs  associated  with the operation of the  Partnership and the
Lithotripsy  Systems,  and the General  Partner will also be reimbursed  for all
expenses related to the organization of the Partnership and this Offering.

                  3.  Partnership  Distributions.  In its  capacity  as  general
partner of the Partnership, the General Partner is entitled to its distributable
share (20%) of Partnership Cash Flow, Partnership Sales Proceeds and Partnership
Refinancing  Proceeds  as  provided by the  Partnership  Agreement.  The General
Partner  and its  Affiliates  will also  receive  Partnership  Distributions  in
respect of any Units they own. The amount of such  Distributions  to the General
Partner,  if any,  cannot  be  determined  at this  time.  See  "Summary  of the
Partnership  Agreement  - Profits,  Losses  and  Distributions,"  the  Financial
Projections  attached as Appendix A and the Partnership  Agreement,  the form of
which is  attached  as Appendix  B. In  addition,  whereas the Limited  Partners
cannot  participate  in any future  Dilution  Offering  to avoid  dilution,  the
General Partner may make capital  contributions  or acquire  additional  limited
partnership  interests  in a  Dilution  Offering  in  order  to  avoid  economic
dilution. See "Summary of the Partnership Agreement - Dilution Offerings."

                  4.  Sales  Commissions.   The  Sales  Agent,  a  wholly  owned
subsidiary  of  Prime,  has  entered  into a Sales  Agency  Agreement  with  the
Partnership  pursuant to which the Sales Agent has agreed to sell the Units on a
"best efforts" all or none basis.  As compensation  for its services,  the Sales
Agent will receive a commission  equal to $250 for each Unit sold. No commission
is payable to the Sales Agent unless all Units are sold as provided  herein.  If
the  Offering  is  successful,  the Sales Agent will also be  reimbursed  by the
Partnership for its out-of-pocket expenses associated with its sale of the Units
in an amount not to exceed $10,000. See "Plan of Distribution" and "Conflicts of
Interest."

                  5.  Acquisition of Dornier HM-3. The  Partnership  anticipates
purchasing  from the General Partner a used Dornier HM-3  lithotripter,  trailer
and  tractor-truck.  Servicetrends has valued the Dornier HM-3 to be acquired by
the Partnership at $60,000.  AK Associates has appraised the trailer at $21,000,
and Ronnie Burns Ford,  Inc., a tractor truck vendor,  has appraised the General
Partner's tractor truck at $12,500. Investors should note that Servicetrends, AK
Associates and the tractor truck dealer are not expert appraisers. Servicetrends
provides  maintenance to many medical  enterprises  affiliated  with the General
Partner and AK Associates is an Affiliate of the General Partner,  factors which
may  undermine  their  independence.  Based upon such  estimates and the General
Partner's own experience,  the General Partner believes that $94,000 is the fair
value of the Dornier HM-3, trailer, and tractor-truck;  however,  there has been
no  formal  valuation,  and  there  is no  assurance  that  such  $94,000  price
accurately reflects the value of such equipment.

                  6. Loans.  The  General  Partner or its  Affiliates  will also
receive  interest  on  loans,  if any,  made by  them  to the  Partnership.  See
"Conflicts of Interest."  Neither the General  Partner nor any of its Affiliates
are,  however,  obligated  to make loans to the  Partnership.  While the General
Partner  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.

                  7.  Miscellaneous.  The  Partnership  may  contract  with  the
General Partner or its Affiliates to render 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. If the Partnership's Lithotripsy
Systems experience  substantial downtime for unexpected maintenance and repairs,
the  General  Partner  or its  Affiliates  may  provide  a loaner  system to the
Partnership for a reasonable fee. The General  Partner  anticipates  (subject to
the approval of the Partnership's  Medical Advisory Board) that during the first
year  of  Partnership   operations,   the  Partnership  will  contract  with  AK
Associates,  L.L.C., an Affiliate of the General Partner,  to refurbish the used
Calumet Coach  trailer.  See "Proposed  Activities - Acquisition  of Lithotripsy
Systems - Used Equipment."

                  General.  The  General  Partner  of the  Partnership  is Prime
Lithotripter  Operations,  Inc., a New York corporation  originally formed under
the name DCG Tape Scan,  Inc.  ("DCG") on November  16, 1981.  DCG  subsequently
changed its name to Satellite  EKG Systems,  Inc.  ("Satellite")  in March 1982.
Prime indirectly acquired all of the outstanding stock of Satellite in July 1993
and subsequently changed the name of Satellite to Prime Lithotripter Operations,
Inc. in January 1994. The principal  executive  office of the General Partner is
located at 1301  Capital of Texas  Highway,  Suite C-300,  Austin,  Texas 78746,
(512)  328-2892.  The General  Partner also has an office at 1900 Church Street,
Suite 101, Nashville, Tennessee 37203, (800) 699-8190. The primary assets of the
General Partner are used mobile  lithotripters and numerous lithotripsy services
agreements  with  hospitals  and other  treatment  centers  located in  Alabama,
Arkansas,  Kentucky and Tennessee. The General Partner has substantial potential
financial exposure as a guarantor of certain Prime indebtedness.

                  Management.  The  following  table  sets  forth  the  name and
respective  positions  of the  individuals  serving as  executive  officers  and
directors of the General  Partner many of whom also serve as executive  officers
of Prime.

                           Name                               Office

                  Joseph Jenkins, M.D.                    President
                  Thomas J. Driber, Ph.D.                 Vice President
                  Cheryl Williams                         Treasurer and Director
                  James D. Clark                          Secretary

     The General Partner itself is managed by its sole Director,  Ms.  Williams.
Descriptions  of the  background of the key executive  officers and directors of
the General Partner are set forth in "The Management Agent" below.




                  The  Management  Agent of the  Partnership  is  Lithotripters,
Inc., a North  Carolina  corporation  formed in November 1987 for the purpose of
sponsoring  and managing  medical  service  limited  partnerships  in the United
States ("Litho").  Litho became a wholly-owned  subsidiary of Prime on April 26,
1996. Litho is an Affiliate of the General Partner.  Litho's assets are illiquid
in nature.  The primary  assets of Litho are  partnership  interests  in over 20
lithotripsy limited partnerships. The Management Agent has substantial potential
financial  exposure as a guarantor  of certain  Prime  indebtedness.  Additional
information about Litho appears below.

                  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 shareholders of Litho prior to its acquisition by Prime
and/or are current shareholders and/or management personnel of Prime.

