Name of Prospective Investor                               Memorandum Number











                FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP -
                                   ARKANSAS I

             A Limited Partnership Formed Under the Laws of Arkansas

                    CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

                             up to $322,220 in Cash

                    20 Units of Limited Partnership Interest
                           at $16,111 in Cash per Unit





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






                            Medtech Investments, Inc.
                              Exclusive Sales Agent
                                2008 Litho Place
                       Fayetteville, North Carolina 28304
                                 1-800-682-7971

<PAGE>

                The Date of this Memorandum is November 18, 1998

           FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP - ARKANSAS I

                             up to $322,220 in Cash

                 up to 20 Units of Limited Partnership Interest
                           at $16,111 in Cash per Unit

Fayetteville Lithotripters Limited Partnership - Arkansas I, an Arkansas limited
partnership (the "Partnership") operated by its General Partner,  Lithotripters,
Inc., a North Carolina corporation (the "General Partner"), hereby offers on the
terms set forth  herein up to 20 Units  (the  "Units")  of  limited  partnership
interest in the Partnership,  at a price per Unit of $16,111 in cash. See "Terms
of the Offering."  Each Unit will  represent an initial 1% economic  interest in
the  Partnership.  See "Risk  Factors - Other  Investment  Risks -  Dilution  of
Limited  Partners'  Interest." The Partnership owns and operates two LithostarTM
second generation extracorporeal shock-wave lithotripters for the lithotripsy of
kidney stones.  Each LithostarTM is installed in its own self-propelled  Calumet
Coach (collectively, the Coaches with the installed LithostarsTM are referred to
herein as the "Mobile Lithotripsy  Systems") enabling the Partnership to provide
lithotripsy services at various locations throughout Arkansas.

The  Partnership  intends to use the  proceeds  of this  Offering  primarily  to
finance  the cost of  reconditioning  the  Coaches  and  renting  loaner  Mobile
Lithotripsy  Systems from the General Partner or its Affiliates  during the time
the Partnership's Mobile Lithotripsy Systems are being  reconditioned.  See "Use
of  Proceeds."  The  cash  purchase  price  is  due  at  subscription;  however,
prospective  Investors who meet certain  requirements may be able fund a portion
of their Unit purchase price with the proceeds of certain third-party financing.
See "Terms of the Offering - Limited Partner Loans." The Offering will terminate
on  December  30,  1998 (or  earlier  upon the sale of all 20 Units as  provided
herein),  unless  extended at the discretion of the General Partner for a period
not to exceed 180 days. ______________________________

Purchase of Units involves risks and is suitable only for persons of substantial
means who have no need for liquidity in this  investment.  Among other  factors,
prospective  investors  should note that (1) the Partnership  faces  substantial
competition  in the Service Area and (2) the health care  industry is undergoing
significant   government   regulatory  reforms.  See  "Risk  Factors"  and  "The
Offering - Suitability Standards."
 ______________________________


                                    Cash              Selling          Net Cash
                               Offering Price     Commissions(1)     Proceeds(2)
Per Unit(3)                       $ 16,111          $     250         $ 15,861
Total Maximum(4)                  $322,220          $   5,000         $317,220

(See Footnotes on Back of Cover Page)

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


                                                                 i
<PAGE>

                                                     ___________________________

     (1) The Units will be sold on a "best-efforts"  any or all basis by MedTech
Investments,  Inc., a broker-dealer  registered with the Securities and Exchange
Commission, a member of the National Association of Securities Dealers, Inc. and
an Affiliate of the General  Partner (the "Sales Agent").  The Partnership  will
pay the Sales Agent a $250  commission for each Unit sold and will reimburse the
Sales Agent for its Offering costs (not to exceed  $7,500).  The Partnership has
agreed to  indemnify  the Sales Agent  against  certain  liabilities,  including
liabilities  under the Securities Act of 1933 (the "Securities  Act"). See "Plan
of Distribution."

     (2) Net Cash Proceeds do not reflect  deduction of expenses  payable by the
Partnership.  See "Use of Proceeds."  The price per Unit ($16,111) is payable in
cash upon Subscription;  provided,  that prospective  Investors who meet certain
requirements may be able to fund a portion of their Unit purchase price with the
proceeds of certain  third-party  financing.  The  Partnership  has arranged for
financing of a portion of the Units'  purchase price with First- Citizens Bank &
Trust Company, Fayetteville,  North Carolina (the "Bank"). Therefore, in lieu of
paying the entire purchase price in cash at subscription,  prospective Investors
may  execute and deliver to the Sales  Agent  together  with their  subscription
packets,  at least $2,500 cash and a Limited Partner Note payable to the Bank in
a maximum principal amount of up to $13,611 per Unit to be purchased, a Loan and
Security Agreement, Security Agreement and two Uniform Commercial Code Financing
Statements ("UCC-1s")  (collectively,  the "Loan Documents").  See "Terms of the
Offering - Limited Partner Loans" and the forms of the Limited Partner Note, the
Loan  and  Security  Agreement  and  Security  Agreement  attached  to the  Bank
Commitment  as Exhibits A, B and C,  respectively,  which is attached  hereto as
Appendix C and the UCC's attached as part of the Subscription Packet.

     (3) Each Investor may purchase no less than one Unit. The General  Partner,
however,  reserves the right to sell less than one Unit as a minimum  investment
on a  limited  basis,  and to  reject  in  whole  or in part  any  subscription.
Purchases of fractional Units will be in multiples of one-half Units.