                           Name                         Office

                  Joseph Jenkins, M.D.        President, Chief Executive Officer
                                                 and Director
                  Kenneth S. Shifrin          Director
                  W. Alan Terry               Vice President
                  Cheryl Williams             Vice President and Director
                  Thomas J. Driber, Ph.D.     Vice President
                  David Vela, M.D.            Vice President
                  Stan Johnson                Vice President
                  Philip J. Gallina           Secretary and Treasurer
                  James D. Clark              Assistant Secretary

     Supervision  of  the  day-to-day   management  and  administration  of  the
Partnership will be the  responsibility  of the Management Agent. The Management
Agent itself is managed by a  three-member  Board of  Directors  composed of Mr.
Shifrin, Ms. Williams and Dr. Jenkins.

                  Set  forth  below  are  the  names  and  descriptions  of  the
background of the key executive officers and directors of the Management Agent.

     Joseph Jenkins,  M.D. has been President and Chief Executive Officer of the
Management Agent since April 1996 and is President of the General Partner.  From
May 1990 until December 1991, Dr. Jenkins was a Vice President of the Management
Agent and  previously  practiced  urology in  Washington,  North  Carolina.  Dr.
Jenkins was recently elected to the Board of Directors of the Management  Agent.
Dr.  Jenkins  is a  board  certified  urologist  and  is a  founding  member,  a
past-president and currently a Director of the American Lithotripsy Society.

                  Kenneth  S.  Shifrin  has been  Chairman  of the  Board  and a
Director  of  Prime  since  October  1989  and was  elected  a  Director  of the
Management Agent following Prime's  acquisition of all of the Management Agent's
stock.  Mr.  Shifrin  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.

                  W. Alan Terry was recently  appointed a Vice  President of the
Management  Agent and served as the Chief  Financial  Officer of the  Management
Agent from 1991 to 1998. In August,  1986,  Mr. Terry 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 the  Management  Agent and served in that capacity  until
April 1996.

     Cheryl  Williams is the Treasurer  and Director of the General  Partner and
has been Chief Financial Officer, Vice  President-Finance and Secretary of Prime
since October 1989.  Ms.  Williams is also a Vice  President and Director of the
Management  Agent and was  Controller  of Fairchild  Aircraft  Corporation  from
August 1988 to October 1989. From 1985 to 1988, Ms. Williams served as the Chief
Financial Officer of APS Systems, Inc., a wholly-owned subsidiary of APS.

     Thomas J. Driber,  Ph.D. is a Vice President of the General Partner and was
recently  appointed a Vice President of the Management  Agent.  Dr. Driber 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,  Dr.  Driber 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. Dr.
Driber  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. Dr. Driber  received a Ph.D. in  Medical/Social  Change
Theory,   Concentration:   Ambulatory   Medical  Delivery  Systems  from  Walden
University, Institute for Advanced Studies in Minneapolis, Minnesota in 1984.

                  Stan  Johnson was recently  appointed a Vice  President of the
Management  Agent and has been a Vice  President  of Prime and  President of Sun
Medical  Technologies,  Inc. ("Sun") (an affiliate of the General Partner) since
November 1995. Mr. Johnson was the Chief  Financial  Officer of Sun from 1990 to
1995.

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

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

     James D. Clark is the Secretary of the General  Partner and recently became
Assistant Secretary of the Management Agent. Mr. Clark has served as Tax Manager
of Prime since January 1998 and is a Certified Public Accountant in Texas. Prior
to joining Prime,  Mr. Clark was Controller for ERISA  Administrative  Services,
Inc.



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

                  The Management  Agent and the Sales Agent,  both Affiliates of
the General  Partner,  will  receive  management  fees and  broker-dealer  sales
commissions,  respectively,  in connection  with the business  operations of the
Part-ner-ship  and the sale of the Units that will be paid regardless of whether
any sums are distributed to Limited  Partners.  None of such fees,  compensation
and benefits has been determined by arm's length negotiations.  In addition, the
Partnership  may contract with the General  Partner or its  Affiliates to render
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.  The General Partner or its Affiliates  will also receive  interest on
loans, if any, they make to the  Partnership.  In addition,  upon the Closing of
the Offering it is anticipated that the Partnership will purchase a used Dornier
HM-3, a trailer and a tractor truck from the General Partner.  See "Compensation
and  Reimbursement  to the General  Partner and its  Affiliates"  and  "Proposed
Activities - Acquisition of the Lithotripsy Systems."

                   The General Partner 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 the General Partner and the Management Agent
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." The
General  Partner  believes  it and  its  Affiliates  together,  have  sufficient
resources  to be capable of fully  discharging  the  General  Partner's  and its
Affiliates'  responsibilities to the Part-ner-ship.  The General Partner 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.  The General Partner,  its Affiliates  (including  affiliated
limited partnerships and other entities),  and their employees engage in medical
related service activities for their own accounts.  See "Prior  Activities." The
General Partner may serve as a general partner and/or  management agent 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.  See "Competition" and "Prior Activities." The
General Partner and its Affiliates are, however, obligated to act in a fiduciary
manner with respect to the management of the  Partnership  and any other medical
enterprise in which they serve in a management  capacity.  In the event an issue
arises as to whether a particular lithotripsy service opportunity in or near the
Service  Area  belongs  to the  Partnership,  the  General  Partner  or  another
Affiliate,  the General  Partner will in good faith attempt to resolve the issue
in a manner that it believes to be in or not opposed to the best interest of the
Partnership.  Notwithstanding the foregoing,  no assurance can be given that one
or more limited partners of such Affiliates or the Limited Partners  themselves,
may not  challenge  the  decision of the General  Partner on  fiduciary or other
grounds.  To the extent the General Partner or its Affiliates  purchase Units in
the Offering,  they will be able to effect any vote on matters requiring Limited
Partner approval. See "Summary of the Partnership Agreement."

     The Sales Agent is MedTech Investments,  Inc., which is an Affiliate of the
General  Partner.  Because of the Sales  Agent's  affiliation  with the  General
Partner,  there  are  conflicts  in the  Sales  Agent's  performance  of its due
diligence  responsibilities  under the  federal  securities  laws.  See "Plan of
Distribution."

                   The   interests  of  the  Limited   Partners  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 the  Part-ner-ship  were  retained by the General
Partner and have in the past performed and are expected in the future to perform
similar services for the General Partner and its Affiliates.

                  The 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 the General Partner should
consult with their counsel.

                  Under the Partnership  Agreement,  the General Partner and its
Affiliates will have no liability to the Part-ner-ship or to any Partner for any
loss suffered by the Part-ner-ship  that arises out of any action or inaction of
the General  Partner or its Affiliates if the General Partner or its Affiliates,
in good faith,  determined  that such course of conduct was in the best interest
of the  Part-ner-ship  and such  course  of  conduct  did not  constitute  gross
negligence  or willful  misconduct  of the  General  Partner or its  Affiliates.
Accordingly, Limited Partners will have a more limited right of action than they
otherwise  would  have  absent  the  limitations  set  forth in the  Partnership
Agreement.  The General  Partner and its  Affiliates  will be indemnified by the
Part-ner-ship 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 the General Partner 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   fixed-site  and  mobile   extracorporeal
shock-wave lithotripters are currently operating in and around the Service Area.
The following  discussion  identifies  the existing  competitors  in the Service
Area, to the best knowledge of the General Partner.

Affiliated Competition

                  The  General  Partner  directly  provides  mobile  lithotripsy
services in the Service Area using a Dornier HM-3  lithotripter  and pursuant to
certain  Service  Contracts at:  Owensboro  Mercy  Medical  Center in Owensboro;
Lourdes Hospital in Paducah;  Regional  Medical Center in  Madisonville;  Jennie
Stuart Medical Center in Hopkinsville;  Community  United Methodist  Hospital in
Henderson;  and Greenview Hospital in Bowling Green. The General Partner intends
to terminate  these  contracts or to assign these  contracts to the  Partnership
after the Partnership commences operations.  If the General Partner is unable to
terminate or assign one or more of the existing  Service  Contracts prior to the
commencement  of Partnership  operations,  the General  Partner may be providing
lithotripsy  services in direct  competition with the Partnership until all such
related  contracts  to provide  lithotripsy  services in the Service Area can be
terminated.  Generally,  the arrangements in the Service Area terminate by their
own terms or may be terminated by written  notice  provided 90 days prior to the
anniversary  date of the contract.  Assuming the General Partner provides timely
notice, all of its contracts in the Service Area will be terminated by August 1,
2001.

                  Several   Affiliates  of  the  General  Partner  also  provide
services  near the Service Area.  Kentucky I  Lithotripsy,  LLC provides  mobile
lithotripsy  services  in central and eastern  Kentucky.  Indiana  Lithotripters
Limited  Partnership I provides mobile lithotripsy  services in southern Indiana
and treats patients who are residents of northern Kentucky.  The General Partner
operates several Dornier HM-3  lithotripters  in Tennessee.  Other Affiliates of
the General  Partner are  planning  and  conducting  other  limited  partnership
offerings that would operate lithotripters in other states.

Other Competition

                  Lithotripsy  services are available at Deaconess  Hospital and
St. Mary's Medical Center in Evansville,  Indiana;  to the best knowledge of the
General  Partner,  these  services are used by  physicians  from  Kentucky.  The
General Partner is aware that Healthtronics and Medispect,  two manufacturers of
lithotripters, are demonstrating their machines in the Service Area; indeed, the
General Partner understands that Healthtronics has temporarily  installed a unit
in a hospital in the Service Area in an effort to attract business.

                  There may be other  existing or planned  fixed-base  or mobile
lithotripsy  services in or near the Service  Area which will  directly  compete
with the  Partnership's  Lithotripsy  Systems,  but the  General  Partner is not
familiar with these other competitors or potential  competitors.  It is possible
that  some or all of the  Partnership'  s  competitors  are  physician-owned  or
include  physicians  among  their  owners.  The  General  Partner  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  "Proposed
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.  The General Partner believes
these machines have a competitive disadvantage because such machines are capable
of  treating  stones  only in the  ureter.  The  General  Partner  believes  the
Lithotripsy  Systems can be used on stones in  locations  other than the ureter.
See "Proposed 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.

                  No  assurances  can be given  that new  competing  lithotripsy
operations  will not commence  operations in the future or that  innovations  in
lithotripters or other treatment  methods for kidney stone disease will not make
the Lithotripsy Systems  competitively  obsolete.  See "Risk Factors - Operating
Risk -  Technological  Obsolescence."  In addition,  the General Partner and its
Affiliates are not prohibited from engaging in lithotripsy ventures unassociated
with the Partnership that may compete with the Partnership.

                  The  manufacturers  of the  Lithotripsy  Systems  are under no
obligation  to the General  Partner or the  Partnership  to refrain from selling
their 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 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 the General Partner.

Federal Regulation

                  The Partnership,  the General Partner 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,  the  General  Partner 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. The General Partner believes
the lower  reimbursement rate will be implemented in the latter half of the year
2000. In some cases,  reimbursement rates payable to the General Partner and its
Affiliates are less than the proposed HCFA rate.

                  The  General  Partner  retains  the  discretion  to  make  the
Lithotripsy  Systems 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 the General
Partner.

                  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 - 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  Lithotripsy  Systems.  The General Partner
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  program in Kentucky is 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
Kentucky  Medicaid  program  currently  provides  reimbursement  for lithotripsy
services.   The   federal   Personal   Responsibility   and   Work   Opportunity
Reconciliation  Act of 1996 requires  state health  plans,  such as the Kentucky
Medicaid  program,  to limit Medicaid  coverage for certain  otherwise  eligible
persons.  The General  Partner  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.  The General  Partner does not know
whether the Kentucky Medicaid program has taken or will 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) ("Stark 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 Stark II.

                  Following  the passage of the Stark II  legislation  effective
January 1, 1995, the General Partner determined that the statute would not apply
to the type of lithotripsy services to be provided by the Partnership.  Stark 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 Stark II.

                  This  interpretation   adopted  by  the  General  Partner  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 Stark 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 Stark II statute (the "Proposed  Stark II  Regulations").  The
Proposed Stark II Regulations and HCFA's accompanying commentary would apply the
physician referral  prohibitions of Stark II to the Partnership's  contracts for
provision of the Lithotripsy  Systems.  Under the Proposed Stark 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.  The General  Partner cannot predict when final  regulations
will be issued or the substance of the final  regulations,  but the interpretive
provisions of the Proposed Stark II Regulations  may be viewed as HCFA's interim
position  until  final   regulations  are  issued.  If  the  Proposed  Stark  II
Regulations  are adopted as final (or,  in the  meantime,  if a reviewing  court
adopted their reasoning as the proper  interpretations of the Stark II statute),
then the  Partnership's  operations would not be in compliance with Stark 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 Stark 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.  The  General  Partner  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,  the General  Partner will continue to carefully
review the Proposed Stark II Regulations and accompanying  HCFA commentary,  and
explore other  alternative  plans of operations that would allow the Partnership
to operate in compliance with Stark II and its final regulations.

                  HCFA's  adoption of the current  Proposed Stark II Regulations
as final or a  reviewing  court's  interpretation  of the  Stark II  statute  in
reliance on the Proposed  Stark 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 Stark 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 the General  Partner is
unable to  devise a plan  pursuant  to which  the  Partnership  may  operate  in
compliance  with  Stark II and its final  regulations,  the  General  Partner 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  Stark II  self-referral  prohibition.  One  (H.R.  2650)  was
introduced  by  Representative  Stark,  the other (H.R.  2651) by House Ways and
Means health subcommittee chair Representative Bill Thomas. The Stark bill would
modify,  and the  Thomas  bill  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 Stark II on this Offering discussed above.