     (4) Offering Proceeds will first be used by the Partnership to pay offering
costs and  expenses (up to $37,250)  and the  remainder of the proceeds  will be
used to finance the cost of reconditioning the Coaches and renting loaner Mobile
Lithotripsy  Systems from the General Partner or its Affiliates  during the time
the  Partnership's  Mobile  Lithotripsy  Systems  are out of service  due to the
reconditioning  of the Coaches.  See "Use of Proceeds." The Partnership seeks by
this  Offering to sell up to 20 Units for an aggregate of up to $322,220 in cash
($317,220 net of Sales Agent's  commissions).  All  subscription  funds and Loan
Documents will be held in an interest bearing escrow account with First-Citizens
Bank & Trust Company, with offices in Fayetteville and Raleigh,  North Carolina,
until the acceptance of the Investor's subscription, rejection of the Investor's
subscription or termination of the Offering.  The Partnership has set no minimum
number of Units to be sold in this Offering.  Accordingly,  upon the receipt and
acceptance of an Investor's subscription by the Partnership
                                                        ii

<PAGE>

     Partner  Loan.  Upon  admission  as  a  Limited  Partner,   the  Investor's
subscription  funds will be released to the  Partnership and the Loan Documents,
if any, will be released to the Bank. In the event a  subscription  is rejected,
all subscription funds (without interest), the Loan Documents, if any, and other
subscription  documents held in escrow will be promptly returned to the rejected
Investor.  The Offering will terminate on December 30, 1998, unless it is sooner
terminated by the General Partner,  or unless extended for an additional  period
not to exceed 180 days. See "The Offering - General." _______________________

          THE  UNITS  ARE  BEING  OFFERED  PURSUANT  TO AN  EXEMPTION  FROM  THE
          REGISTRATION  REQUIREMENTS  OF THE SECURITIES ACT OF 1933, AS AMENDED,
          PROVIDED  IN  SECTION 4(2)  THEREOF  AND  RULE  506  OF  REGULATION  D
          PROMULGATED THEREUNDER, AS AMENDED, AND AN EXEMPTION FROM REGISTRATION
          PROVIDED  IN  SECTION  23-42-509(c)  OF  THE  ARKANSAS  CODE  OF  1987
          ANNOTATED,   AS  AMENDED,   AND  RULE  509.01(B)  OF  THE  REGULATIONS
          PROMULGATED THEREUNDER,  AS AMENDED. A REGISTRATION STATEMENT RELATING
          TO THESE  SECURITIES  HAS NOT BEEN  FILED  WITH ANY  STATE  SECURITIES
          AGENCY OR WITH THE SECURITIES AND EXCHANGE COMMISSION.
                                                  ______________

          NEITHER  THE  SECURITIES   AND  EXCHANGE   COMMISSION  NOR  ANY  STATE
          REGULATORY BODY HAS PASSED UPON THE VALUE OF THE SECURITIES,  MADE ANY
          RECOMMENDATIONS  AS TO THEIR  PURCHASE,  APPROVED OR  DISAPPROVED  THE
          OFFERING,  OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS MEMORANDUM.
          ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ______________

          THESE  SECURITIES ARE SUBJECT TO RESTRICTIONS ON  TRANSFERABILITY  AND
          RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED  UNDER
          THE  SECURITIES  ACT OF 1933,  AS AMENDED,  AND THE  APPLICABLE  STATE
          SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION  THEREFROM.  NO
          PUBLIC OR OTHER MARKET EXISTS OR WILL DEVELOP FOR THE UNITS. UNITS ARE
          NOT  TRANSFERABLE  WITHOUT  THE  CONSENT OF THE  GENERAL  PARTNER  AND
          SATISFACTION OF CERTAIN OTHER CONDITIONS INCLUDING THE AVAILABILITY OF
          AN  EXEMPTION  UNDER  THE  SECURITIES  ACT OF 1933 AND  VARIOUS  STATE
          SECURITIES LAWS.  INVESTORS SHOULD PROCEED ONLY ON THE ASSUMPTION THAT
          THEY MAY HAVE TO BEAR


                                                        iii

<PAGE>

          THE  ECONOMIC  RISK OF AN  INVESTMENT  IN THE UNITS FOR AN  INDEFINITE
          PERIOD OF TIME. ______________

          IN MAKING AN  INVESTMENT  DECISION,  INVESTORS  MUST RELY ON THEIR OWN
          EXAMINATION  OF THE PERSON OR ENTITY  CREATING THE  SECURITIES AND THE
          TERMS OF THE OFFERING,  INCLUDING THE MERITS AND RISKS INVOLVED. THESE
          SECURITIES  HAVE  NOT  BEEN   RECOMMENDED  BY  ANY  FEDERAL  OR  STATE
          SECURITIES  COMMISSION  OR  REGULATORY  AUTHORITY.   FURTHERMORE,  THE
          FOREGOING  AUTHORITIES  HAVE NOT  CONFIRMED THE ACCURACY OR DETERMINED
          THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
          CRIMINAL OFFENSE. ______________

          PROSPECTIVE  INVESTORS  SHOULD  NOT  CONSTRUE  THE  CONTENTS  OF  THIS
          MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS,  WHETHER WRITTEN
          OR ORAL,  FROM THE  PARTNERSHIP,  ITS  GENERAL  PARTNER  OR ANY OF ITS
          AGENTS OR  REPRESENTATIVES  AS INVESTMENT,  TAX OR LEGAL ADVICE.  THIS
          MEMORANDUM  AND THE  APPENDICES  HERETO,  AS WELL AS THE NATURE OF THE
          INVESTMENT,  SHOULD BE  REVIEWED  BY EACH  PROSPECTIVE  INVESTOR,  HIS
          INVESTMENT,  TAX OR  OTHER  ADVISORS,  AND HIS  ACCOUNTANTS  OR  LEGAL
          COUNSEL.
                                                  ______________

          NO OFFERING  LITERATURE OR ADVERTISING IN WHATEVER FORM WILL OR MAY BE
          EMPLOYED  IN  THE  OFFERING  OF  UNITS,  EXCEPT  FOR  THIS  MEMORANDUM
          (INCLUDING   AMENDMENTS  AND   SUPPLEMENTS,   IF  ANY)  AND  DOCUMENTS
          SUMMARIZED  HEREIN. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
          TO MAKE ANY  REPRESENTATION NOT CONTAINED IN THIS MEMORANDUM OR IN THE
          APPENDICES  HERETO,  AND, IF GIVEN OR MADE, SUCH OTHER  INFORMATION OR
          REPRESENTATION MUST NOT BE RELIED UPON.
                                                  ______________