                  Fraud 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 v. Greber,  760 F.2d 68 (1985). The Greber case
was followed by the United States Court of Appeals for the Ninth Circuit, United
States v. Kats, 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  Lithotripsy  Systems 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 Lithotripsy  Systems; 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.  The General  Partner 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. The General Partner 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.  The
General  Partner has not  requested  the OIG to review this Offering and, to the
best knowledge of the General  Partner,  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 the General  Partner's  view of valid business
reasons  to engage in this  transaction,  form the basis in part of the  General
Partner's belief that this Offering is appropriate.

                  The  General  Partner  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).  The General
Partner 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,  the General Partner,  officers and
directors of the General  Partner,  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
Stark 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 Stark II law were
discussed above in the disclosures  related to self-referral  restrictions.  The
General Partner 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 Stark II and the  Anti-Kickback  laws
discussed  above. In the event that legislation is enacted which, in the opinion
of  the  General   Partner,   would  adversely   affect  the  operation  of  the
Partnership's  business, the General Partner 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 the
General  Partner,  to  determine  whether they posed an  unreasonable  threat to
competition  in the health  care  field.  The  General  Partner  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, the General Partner cannot
assure that the FTC will not  investigate  issues  arising from  physician-owned
health care  facilities in the future with respect to the General Partner 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,  the General Partner
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.

                  Kentucky requires a certificate of need ("CON") to establish a
health  facility,  to make a  substantial  change  in a  health  service,  or to
purchase any capital  equipment  which costs more than  $1,655,678.  The General
Partner has sought and received a written  opinion from the  Certificate of Need
Office of the Kentucky  Cabinet for Health Services that no CON is necessary for
mobile lithotripsy  services similar to those discussed in this Offering so long
as the hospital  establishes  and provides the service;  the General Partner has
confirmed this opinion is the same for transportable  lithotripters  such as the
Storz  Modulith(R)  SLX-T. To ensure that the hospital  establishes and provides
the service,  contracting  hospitals will lease the Lithotripsy  Systems and pay
the Partnership for the use of the equipment;  the Partnership will not bill for
the services itself.

                  To  the  best   knowledge   of  the   General   Partner,   the
Partnership's mobile Dornier HM-3 must be licensed as a mobile health service by
the Division of Licensing  and  Regulation.  Licensure  requires a survey of the
Lithotripsy  Systems and approval of the policies and procedures  related to the
Lithotripsy  Systems.  The  General  Partner  does  not  believe  the  licensure
requirement  will prevent the Partnership from operating as planned in Kentucky.
The  Division  of  Licensing  and   Regulation   has  not   determined   whether
transportable lithotripters such as the Storz Modulith(R) SLX-T must be licensed
as a  mobile  health  service.  Given  that  the  procedures  performed  on  the
transportable  lithotripter  are performed within a hospital's  premises,  it is
possible the Division of Licensing  and  Regulation  would  conclude no separate
licensure is necessary for the lithotripter; however, no assurances can be given
in this  regard.  When a Storz  Modulith(R)  SLX-T  or any  other  transportable
lithotripter  is  purchased,  the  Partnership  will  seek to  comply  with  any
licensure requirements.

                  Regarding physician  referrals,  Kentucky law incorporates the
American  Medical  Association's  Code of Medical  Ethics  (discussed  above) in
requiring  physicians  to provide  services  at  entities  in which they have an
ownership  interest and to which they refer patients.  Therefore,  all physician
Limited  Partners who make referrals to the  Partnership's  Lithotripsy  Systems
must provide  services on the  lithotripter.  Kentucky law prohibits  physicians
from  receiving  any  compensation  in  exchange  for  referrals  of Medicare or
Medicaid  patients.  As the  Partnership  will not  compensate any physician for
referrals  (rather,  all  payments  to  physicians  are  based on  their  equity
interests in the Partnership), the General Partner believes this law will not be
violated.  The law also  provides  that any conduct  which  violates the federal
Stark II and  Anti-Kickback  laws  (discussed  above) shall be deemed to violate
Kentucky law.  Violations  are  punishable by criminal  penalties,  repayment of
Medicaid  reimbursements  which were in violation of the law and exclusion  from
the Kentucky Medicaid program.

                  Kentucky   requires   registration   of  x-ray   machines  and
certification of radiologic  technologists.  The Partnership will seek to comply
with  this  and all  other  regulatory  requirements  in order  to  operate  the
Lithotripsy Systems.  Further regulations may be imposed in Kentucky 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  Partnership's  Lithotripsy  Systems 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.

                  THE GENERAL  PARTNER 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 the General Partner,
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,  the General Partner
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 the General  Partner  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 the General  Partner's  Affiliates in the  lithotripsy
field should not be considered as indicative of the operating results obtainable
by the Partnership.

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

                  The Part-ner-ship was formed on November 24, 1999 as a limited
partnership under the laws of the State of Kentucky and has had no operations to
date. The Initial Limited Partner will with-draw from the Part-ner-ship upon the
admission  of  the  Limited  Partners  to the  Part-ner-ship  pursuant  to  this
Offering.  The  General  Partner  of the  Part-ner-ship  is  Prime  Lithotripter
Operations, Inc., a New York corporation. See "General Partner."

                  The Limited  Partners  will  acquire  their  interests  in the
Part-ner-ship  in the form of  Units.  Upon  the  successful  completion  of the
Offering,  each  purchaser  of the Units whose  subscription  is accepted by the
General Partner and the Bank will become a Limited Partner in the Part-ner-ship.
For each Unit  purchased,  a cash payment of $2,500 is required in addition to a
personal  guaranty of 1% of the Partnership 's obligations under the Loan (up to
a $5,978.40 principal guaranty obligation). The per Unit cash purchase price and
execution  and delivery of the  Guaranties  are both due upon  subscription.  No
Limited  Partner will have any  liability for the debts and  obligations  of the
Part-ner-ship by reason of being a Limited Partner,  except to the extent of (i)
his Capital Contribution, (ii) his liability under the Guaranty to which he is a
party,  (iii)  his  proportionate  share  of the  undistributed  profits  of the
Part-ner-ship,  and (iv) the amount of certain  Distributions  received from the
Partnership  as  provided  by the Act.  See "Risk  Factors -  Operating  Risks -
Liability  Under the  Guaranty"  and "Risk  Factors - Other  Investment  Risks -
Limited Partners' Obligation to Return Certain  Distributions." See also Form of
Legal  Opinion  of Womble  Carlyle  Sandridge  & Rice,  a  Professional  Limited
Liability Company, attached hereto as Appendix E.

                  The General Partner will contribute cash to the Partnership in
an  amount  equal  to  20%  (up  to  $50,000)  of all  cash  contributed  to the
Partnership.

                  The General Partner,  with the prior approval of a Majority in
Interest of the Limited  Partners,  has the authority to periodically  offer and
sell additional  limited  partnership  interests in the Partnership (a "Dilution
Offering")  to  local  investors  who  are  not  investors  in  the  Partnership
("Qualified Investors").  The primary purpose of a Dilution Offering is expected
to be (i) to raise additional capital for any legitimate Partnership purpose and
(ii) to assure  the  highest  quality  of patient  care by  admitting  qualified
investors to the  Partnership  who will be dedicated  and motivated as owners to
follow  the  Partnership's  treatment  protocol,  and  comply  with its  quality
assurance and outcome analysis programs.

                  Any  sale  of  limited  partnership  interests  in a  Dilution
Offering will result in  proportionate  dilution of the  Partnership  Percentage
Interests of the existing  Partners;  i.e., the interests of the General Partner
and of the Limited Partners in Partnership  allocations,  cash Distributions and
voting  rights  will be  proportionately  reduced  as a result  of a  successful
Dilution Offering. Limited Partners have no right to purchase additional limited
Partnership  interests  offered  by  the  Partnership  in a  Dilution  Offering;
however, the General Partner may elect, in its sole discretion,  to make capital
contributions or purchase additional limited partnership  interests offered in a
Dilution  Offering in order to avoid dilution.  Unless  otherwise  agreed by the
General  Partner  and a  Majority  in  Interest  of the  Limited  Partners,  any
additional limited partnership  interests offered in a Dilution Offering will be
sold for a price no lower than the  highest  cash price for which  proportionate
limited  partnership  interests in the Partnership  have been previously sold by
the Partnership.

                  Under  the terms of the  Partnership  Agreement,  the  General
Partner  with the prior  approval  of a  Majority  in  Interest  of the  Limited
Partners  may cause the  Partnership  to engage in certain  transactions  in the
future,   any  of  which   transactions  could  result  in  the  termination  or
reorganization of the Partnership and a partial or total dilution of all Limited
Partners' interests in the Partnership. The General Partner could propose a plan
providing for merger or  consolidation  of the Partnership  with another entity;
the sale of all or  substantially  all of the  Partnership's  assets to  another
entity;  or  any  other  reorganization,  reclassification  or  exchange  of the
Partnership Interests,  including without limitation the exchange of Partnership
Interests  for  equity  interests  in  another  entity  or  for  cash  or  other
consideration.  If such a plan were adopted,  the Limited Partners are obligated
by the terms of the Partnership Agreement to take or refrain from taking, as the
case  may  be,  such  actions  as  the  plan  may  provide,  including,  without
limitation,  executing such  instruments,  and providing such information as the
General  Partner  may  reasonably  request.  Any such plan may also result in an
amendment to the  Partnership  Agreement  or the  adoption of a new  partnership
agreement in connection with the merger of the  Partnership  with another entity
as provided in Section 362.546(5) of the Act. The plan may also provide that the
General  Partner and its affiliates  will receive fees for services  rendered in
connection  with  the  operation  of the  Partnership  or any  successor  entity
following  the  consummation  of the  transactions  described  in the plan,  and
neither the Partnership  nor the Limited  Partners will have any right by virtue
of the Partnership Agreement in the fees to be derived therefrom. Any securities
or other  consideration  to be distributed to the Partners  pursuant to any such
plan shall be distributed in the manner set forth in the  Partnership  Agreement
as though the Partnership  were being  liquidated.  Although the General Partner
will endeavor to keep the Limited Partners apprised of all relevant  information
regarding  the above  transactions,  the  General  Partner is not  obligated  to
provide such  information  in any  particular  manner  concerning  the risks and
effect of the proposed transaction;  the fairness of the proposed transaction to
the  Partnership  and the Limited  Partners;  comparative  distributions  to the
General  Partner  under  the  Partnership  operations  and  under  the  proposed
reorganization;   the  method  of  valuing  the   Partnership  in  the  proposed
transaction and the method of allocating value among various participants in the
proposed  transaction;  the  background,  reasons  for and  alternatives  to the
transaction;  and  conflicts of interest of the General  Partner in the proposed
reorganization.

                  In  December  1993,   Congress  passed  legislation   amending
portions of the  Securities  Exchange Act of 1934 to afford new  protections  to
limited  partnership  investors  in the context of certain  limited  partnership
mergers and  reorganizations  commonly  known as partnership  rollups.  The law,
known as the "Limited Partnership Rollup Reform Act of 1993" (the "Reform Act"),
became   effective  on  December  17,  1994,   and  applies  to  certain  rollup
transactions  proposed after such date. The Reform Act and the Rules promulgated
thereunder are applicable only to certain types of partnership rollups and, when
applicable, provide limited partners with the following protections:

     (i) allows and facilitates  communication  between limited  partners during
their consideration of a proposed rollup;

     (ii)  allows the  limited  partners  to obtain a list of the other  limited
partners involved in the rollup;

                  (iii)   disallows   the  practice  of   compensating   persons
         soliciting  the limited  partners'  approval of the rollup based on the
         number of approvals received;

                  (iv) requires  greater  disclosure to the limited  partners of
         the  terms  of the  rollup  and its  effects  on the  limited  partners
         including  (a) the  reason  for the  rollup  and  consideration  of the
         alternatives;  (b) the method of allocating  interests in the successor
         entity to the limited  partners  and why such  method was  chosen;  (c)
         comparative  information  including  changes in limited  partner voting
         rights, changes in distributions to the limited partners and changes in
         compensation to the general  partner;  (d) conflicts of interest of the
         general partner;  (e) changes in the  partnership's  business plan; (f)
         the valuation of the limited partnership interests; (g) any significant
         difference between the exchange values of the limited  partnerships and
         the  trading  price  of the  securities  to be  issued  in  the  rollup
         transaction;   (h)  the  risks  and  effects  of  the  proposed  rollup
         transaction;  (i) a statement by the general partner of the fairness of
         the rollup and the general partner' s basis for such opinion;  (j) full
         disclosure of any opinion (other than opinions of counsel) or appraisal
         received by the general partner related to the proposed transaction, or
         if no such opinion or appraisal was sought by the general  partner,  an
         explanation  of why no such opinion or appraisal is necessary to permit
         the  limited  partners  to  make an  informed  decision  regarding  the
         proposed  transaction;  (k)  the  rights  of the  limited  partners  to
         exercise  dissenters' or appraisal  rights or similar  rights;  (l) the
         method for allocating rollup  consideration to the limited partners and
         an explanation why such method was chosen;  and (m) tax consequences of
         the rollup; and

                  (v) requires a minimum 60 day offering period during which the
         limited  partners may  consider  the  proposed  rollup (or such shorter
         period as required by state law).