          THE GENERAL PARTNER WILL MAKE AVAILABLE, PRIOR TO THE CLOSING, TO EACH
          PROSPECTIVE INVESTOR OR HIS REPRESENTATIVES,  OR BOTH, THE OPPORTUNITY
          TO ASK QUESTIONS OF, AND RECEIVE  ANSWERS FROM, THE GENERAL PARTNER OR
          A PERSON ACTING ON ITS BEHALF  CONCERNING  THE TERMS AND CONDITIONS OF
          THIS  OFFERING,  THE  PARTNERSHIP,  THE  GENERAL  PARTNER OR ANY OTHER
          RELEVANT  MATTERS,  AND TO OBTAIN ANY ADDITIONAL  INFORMATION,  TO THE
          EXTENT THAT THE GENERAL  PARTNER  POSSESSES  SUCH  INFORMATION  OR CAN
          ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY
          THE ACCURACY OF THE INFORMATION HEREIN SET FORTH, SUBJECT TO CERTAIN


                                                        iv

<PAGE>

          CONFIDENTIALITY RESTRICTIONS CONTAINED IN VARIOUS CONTRACTS WITH THIRD
          PARTIES. ______________

          THIS MEMORANDUM CONTAINS SUMMARIES, BELIEVED BY THE GENERAL PARTNER TO
          BE ACCURATE,  OF CERTAIN TERMS OF CERTAIN DOCUMENTS,  BUT REFERENCE IS
          HEREBY MADE TO THE ACTUAL  DOCUMENTS,  COPIES OF WHICH  ACCOMPANY THIS
          MEMORANDUM  OR ARE  AVAILABLE  FROM THE GENERAL  PARTNER UPON REQUEST,
          SUBJECT TO CERTAIN  CONFIDENTIALITY  RESTRICTIONS CONTAINED IN VARIOUS
          CONTRACTS  WITH THIRD  PARTIES.  ALL SUCH  SUMMARIES  ARE QUALIFIED IN
          THEIR ENTIRETY BY THIS REFERENCE.
                                                  ______________

          THIS  OFFER  CAN  BE  WITHDRAWN  AT ANY  TIME  BEFORE  CLOSING  AND IS
          SPECIFICALLY  MADE SUBJECT TO THE TERMS DESCRIBED IN THIS  MEMORANDUM.
          SUBJECT TO SPECIFIC  RESTRICTIONS  PROVIDED  FOR  HEREIN,  THE GENERAL
          PARTNER  RESERVES THE RIGHT TO REJECT ANY  SUBSCRIPTION IN WHOLE OR IN
          PART OR TO  ALLOT  TO ANY  INVESTOR  LESS  THAN  THE  NUMBER  OF UNITS
          SUBSCRIBED FOR BY SUCH INVESTOR. SEE "THE OFFERING."
                                                  ______________

          THIS  MEMORANDUM HAS BEEN PREPARED SOLELY FOR THE BENEFIT OF INVESTORS
          INTERESTED  IN  THE  PROPOSED  PRIVATE  PLACEMENT  OF  THE  UNITS  AND
          CONSTITUTES  AN OFFER  ONLY IF THE NAME OF AN  OFFEREE  APPEARS IN THE
          APPROPRIATE  SPACE PROVIDED ON THE COVER PAGE HEREOF.  DISTRIBUTION OF
          THIS  MEMORANDUM  TO ANY  PERSON  OTHER  THAN SUCH  OFFEREE  AND THOSE
          PERSONS  RETAINED TO ADVISE HIM WITH RESPECT THERETO IS  UNAUTHORIZED,
          AND ANY REPRODUCTION OF THIS  MEMORANDUM,  IN WHOLE OR IN PART, OR THE
          DIVULGENCE OF ANY OF ITS CONTENTS,  WITHOUT THE PRIOR WRITTEN  CONSENT
          OF THE GENERAL  PARTNER,  IS  PROHIBITED.  EACH OFFEREE,  BY ACCEPTING
          DELIVERY  OF THIS  MEMORANDUM,  AGREES TO  RETURN  IT AND ALL  RELATED
          APPENDICES  AND OTHER  DOCUMENTS  TO THE GENERAL  PARTNER,  2008 LITHO
          PLACE,  FAYETTEVILLE,  NORTH CAROLINA  28304,  IF THE OFFEREE DOES NOT
          INTEND TO  SUBSCRIBE  FOR THE  PURCHASE  OF THE UNITS,  THE  OFFEREE'S
          SUBSCRIPTION IS NOT ACCEPTED OR THE OFFER IS TERMINATED.
                                                  ______________

          NEITHER THE DELIVERY OF THIS  MEMORANDUM  NOR ANY SALES MADE HEREUNDER
          SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE IN
          THE AFFAIRS OF THE PARTIES  DESCRIBED HEREIN SINCE THE DATE HEREOF, OR
          THAT THE INFORMATION CONTAINED HEREIN IS

                                                         v
<PAGE>

         CORRECT  AS OF ANY  TIME  AFTER  THE  DATE  OF THIS  MEMORANDUM.  THIS
          MEMORANDUM  DOES NOT CONSTITUTE AN OFFER OR  SOLICITATION IN ANY STATE
          TO ANY PERSON TO WHOM SUCH OFFER OR  SOLICITATION  WOULD BE  UNLAWFUL.
          ______________

          THE BUSINESS OF THE PARTNERSHIP  INVOLVES  CONFLICTS OF INTEREST.  SEE
     "CONFLICTS OF INTEREST."
                                                  ______________
          AFFILIATES  OF THE  GENERAL  PARTNER  WILL  CONTINUE  TO RECEIVE  FEES
     WHETHER  OR  NOT  THE  PARTNERSHIP   EARNS  ANY  ADDITIONAL   INCOME.   SEE
     "COMPENSATION AND REIMBURSEMENT TO THE GENERAL PARTNER AND ITS AFFILIATES."
                                                   ____________

          THE GENERAL PARTNER  BELIEVES THIS OFFERING IS AN ECONOMIC  INVESTMENT
     OPPORTUNITY;  THUS,  INVESTORS SHOULD NOT PURCHASE UNITS IN ANTICIPATION OF
     TAX BENEFITS.
                                                  ______________




                                                        vi

<PAGE>

                             TABLE OF CONTENTS 

RISK FACTORS...................................................................1
         Operating Risks.......................................................1
         Tax Risks.............................................................7
         Other Investment Risks................................................8

THE PARTNERSHIP...............................................................11

TERMS OF THE OFFERING.........................................................12
         The Units and Subscription Price.....................................12
         Acceptance of Subscriptions..........................................12
         Limited Partner Loans ...............................................13
         Subscription Period; Closing.........................................14
         Offering Exemption...................................................14
         Suitability Standards................................................15
         How to Invest........................................................16
         Restrictions on Transfer of Units....................................17