                  Further,  the Reform Act also  provides  that related Rules of
Fair  Practice  will be amended to prohibit  exchanges  and national  securities
associations  from listing  securities issued in connection with a rollup unless
the limited partners are afforded the following protections:

                  (i) dissenting  limited partners must have the right to one of
         the  following:  (a) to receive an appraisal and  compensation;  (b) to
         retain a security  under  substantially  similar  terms as the original
         issue;  (c) to  approve of the rollup by a vote of not less than 75% of
         the outstanding securities of each participating  partnership,  or; (d)
         to  use  an  independent  committee  to  negotiate  the  terms  of  the
         transaction.

     (ii) not to have their voting power unfairly reduced or abridged.

     (iii)  not to  bear  an  unfair  proportion  of  the  costs  of the  rollup
transaction.

                  The  Reform  Act  applies  only to  certain  types  of  rollup
transactions,  and  there  is no  certainty  that  any  plan  considered  by the
Partnership  at any time would be subject to the Reform Act. Thus Investors must
assume in making an investment in the Units that their Partnership Interest will
be subject to the provisions of the Partnership Agreement permitting fundamental
changes  which  could  result  in  the  termination  or  reorganization  of  the
Partnership and a partial or total dilution of all Limited  Partners'  interests
in the Partnership.

                  The  following  is a  summary  of  certain  provisions  of the
Part-ner-ship  Agreement  relating to the  allocation  and  distribution  of the
Profits, Losses,  Part-ner-ship Cash Flow,  Part-ner-ship  Refinancing Proceeds,
Part-ner-ship  Sales Proceeds,  and cash upon dissolution of the  Part-ner-ship.
Investors should note that the Percentage Interests referenced in the discussion
below could change as a consequence of a future  Dilution  Offering.  Because an
understanding  of the defined  financial  terms is essential to an evaluation of
the information  presented  below,  Investors are urged to review  carefully the
definitions of the terms appearing in the Glossary.

                  1.       Allocations.

                  Losses.  After giving  effect to the special  allocations  set
forth below, the  Partnership's  Losses, if any, for each Year generally will be
allocated  to the  Partners  in  accordance  with  their  respective  Percentage
Interests.

                  Profits.  After giving effect to the special  allocations  set
forth below, the Partnership's  Profits for any Year generally will be allocated
to the Partners in accordance with their respective Percentage Interests.

                  All items of income, gain, loss, deduction,  or credit will be
allocated  among the  Partners  proportionately.  Further,  notwithstanding  the
foregoing,  after  giving  effect to certain  special  allocations,  the General
Partner  must be  allocated  at least 1% of all  items of  income,  gain,  loss,
deduction or credit.

     2. Special Allocations.  The following special allocations shall be made in
the following order:

                  (i)  Partnership  Minimum Gain  Chargeback.  If there is a net
decrease in  Partnership  Minimum Gain during any Year,  each  Partner  shall be
specially  allocated items of Partnership income and gain for such Year (and, if
necessary,  subsequent Years) in an amount equal to such Partner' s share of the
net decrease in Partnership Minimum Gain, determined in accordance with Treasury
Regulations  Section  1.704-2(g)(2).  Allocations  made pursuant to the previous
sentence  will be made in proportion to the  respective  amounts  required to be
allocated to each  Partner  pursuant to that  section of the  Regulations.  This
provision relating to Partnership Minimum Gain Chargebacks is intended to comply
with Treasury Regulations Section 1.704-2(f) and will be interpreted and applied
in a manner consistent with that Regulation.

                  (ii)  Partner  Minimum  Gain  Chargeback.  If  there  is a net
decrease in Partner  Minimum Gain  attributable  to a Partner  Nonrecourse  Debt
during  any Year,  each  Partner  who has a share of the  Partner  Minimum  Gain
attributable to such Partner Nonrecourse Debt shall be specially allocated items
of  Partnership  income and gain for such Year (and,  if  necessary,  subsequent
Years) in an amount equal to such Partner's share of the net decrease in Partner
Minimum  Gain  attributable  to such  Partner  Nonrecourse  Debt,  to the extent
required  and  determined  in  accordance  with  Treasury   Regulations  Section
1.704-2(i)(4).  Allocations  pursuant to the previous  sentence  will be made in
proportion to the  respective  amounts  required to be allocated to each Partner
pursuant to that section of the Regulations.  This provision relating to Partner
Minimum  Gain  Chargebacks  is  intended  to  comply  with  Regulation   Section
1.704-2(i)(4)  and will be interpreted  and applied in a manner  consistent with
that Regulation.

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

     (iv) Sales Commission. The Sales Commission shall be allocated to the Units
which are not held by the General Partner and its Affiliates and are acquired in
the Offering in proportion to the respective capital  contributions  represented
by such Units (i.e., $250 in Sales Commissions per each such Unit).


                  3. Allocations Between Transferor and Transferee. In the event
of the transfer of all or any part of a Partner's  interest (in accordance  with
the  provisions of the  Partnership  Agreement) in the  Partnership  at any time
other  than  at the  end  of a  year,  or the  admission  of a new  Partner  (in
accordance with the provisions of the Partnership  Agreement),  the transferring
or new Partner's share of the Partnership's  income, gain, loss,  deductions and
credits,  as computed both for  accounting  purposes and for federal  income tax
purposes,  will be allocated  between the transferor  Partner and the transferee
Partner (or Partners),  or the new Partner and the other  Partners,  as the case
may be, in the same  ratio as the  number of days in such year  before and after
the date of the transfer or admission; provided, however, that if there has been
a sale or  other  disposition  of the  assets  of the  Partnership  (or any part
thereof)  during such year,  then upon the mutual  agreement of all the Partners
(excluding the new Partner and the transferring Partner), the Partnership may in
its sole discretion  treat the periods before and after the date of the transfer
or admission as separate years and allocate the Partnership's net income,  gain,
net  loss,  deductions  and  credits  for each of such  deemed  separate  years.
Notwithstanding the foregoing,  the Partnership's  "allocable cash basis items,"
as that term is used in Section  706(d)(2)(B) of the Code, shall be allocated as
required by Section  706(d)(2) of the Code and the Regulations  thereunder.  See
"Risk Factors - Tax Risks - Partnership Allocations."

                  4.  Incoming  Partner  Allocations.  The  Code  prohibits  the
retroactive  allocation of a full share of partnership items to persons who were
partners  for less than the entire  year.  As provided  above,  the  Partnership
Agreement provides that items of income, gain, loss, deductions and credits will
be allocated between a transferor  Partner and a transferee  Partner in the same
ratio  as the  number  of days in the  year  before  and  after  the date of the
transfer or admission,  unless the Partnership has sold any of its assets in the
year of the transfer or admission. If the Partnership has sold any of its assets
in the year of the transfer or admission, then the General Partner may elect, in
its sole  discretion,  to use the interim closing of the books method  described
above. See "Risk Factors - Tax Risks - Partnership Allocations."