PLAN OF DISTRIBUTION..........................................................18

BUSINESS ACTIVITIES...........................................................19
         General  ............................................................19
         Treatment Methods for Kidney Stone Disease...........................19
         The LithostarTM......................................................20
         The Calumet Coaches..................................................21
         Anticipated Partnership Expenditures.................................21
         Acquisition of Additional Assets.....................................21
         Hospital Contracts...................................................22
         Management...........................................................23
         Employees............................................................23

THE GENERAL PARTNER...........................................................24

COMPENSATION AND REIMBURSEMENT TO THE
         GENERAL PARTNER AND ITS AFFILIATES...................................25

CONFLICTS OF INTEREST.........................................................27

FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER...............................28



                                                        vii

<PAGE>

                                                                            Page

COMPETITION...................................................................29
         Affiliated Competition...............................................29
         Other Competition....................................................29

REGULATION....................................................................31
         Federal Regulation...................................................31
         State Regulation.....................................................38

PRIOR ACTIVITIES..............................................................39

SOURCES AND APPLICATIONS OF FUNDS.............................................41

FINANCIAL CONDITION OF THE PARTNERSHIP........................................42

MANAGEMENT'S DISCUSSION AND
         ANALYSIS OF THE RESULTS OF OPERATIONS................................47
         Nine Months Ended September 30, 1998 and September 30, 1997..........47
         Year Ended December 31, 1997 and December 31, 1996...................47
         Year Ended December 31, 1996 and December 31, 1995...................47

SUMMARY OF THE PARTNERSHIP AGREEMENT..........................................48
         Nature of Limited Partnership Interest...............................48
         Profits, Losses and Distributions....................................48
         Management of the Partnership........................................50
         Powers of the General Partner........................................50
         Rights and Liabilities of the Limited Partners.......................51
         Restrictions on Transfer of Partnership Interests....................52
         Dissolution and Liquidation..........................................52
         Optional Purchase of Limited Partner Interests.......................53
         Dilution Offerings...................................................53
         Arbitration..........................................................54
         Power of Attorney....................................................54
         Reports to Limited Partners..........................................54
         Records  ............................................................54

LEGAL MATTERS.................................................................55

GLOSSARY .....................................................................55




                                                       viii
<PAGE>

Appendix A        AGREEMENT OF LIMITED PARTNERSHIP OF FAYETTEVILLE
                  LITHOTRIPTERS LIMITED PARTNERSHIP - ARKANSAS I

Appendix B        BANK COMMITMENT (WITH EXHIBITS)

Appendix C        FORM OF OPINION OF WOMBLE CARLYLE SANDRIDGE & RICE, PLLC

Appendix D        NOTES TO FINANCIAL STATEMENTS


                                                        ix

<PAGE>

                                                  RISK FACTORS

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.

Operating Risks

General Risks of Operations. Although the General Partner and its personnel have
significant  experience  in  managing  lithotripsy   enterprises,   whether  the
Partnership  can continue to effectively  operate and expand its business cannot
be accurately  predicted.  The benefits of an investment in the Partnership also
depend on many  factors  over which the  Partnership  has no control,  including
competition,  technological innovations rendering the Mobile Lithotripsy 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 its Mobile  Lithotripsy  Systems  difficult or unattractive.  Other
factors  that may  adversely  affect the  operation  of its  Mobile  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  healthcare
industry has experienced  substantial changes in recent years.  Although managed
care has yet to become a major factor in the delivery of  lithotripsy  services,
the General Partner anticipates that managed care programs, including capitation
plans,  may play an increasing role in the delivery of lithotripsy  services 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  healthcare  environment  will
not have a material adverse effect on the Partnership.

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

Dependence on Insurance  Reimbursement.  The prices the Partnership  charges its
patients for the  lithotripsy of kidney stones is  significantly  dependent upon
the  amount  of  reimbursement  private  health  care  insurers  allow  for this
procedure.  Most of the  Partnership's  patients pay for services  directly from
private  payment  sources,  primarily  from  third-party  insurers  such as Blue
Cross/Blue Shield and other commercial insurers. Coverage and payment levels for
these private  payment  sources vary  depending  upon the  patient's  individual
insurance policy. While the Partnership does not rely on Medicare  reimbursement
for a substantial portion of its revenues,

                                                         1
<PAGE>

the Medicare  program has  historically  influenced the setting of reimbursement
standards   by  private   insurance   programs.   The  Health   Care   Financing
Administration  ("HCFA") has  recently  proposed  rules which would  establish a
prospective  payment  system  for  hospital  outpatient  procedures,   including
lithotripsy.  HCFA's proposed reimbursement rate for lithotripsy is $2,612. This
rate is lower than the typical charge for lithotripsy services currently charged
by the  Partnership  and  could  result  in  private  payment  sources  such  as
third-party   insurers  lowering  the  reimbursement   rates  they  pay  to  the
Partnership.  The  General  Partner  anticipates  that over  time  reimbursement
amounts for both the  professional  and technical  components of the lithotripsy
procedure may continue to decrease. See "Regulation."

     Reliability   and  Efficacy  of  the   Partnership's   Lithotripters.   The
LithostarTM  has a ten-year  United States  operating  history,  having received
premarket  approval  from the FDA for renal  lithotripsy  on September 30, 1988.
This approval  followed a period of clinical testing  beginning in February 1987
at four test sites in the  United  States,  which was  preceded  by  substantial
clinical  testing of the  LithostarTM at the  Urological  Clinic of the Johannes
Gutenberg  University of Mainz, West Germany. The General Partner estimates that
more  than 400  LithostarTM  systems  are  currently  operating  in over  twenty
countries,   and  the  General  Partner  and  its  Affiliates  operate  over  30
LithostarsTM  in  other  ventures.   In  the  General  Partner's  opinion,   the
LithostarTM has proven to be reliable and dependable medical equipment. Downtime
periods  necessitated  for  maintenance or repairs of the  Partnership's  Mobile
Lithotripsy Systems will adversely affect Partnership revenues. In 1996, the FDA
approved a new higher intensity shock-head system for the LithostarTM, which the
General  Partner   believes  has  shortened   procedure   times.   Both  of  the
Partnership's  LithostarsTM  have been upfitted with the new tube system.  Based
upon a  detailed  follow-up  study of 86,000  renal and 51,000  ureteral  stones
treated  on  the  LithostarTM  in  all  of  the  General  Partners's  affiliated
partnerships using both the original and newer shock-head  systems,  the General
Partner notes an 86% total success rate with an overall retreatment rate of only
15%. This retreatment rate included stones of all sizes and locations, including
staghorn calculi which at times required  multiple  treatments.  Based upon this
study and the General  Partner's  experience  in doing well in excess of 128,000
cases  over  the  past  nine  and  one-half  years  in  its  affiliated  limited
partnerships,  the General  Partner is of the opinion  that the  LithostarTM  is
presently a very  effective  and sound  alternative  for the  treatment of renal
stones.

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

Technological  Obsolescence.  The history of  lithotripsy of kidney stones as an
accepted  treatment  procedure is  relatively  recent,  with the first  clinical
trials being conducted in West Germany beginning in 1980 and the first premarket
approval for a renal  lithotripter in the United States being granted by the FDA
in December 1984.  Today,  lithotripsy is the treatment  procedure of choice for
kidney stone disease, having replaced other treatment methods. Published reports
indicate that certain  researchers are attempting to improve a laser  technology
to more  easily  eradicate  kidney  stones,  and  pharmaceutical  companies  and
researchers have attempted to develop




                                                         2
<PAGE>
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.  The  proceeds  of this
Offering cannot be accurately  determined until the Closing has occurred and the
number of Units sold has been  calculated.  In the event such  proceeds  are not
sufficient  to fund all  anticipated  expenses,  it may be necessary in order to
meet current or projected  expenses,  to supplement  Partnership  funds with the
proceeds of debt financing.  See "Business Activities - Anticipated  Partnership
Expenditures"  and  "Sources  and  Application  of Funds."  Although the General
Partner   maintains  good   relationships   with  certain   commercial   lending
institutions, it has not obtained a loan commitment from any party in any amount
on behalf of the  Partnership  and whether one would  timely be  forthcoming  on
terms  acceptable  to the  Partnership  cannot be assured.  The General  Partner
and/or its  Affiliates  may, but are under no  obligation  to, make loans to the
Partnership,  and there is no assurance that they would be willing or able to do
so at the time, in amounts and on terms required by the  Partnership.  While 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.

Acquisition  of  Additional  Assets.  If  in  the  future  the  General  Partner
determines  that it is in the best interest of the Partnership to acquire one or
more  additional  fixed base or Mobile  Lithotripsy  Systems (or any other renal
stone  treatment  equipment)  for the  treatment  of renal  stones,  the General
Partner has the authority  (without  obtaining the Limited Partners' consent) 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.  The acquisition of additional  assets may  substantially
increase the Partnership's  monthly  obligations and result in greater personnel
requirements.  See  "Risk  Factors  -  Operating  Risks  -  Partnership  Limited
Resources  and Risks of  Leverage."  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. In any event, no Limited Partner would be personally liable on any
additional  Partnership   indebtedness  without  such  Partner's  prior  written
consent.  There  is no  assurance  that  financing  would  be  available  to the
Partnership  to  acquire  additional  assets or to fund any  additional  working
capital  requirements.  Any such  borrowing  by the  Partnership  will  serve to
increase  the risks to the  Partnership  associated  with  leverage  as provided
above.

Competition.  Many competing  fixed-site and mobile  lithotripters are currently
operating  in and  around  the  Service  Area in  direct  competition  with  the
Partnership's  Mobile Lithotripsy  Systems.  The competing  lithotripsy  service
providers generally have existing contracts

                                                         3

<PAGE>
with  hospitals and other  facilities.  There is no assurance that other 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 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 in the Service Area's vicinity.  See "Prior
Activities"  and  "Competition."  Affiliates of the General Partner are planning
and  conducting   other  limited   partnership   offerings  that  would  operate
lithotripters  in other states.  In addition,  the Partnership will be competing
with  facilities and individual  medical  practitioners  who offer  conventional
treatment  (e.g.,  surgery) for kidney stones.  In order to be  successful,  the
Partnership must continually  convince  physicians and potential patients of the
quality of the treatment it can provide, its reasonable charges, the superiority
of its  lithotripters to other  lithotripters  and the advantages of lithotripsy
over conventional surgery and other treatment methods. The Partnership Agreement
severely  restricts the Limited  Partners' ability to own interests in competing
equipment or ventures. The enforceability of these noncompetition  agreements is
generally a matter of state law and is evolving  over time.  No assurance can be
given that one or more Limited  Partners may not  successfully  compete with the
Partnership.  See  "Proposed  Activities  - Treatment  Methods for Kidney  Stone
Disease" and "Competition."

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 regulations,  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 and may subject the
General  Partner  and all  Limited  Partners  to  governmental  scrutiny  and/or
prosecution as a felony and punishment in the form of large monetary fines, loss
of  licensure,  imprisonment  and exclusion  from Medicare and Medicaid.  Recent
changes in Medicare and Medicaid law have limited 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, the Health Care Financing  Administration
("HCFA"), the federal agency responsible for administering the Medicare program,
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 guidance,
then the Partnership and its physician Limited Partners would be 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

                                                         4

<PAGE>


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,  fines and/or  exclusion  from the Medicare and Medicaid
programs.

Regarding  state  law,  various  licensure  requirements  must  be met  for  the
Partnership to provide mobile lithotripsy services in Arkansas.  The Partnership
is in compliance with such requirements. See "Regulation - State Regulation".
 