     5.  Other  Allocations.   Additional   allocations  are  discussed  in  the
Partnership  Agreement and each Investor should  carefully  review Article 13 of
the  Partnership  Agreement.  See the Partnership  Agreement  attached hereto as
Appendix B.

                  6.       Distributions.

                  The   Partnership    Agreement    authorizes   the   following
Distributions to be made to the Partners:

                  Distribution of Partnership  Cash Flow.  Partnership Cash Flow
will be distributed to the Partners within 60 days after the end of each Year of
the  Partnership,  or  earlier  in the  discretion  of the  General  Partner  in
accordance with their respective Percentage Interests.

                  Distribution  of Partnership  Sales  Proceeds and  Partnership
Refinancing  Proceeds.  Partnership  Sales Proceeds and Partnership  Refinancing
Proceeds  will be  distributed  to the  Partners  within 60 days of the  Capital
Transaction  giving rise to such  proceeds,  or earlier in the discretion of the
General Partner in accordance with their respective Percentage Interests.

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

     (i) First,  to the  payment  of debts and  liabilities  of the  Partnership
(including  amounts  owed to the  General  Partner and its  Affiliates)  and the
expenses of liquidation;

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

                  (iii) Third,  the balance,  if any, will be distributed to the
         Partners in accordance  with the  Partners'  positive  Capital  Account
         balances  after such  Capital  Accounts are adjusted as provided in the
         Partnership Agreement,  and any other adjustments required by the final
         Regulations  under Section 704(b) of the Code. Any general partner with
         a negative  Capital Account  following  distribution of the liquidation
         proceeds or the  liquidation  of its interest in the  Partnership  must
         contribute to the Partnership an amount equal to such negative  capital
         account on or before the later of the end of the Partnership's  taxable
         year or within 90 days after the date of  liquidation.  Any  capital so
         contributed  will 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. It is intended that
         Capital  Accounts will allow for liquidation  distributions  consistent
         with the manner in which  Partnership  Sales  Proceeds and  Partnership
         Refinancing  Proceeds  are  distributed;   however,  there  can  be  no
         assurance that such will be the case.

                  Tax  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.  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.

                  The General  Partner has the sole right to manage the business
of  the   Part-ner-ship   and  at  all  times  is  required   to  exercise   its
responsibilities  in a fiduciary  capacity.  Although the consent of the Limited
Partners is not required for any sale or refinancing of the Lithotripsy Systems,
in certain  instances the requisite  consent of the Limited Partners is required
for the purchase of additional assets by the  Part-ner-ship.  See "Powers of the
General Partner and Limited Partners' Voting Rights" below. On the Closing Date,
the Partnership will contract with the Management Agent to manage and administer
the day-to-day operations of the Lithotripsy Systems. See "Proposed Activities -
Management and Administration" and the Management  Agreement,  the form of which
is attached as Appendix D.

                  Under the Part-ner-ship  Agreement,  if the General Partner is
adjudged  by a court of  competent  jurisdiction  to be  liable  to the  Limited
Partners or the  Part-ner-ship  for acts or  omissions  of gross  negligence  or
constituting willful misconduct,  the General Partner may be removed and another
substituted with the consent of all of the Limited Partners.

                  1.       General.

                  The business and affairs of the Partnership will be managed by
the General  Partner;  provided,  however,  that without the prior approval of a
Majority in Interest of the Limited Partners,  the General Partner shall have no
authority to do any of the following:

     (a)  Offer  and  sell  additional  limited  partnership  interests  in  the
Partnership pursuant to a Dilution Offering;

     (b)   Institute   and  carry  out  any  plan   providing  for  the  merger,
consolidation or sale of Partnership Interests; or

                  (c) Incurring any single  capital  expenditure,  any long-term
         debt or any single borrowing of the Partnership during any twelve month
         period in excess of $100,000.

The General Partner is also expressly  prohibited from, among other things:  (i)
possessing  Partnership  assets or assigning the rights of the  Part-ner-ship in
Partnership  assets or the  Lithotripsy  Systems  for other  than  Part-ner-ship
purposes;   (ii)  admitting   Limited   Partners   except  as  provided  in  the
Part-ner-ship  Agreement;  and  (iii)  performing  any  act  (other  than an act
required by the Part-ner-ship  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.

                  2.       Tax Matters.

                  (i)  Elections.   The  General   Partner  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.

                  (ii) Tax Matters Partner. The Partnership Agreement designates
the General  Partner 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,  the General  Partner 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, the General
Partner shall oversee the  Partnership  tax affairs in the manner which,  in its
best  judgment,  are in the  interests of the  Partners.  Moreover,  the General
Partner 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.

                  Subject  to certain  exceptions  provided  in the  Partnership
Agreement  or the Act, the Limited  Partners  generally do not have any right to
participate  in the  management  or control of the business of the  Partnership.
Limited  Partners  are not  required  to make any capital  contributions  to the
Part-ner-ship  except amounts agreed by them to be paid, or pay or be personally
liable for, any expense,  liability or obligation of the  Part-ner-ship,  except
(i) to the extent of their respective  interests in the Part-ner-ship,  (ii) for
the obligation to return certain  Distributions  made to them as provided by the
Act, and (iii) to the extent of their  liabilities  pursuant to their respective
Guaranties.  See "Risk  Factors  - Other  Investment  Risks - Limited  Partners'
Obligations to Return Certain  Distributions"  and "Operating  Risks - Liability
Under the Guaranty."

                  No  Part-ner-ship  Interest  nor any Units may be  transferred
without the prior written consent of the General Partner,  which approval may be
granted or denied in the sole discretion of the General Partner,  and subject to
the  satisfaction  of certain other  conditions  set forth in the  Part-ner-ship
Agreement.  The  Part-ner-ship  Agreement  contains  additional  limitations  on
transfer,  including provisions  prohibiting transfer that would violate federal
or state securities laws. No transferee of the Units will automatically become a
Limited  Partner.  Admission of a transferee  requires the  fulfillment of other
obligations  enumerated in the  Part-ner-ship  Agreement,  including  either the
approval of a Majority in Interest of the Limited  Partners (except the assignor
Limited  Partner)  and the General  Partner,  or the  approval  of the  assignor
Limited  Partner and the General  Partner.  Any  transferee  of a  Part-ner-ship
Interest who has not been admitted to the  Part-ner-ship  as a Partner shall 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
Part-ner-ship   income,   gains,  profits,   losses,   deductions,   credits  or
distributions.  A  transferor  Limited  Partner  will not be  released  from his
personal  liability  under the  Guaranty  upon the  transfer of his  Partnership
Interest,  unless otherwise  specifically  agreed by the Bank at the time of the
transfer.