Contract Terms and Termination. The Partnership provides lithotripsy services to
17 Contract Hospitals pursuant to 17 separate Hospital Contracts.  Many, but not
all, of the Hospital  Contracts  grant the  Partnership  the exclusive  right to
provide   Lithotripsy   Services   at   the   particular   Contract   Hospitals.
Substantially,  all of the Hospital Contracts provide for automatic renewal on a
year-to-year basis. Most of the Partnership's  Hospital Contracts are terminated
without  cause upon 90 days or less written  notice by either party prior to any
renewal  date or the  noticed  termination  date,  or upon  customary  events of
default.  Although three other  facilities  recently  terminated their contracts
with  the  Partnership  due to  competition  or the  acquisition  of  their  own
lithotripter,  the General Partner does not anticipate significant  terminations
and believes it has a good  relationship  with many of the  Contract  Hospitals.
There is no assurance,  however, that terminations will either not occur or that
the resulting impact to the Partnership would not have a material adverse effect
on  Partnership  operations.  It is expected that most new  lithotripsy  service
contracts would have one-year terms and be  automatically  renewed unless either
party  elects to cancel prior to the end of the term.  In addition,  many of the
existing contracts have, and any new contracts are expected to have, a provision
permitting  termination in the event certain laws or regulations  are enacted or
applied to the  contracting  parties'  business  arrangements in a manner deemed
materially detrimental to either party. See "Government Regulation" above. Thus,
there is no assurance that Partnership operations as planned on the date of this
Memorandum will occur

                                                         5
<PAGE>

or the Partnership's inability to secure new ones could have a material negative
impact on the financial  condition and results of the Partnership.  In addition,
competing  vendors may attempt to cause certain  Contract  Hospitals to contract
with  them  instead  of the  Partnership.  The  loss of  Contract  Hospitals  to
competition will adversely affect Partnership  revenues and such effect could be
material.   See   "Proposed   Activities   -  Business   Activities  -  Hospital
Contracts"and "Risk Factors - Competition."

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

Year 2000  Compliance.  The now familiar  "Year 2000 Issue"  arose  because many
existing  computer  programs  use only the last two  digits  to refer to a year.
Therefore,  such computer programs do not properly  recognize a year that begins
with "20" instead of "19." If not corrected,  many computer  applications  could
fail or create erroneous results on 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 Mobile 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 Mobile 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. Siemens, the manufacturer of the LithostarTM, has
not  assured  Prime  that  its  LithostarTM  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.  The
General  Partner has not inquired as to the Year 2000  readiness of any Contract
Hospital,  vendor or other third party related to the operation of the Business,
but is  relying  that such  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.


                                                         6

<PAGE>
Tax Risks

Investors  should note that the General  Partner  anticipates no significant tax
benefits  associated with the operation of the Mobile Lithotripsy Systems or the
Partnership. No ruling will be sought from the Service on the 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,  however,  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 C TO THE  MEMORANDUM).  IT IS STRONGLY  RECOMMENDED THAT EACH INVESTOR
INDE PENDENTLY CONSULT HIS PERSONAL TAX COUNSEL  CONCERNING THE TAX CONSEQUENCES
ASSOCIATED WITH HIS OWNERSHIP OF AN INTEREST IN THE PARTNERSHIP. THE CONCLUSIONS
REACHED IN THE OPINION ARE RENDERED WITHOUT ASSURANCE THAT SUCH CONCLUSIONS HAVE
BEEN OR WILL BE ACCEPTED BY THE SERVICE OR THE COURTS.

THIS MEMORANDUM AND THE OPINION DO NOT DISCUSS, NOR WILL COUNSEL BE RENDERING AN
OPINION  REGARDING,  THE  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 AND
JUDICIAL  INTERPRETATIONS  OF  APPLICABLE  FEDERAL  INCOME TAX LAWS.  ANY OF THE
FOREGOING MAY BE GIVEN RETROACTIVE EFFECT.

Possible  Legislative or Other Actions Effecting Tax  Consequences.  The federal
income tax treatment of an investment in an  equipment/service  oriented limited
partnership such as the Partnership 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  Partnership  each
Investor  should  consult with his personal tax advisor with respect to possible
legislative, judicial and administrative developments.

                                                         7
<PAGE>
Disqualification of Employee Benefit Plans. Purchase of Units in the Partnership
may cause certain Limited Partners,  certain hospitals and out-patient  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 legal counsel to the Partnership 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.

Partnership Allocations.  The Partnership 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  Regulations  dealing with the  propriety of  partnership
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 Partnership Agreement
would be sustained for federal  income tax purposes.  This opinion is subject to
certain  assumptions  and  qualifications.  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.  If Partnership  Cash Flow is insufficient to
fund expenses and maintain adequate reserves, a Limited Partner could be subject
to income taxes payable out of personal funds to the extent of the Partnership's
income,  if any,  attributed  to him  without  receiving  from  the  Partnership
sufficient  Distributions to pay the Limited  Partner's tax with respect to such
income.

Other Investment Risks

Conflicts  of Interest.  The  activities  of the  Partnership  involve  numerous
existing  and  potential  conflicts  of interest  between the  Partnership,  the
General Partner and their Affiliates.

                                                         8
<PAGE>
See  "Compensation and Reimbursement to the General Partner and its Affiliates,"
"General Partner," "Competition" and "Conflicts of Interest."

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

Limited Partners' Obligation to Return Certain Distributions. Except as provided
by other applicable law and provided that a Limited Partner does not participate
in the management of the Partnership,  he will not be liable for the liabilities
of  the  Partnership  in  excess  of  his  investment,   his  ratable  share  of
undistributed  profits and any Distribution received from the Partnership if the
Limited Partner knew at the time of the  Distribution  that, after giving effect
to the Distribution,  all liabilities of the Partnership, other than liabilities
to Partners on account of their Partnership interests,  exceed the fair value of
the assets of the Partnership.

Dilution of Limited Partners'  Interests.  The General Partner 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");  provided that the Percentage  Interests of the General  Partner and
Initial  Limited  Partners,  as in  effect  prior  to the  commencement  of this
Offering,  may  not  be  diluted  through  Dilution  Offerings  (including  this
Offering) by more than 20% in the aggregate without the prior written consent of
a Majority in Interest of all the  Partners.  Upon the sale of  interests in the
Partnership in a Dilution  Offering,  the  Percentage  Interests of the Partners
will be  proportionately  diluted.  See "Summary of the Partnership  Agreement -
Dilution Offerings."

Liability  Under Limited  Partner Loan.  Investors  financing a portion of their
Unit purchase price with the proceeds of a Limited Partner Loan will be directly
obligated to the Bank as provided in the Loan  Documents.  A default  under such
loan could  result in the  foreclosure  of the  Investor's  right to receive any
Partnership Distributions as well as the loss of other personal assets unrelated
to his Partnership  Interest.  Prospective Investors should review carefully all
the  provisions  contained in the Loan  Commitment  and the terms of the Limited
Partner  Note and Loan and  Security  Agreement  with his counsel and  financial
advisors. Neither the Partnership nor the General Partner endorses or recommends
to the prospective  Investors the  desirability of obtaining  financing from the
Bank nor does the summary of the Loan Documents provided

                                                         9
<PAGE>

herein  constitute legal advice. A Limited  Partner's  liability under a Limited
Partner  Note  continues  regardless  of whether the Limited  Partner  remains a
limited partner in the Partnership.  As a consequence,  such liability cannot be
avoided by claims, defenses or set-offs the Limited Partner may have against the
Partnership,  the  General  Partner  or their  Affiliates.  In  addition  to the
suitability  requirements discussed below, any prospective Investor applying for
a Bank loan to fund a portion of his Unit  purchase must be approved by the Bank
for  purposes  of his  delivery  of the  Limited  Partner  Note.  The  Bank  has
established its own criteria for approving the creditworthiness of a prospective
Investor  and has  not  established  objective  minimum  suitability  standards.
Instead, the Bank is empowered to accept or reject prospective Investors.

Long-term Investment.  The General Partner anticipates that the Partnership will
continue to operate the Mobile  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 Partnership 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
generally may not be transferred unless the General Partner is furnished with an
opinion of counsel, satisfactory to 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 Partnership
will be under no obligation  to register the Units or otherwise  take any action
that would enable the assignment or transfer of a Unit to be in compliance  with
applicable federal and state securities laws. Thus, a Limited Partner may not be
able to liquidate an investment in the  Partnership in the event of an emergency
and the Units may not be readily accepted as collateral for loans.  Moreover,  a
sale of a Unit by a Limited  Partner may cause adverse tax  consequences  to the
selling Limited Partner. Accordingly, the purchase of Units must be considered a
long-term  and illiquid  investment.  See "Tax Aspects of the Offering - Sale of
Partnership Units."

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

Limitation of General Partner's Liability and  Indemnification.  The Partnership
Agreement  provides  that  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  as long as the General  Partner,  in good
faith,  determined  such  course  of  conduct  was in the best  interest  of 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

                                                        10


<PAGE>

of its misfeasance or malfeasance than they would have absent the limitations in
the Partnership  Agreement.  The Partnership  will indemnify the General Partner
against  losses  sustained  by  the  General  Partner  in  connection  with  the
Partnership,  unless such losses came as a result of the General Partner's gross
negligence or willful misconduct. In the opinion of the SEC, indemnification for
liabilities  arising out of the  Securities Act is contrary to public policy and
therefore is unenforceable.

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

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

                                 THE PARTNERSHIP

     Fayetteville  Lithotripters  Limited  Partnership - Arkansas I, an Arkansas
     limited partnership (the "Partnership") was organized and created under the
     Arkansas  Uniform Limited  Partnership Act (the "Act") on January 17, 1990.
     The general  partner of the  Partnership  is  Lithotripters,  Inc., a North
     Carolina corporation (the "General Partner"), and a wholly owned subsidiary
     of Prime Medical Services,  Inc.  ("Prime").  The General Partner currently
     holds a 20%  interest  in the  Partnership  in its  capacity as the general
     partner and the existing limited partners (the "Initial Limited  Partners")
     currently  hold the  remaining 80% interest in the  Partnership  as limited
     partners  (including a 20.66% limited partner  interest held by the General
     Partner). In the event that

                                                        11
<PAGE>
     all 20 Units  offered  hereby  are  sold,  the  General  Partner  will hold
     approximately  a 16%  general  partner  interest  in the  Partnership,  the
     Initial  Limited  Partners will hold  approximately  a 64% limited  partner
     interest  in the  Partnership  and the  Investors  who  purchase  the Units
     offered  hereby (the "New Limited  Partners")  will hold an  aggregate  20%
     interest  in the  Partnership.  The  Percentage  Interests  of the  General
     Partner and Initial  Limited  Partners  (aggregate)  will decrease 0.2% and
     0.8%,  respectively,  for each Unit  sold.  The  principal  address  of the
     Partnership  and the  General  Partner is 2008 Litho  Place,  Fayetteville,
     North  Carolina  28034.  The telephone  number of the  Partnership  and the
     General Partner is (800) 682-7971.

                              TERMS OF THE OFFERING

The Units and Subscription Price

     Fayetteville  Lithotripters  Limited  Partnership  - Arkansas  I, a limited
     partnership  formed under the laws of the State of Arkansas,  hereby offers
     an aggregate  of 20 Units of limited  partner  interest in the  Partnership
     (the "Units").  Each Unit represents an initial 1% economic interest in the
     Partnership.  See "Risk  Factors - Other  Investment  Risks -  Dilution  of
     Limited Partners'  Interests." Each Investor may purchase not less than one
     Unit. The General Partner may, however,  in its sole discretion,  sell less
     than one Unit as a minimum  investment  and  reject in whole or in part any
     subscription.  The  price  for each  Unit is  $16,111  in cash  payable  at
     subscription;  however,  certain qualified Investors may purchase a portion
     of the purchase price through the Limited Partner Loans the Partnership has
     arranged  with the Bank.  See  "Terms  of the  Offering  - Limited  Partner
     Loans." The Proceeds of the Offering will first be used by the  Partnership
     to pay offering costs and expenses,  and the remainder of the proceeds will
     be used to  recondition  the  Partnership's  Coaches  (estimated at $50,000
     each) and pay for "loaner" Mobile  Lithotripsy  Systems during the time the
     Partnership's Coaches are being reconditioned  (estimated at $35,000 loaner
     per month for a two month period). See "Sources and Applications of Funds."
     The  proceeds of this  Offering  cannot be  calculated  until the number of
     Units sold has been  determined at the Closing.  To the extent the proceeds
     of the Offering are insufficient to fund the costs described above, or such
     costs exceed the estimated amounts, it is anticipated that Partnership Cash
     Flow and/or the proceeds of debt financing  will fund such costs.  There is
     no assurance, however, that Partnership Cash Flow or debt financing will be
     available  for  such  purposes.  See  "Risk  Factors  -  Operating  Risks -
     Partnership Limited Resources and Risks of Leverage."