                  The  General  Partner  may  transfer  all or a portion  of its
Part-ner-ship  Interest  only with the  consent of a Majority in Interest of the
Limited  Partners before the transferee can be admitted as a Substitute  General
Partner.  Notwithstanding  the foregoing,  the  Partnership  Agreement gives the
General  Partner the  authority to transfer  all or part of its General  Partner
interest to any  transferee  controlled  by it or one or more of its  Affiliates
without  obtaining the Limited  Partners'  consent.  Any such  transferee  would
automatically  be a  substitute  general  partner.  The  admission  of  any  new
shareholder,  the withdrawal of any  shareholder  from the General  Partner or a
merger of the General  Partner with and into another  entity may be done without
the approval of the Limited Partners.

                  The  Part-ner-ship  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  Part-ner-ship  without  making  provision  for the
replacement thereof (except to the extent otherwise provided in a reorganization
plan approved by the General Partner and Limited Partners as described above);

                  2.       The expiration of its term on December 31, 2049;

     3. The bankruptcy or occurrence of certain other events with respect to the
General Partner;

     4. The election to dissolve the  Part-ner-ship  made by the General Partner
and a Majority in Interest of the  Limited  Partners,  including,  pursuant to a
reorganization plan;

     6. The election to dissolve the Partnership  made by the General Partner in
the event of  certain  legislation,  case law or  regulatory  changes  adversely
affecting the operation of the Partnership; or

     7. Any other event  resulting  in the  dissolution  or  termination  of the
Partnership under the laws of the State of Kentucky.

                  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 Part-ner-ship
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,  a Majority  in Interest of the
Limited  Partners  elect in  writing  to  continue  the  Part-ner-ship  and,  if
necessary, designate a new general partner.

                  Upon dissolution,  the General Partner or, if there is none, a
representative  of the Limited  Partners,  will  liquidate  the  Part-ner-ship's
assets and distribute the proceeds thereof in accordance with the priorities set
forth in the Part-ner-ship 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 the interest of a Limited Partner who (i) dies, (ii) becomes the
subject of a domestic  proceeding,  (iii)  becomes  insolvent,  (iv)  acquires a
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, prorated in the event only
a portion of the  Partnership  Interest is being  purchased  (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 circumstances,  the assumption of
the Limited  Partner's  Guaranty,  if any.  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 (i) purchase the Partnership  Interests of all of the Limited Partners
for an amount  equal to the  lesser of fair  market  value or book value or (ii)
dissolve the Partnership.  In the event of the death of a Limited  Partner,  the
option  purchase  price for that Limited  Partner's  Partnership  Interest is an
amount  equal to the  greater of (x) two (2) times the  aggregate  distributions
made with respect to the  Partnership  Interest during the  twelve-month  period
ending the last day of the month  immediately  preceding  the month in which the
death occurs or (y) the Limited Partner's share of the Partnership's book value,
if any (prorated in the event that only a portion of his Partnership Interest is
being  purchased)  as reflected by the Capital  Account of the Limited  Partner;
provided,  however, that the purchase price under either method (x) or (y) shall
not exceed the fair market value of the  Partnership  Interest.  The withdrawing
Limited  Partner will not be released  from his  obligations  under the Guaranty
unless so agreed by the Bank. See the Partnership  Agreement  attached hereto as
Appendix B and "Risk Factors - Operating Risks - Liability Under the Guaranty."

                  The Partnership  Agreement  provides that each Limited Partner
(other than the General  Partner and its  Affiliates  who hold  Limited  Partner
interests)  is  prohibited  from  having a direct or  indirect  ownership  of an
interest in a competing  venture  (including  the lease or sublease of competing
technology),  other than certain ownership interests acquired before the date of
the  Partnership  Agreement (the "Outside  Activities").  While they are Limited
Partners in the Partnership,  each Limited Partner is precluded from engaging in
any Outside  Activities.  In the event that a Limited Partner's  interest in the
Partnership is terminated or  transferred  upon the occurrence of certain events
as provided in the Partnership Agreement,  he is precluded,  for a period of two
(2) years  following  the date of his  withdrawal,  from engaging in any Outside
Activity within any market area in which the  Partnership is providing  services
or has provided services within the twelve months preceding the withdrawal. This
prohibition  is in addition  to the right of the General  Partner to acquire the
interest of a Limited Partner engaged in an Outside  Activity as provided in the
Partnership  Agreement.  See "Optional Purchase of Limited Partner Interests" in
this Section, and the Partnership Agreement attached hereto as Appendix B.

                  In addition,  the  Partnership  Agreement  provides  that each
Limited  Partner   acknowledges  and  agrees  that  his   participation  in  the
Partnership necessarily involves his access to confidential  information that is
proprietary in nature and, therefore, the exclusive property of the Partnership.
Accordingly,  the  Limited  Partners  (other  than the  General  Partner and its
Affiliates who hold Limited  Partner  interests)  are precluded from  disclosing
such confidential  information during their participation as Limited Partners in
the  Partnership or thereafter  unless required by law or with the prior written
consent of the Partnership.

                  The  Part-ner-ship  Agreement  provides that disputes  arising
thereunder shall be resolved by submission to arbitration in accordance with the
provisions of Kentucky law.

                  Each  Investor,  by  executing  the  Subscription   Agreement,
irrevocably appoints Cheryl Williams and Joseph Jenkins, M.D., severally, to act
as  attorneys-in-fact  to execute the  Part-ner-ship  Agreement,  any amendments
thereto  and any  certificate  of  limited  part-ner-ship  filed by the  General
Partner. The Part-ner-ship Agreement, in turn, contains provisions by which each
Limited Partner irrevocably  appoints Cheryl Williams and Joseph Jenkins,  M.D.,
severally,  to act as his attorneys-in-fact to make, execute,  swear to and file
any document necessary to the conduct of the Part-ner-ship's  business,  such as
deeds of conveyance of real or personal property as well as any amendment to the
Part-ner-ship  Agreement or to any  certificate of limited  part-ner-ship  which
accurately reflects actions properly taken by the Partners.

                  Within   90  days   after   the  end  of  each   Year  of  the
Part-ner-ship,  the General  Partner  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 will be kept
by the  General  Partner  in which  will be  entered  fully and  accurately  all
transactions and other matters relative to the  Part-ner-ship's  business as are
usually entered into records,  books and accounts  maintained by persons engaged
in businesses of a like character. Pursuant to applicable law, the Part-ner-ship
books and records will be kept on the accrual  method basis of  accounting.  The
Part-ner-ship's  fiscal year will be the  calendar  year.  The books and records
will be located at the Partnership's  office, and will be open to the reasonable
inspection  and  examination  of the Limited  Partners or their duly  authorized
representatives during normal business hours as provided by the Act.

                  On the  Closing  Date,  it is  expected  that  Womble  Carlyle
Sandridge & Rice,  a  Professional  Limited  Liability  Company,  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 E to this Memorandum.

                  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 Service
Contracts may not,  however,  be available due to  confidentiality  restrictions
contained therein.