Acceptance of Subscriptions

     An  Investor  that pays the full amount of his or her Unit  purchase  price
     with a check  at  subscription  and  whose  subscription  is  received  and
     accepted  by  the  Partnership,  will  become  a  Limited  Partner  in  the
     Partnership, and his or her subscription funds will be released from escrow
     to the Partnership.  Acceptance by the General Partner of a subscription of
     an  Investor  that elects to finance a portion of the Unit  purchase  price
     with the proceeds of a Limited Partner Note is conditioned  upon the Bank's
     approval of such loan. If the financing Investor is otherwise acceptable

                                                        12
<PAGE>
     to the Partnership,  after receipt of the Bank's approval,  the Partnership
     will  inform  the  Escrow  Agent  that  it  has  accepted  the   Investor's
     subscription  and the Escrow Agent will  release the Loan  Documents to the
     Bank and the Bank will pay the  proceeds  from the Limited  Partner Loan to
     the  Partnership.  The  Investor  will  become  a  Limited  Partner  in the
     Partnership  at the time  the  Bank  releases  the  proceeds  of his or her
     Limited Partner Note to the Partnership.  Subscriptions  may be rejected in
     whole or in part by the  Partnership  and need not be accepted in the order
     received. To the extent the Partnership reduces an Investor's  subscription
     as  provided  above,  the  Investor's  cash  Unit  purchase  price,  or the
     principal  amount of his Limited  Partner Note, as the case may be, will be
     proportionately refunded and reduced. Notice of acceptance of an Investor's
     subscription  to  purchase  Units  and  his  Percentage   Interest  in  the
     Partnership  will be furnished  promptly after acceptance of the Investor's
     Subscription.

Limited Partner Loans

     The  purchase  price for the Units is payable in cash with the  prospective
     Investor's  personal  funds  and/or in part with the  proceeds of a Limited
     Partner Loan. Financing under the Limited Partner Loans was arranged by the
     Partnership  with the Bank as  provided  in the Loan  Commitment,  attached
     hereto as  Appendix B.  If the  prospective  Investor  wishes to  finance a
     portion of the  purchase  price of his Units as  provided  herein,  he must
     deliver to the Sales Agent upon  submission of his  Subscription  Packet an
     executed  Limited  Partner Note payable to the Bank and Note Addendum,  the
     form of which are attached as Exhibit A to the Loan Commitment,  a Loan and
     Security Agreement,  the form of which is attached as Exhibit B to the Loan
     Commitment,  a  Security  Agreement,  the  form of  which  is  attached  as
     Exhibit C to the Loan  Commitment  and two  UCC-1's,  the form of which are
     attached to the Subscription Packet  (collectively,  the "Loan Documents").
     In no event may the maximum amount  borrowed per Unit exceed  $13,611.  The
     Limited Partner Note is repayable in twelve (12) predetermined installments
     in  the  respective   amounts  set  forth  in  the  Loan  Commitment.   The
     installments  are payable on each January 15th,  April 15th,  June 15th and
     September 15th commencing on April 15, 1999 (assuming the Closing occurs in
     1998), with a thirteenth (13th) and final installment in an amount equal to
     the  principal  balance  then  owed on the  Limited  Partner  Note  and all
     accrued,  unpaid interest thereon due and payable on the third  anniversary
     of the first installment date. Interest accrues at the Bank's "Prime Rate,"
     as the same may change  from time to time.  The Prime  Rate  refers to that
     rate  of  interest  established  by the  Bank  and  identified  as  such in
     literature published and circulated within the Bank's offices. Such term is
     used as a  means  of  identifying  a rate of  interest  index  and not as a
     representation by the Bank that such rate is necessarily the lowest or most
     favorable rate of interest  offered to borrowers of the Bank  generally.  A
     prospective  Investor  will have no claim or right of action  based on such
     premise.  See the form of the Limited Partner Note attached as Exhibit A to
     the Loan Commitment.

     The  Limited  Partner  Note will be secured by the cash flow  distributions
     payable with respect to the prospective  Investor's Partnership Interest as
     provided in the Loan and Security  Agreement and the Security Agreement and
     as evidenced by the UCC-1s.  By executing the Loan and Security  Agreement,
     the prospective Investor requests the Bank to extend the Loan Commitment to
     him if he is approved  for a Limited  Partner  Loan.  The Loan and Security
     Agreement also

                                                        13
<PAGE>

     authorizes  (i) the Bank to pay the  proceeds of the Limited  Partner  Note
     directly to the  Partnership  and the  Partnership to  acknowledge  receipt
     thereof and (ii) the Partnership to remit funds directly to the Bank out of
     the prospective  Investor's share of any  Distributions  represented by the
     prospective  Investor's percentage Partnership Interest to fund installment
     payments due on the  prospective  Investor's  Limited Partner Note. See the
     form of the Loan and Security  Agreement  attached as Exhibit B to the Loan
     Commitment which is attached hereto as Appendix B.

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

Subscription Period; Closing

     The subscription period will commence on the date hereof and will terminate
     at 5:00 p.m.,  Central  time,  on December 30, 1998 (the  "Closing  Date"),
     unless sooner  terminated by the General  Partner or unless extended for an
     additional period up to 180 days. See "Plan of Distribution."

Offering Exemption

     The Units are being  offered and will be sold in  reliance on an  exemption
     from the  registration  requirements  of the  Securities  Act of  1933,  as
     amended,  provided by Section  4(2)  thereof and Rule 506 of  Regulation  D
     promulgated  thereunder,  as amended,  and an exemption  from  registration
     provided by Section 23-42-509(c) of the Arkansas Code of 1987 Annotated, as
     amended, and Rule 509.01(B) of the regulations promulgated  thereunder,  as
     amended. The suitability

                                                        14
<PAGE>

          standards  set forth  below have been  established  in order to comply
          with the terms of these offering exemptions.

Suitability Standards

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

          An investment in the  Partnership  involves a high degree of financial
          risk and is suitable only for persons of substantial  financial  means
          who have no need for liquidity in their investments and who can afford
          to lose all of their investment.  See "Terms of The Offering - Limited
          Partner Loans." An Investor should not purchase a Unit if the Investor
          does  not have  resources  sufficient  to bear the loss of the  entire
          amount of the purchase  price,  including  any portion  financed.  The
          General   Partner   anticipates   selling  Units  only  to  individual
          investors;  however,  the General  Partner  reserves the right to sell
          Units to entities.

          Because of the risks involved, the General Partner anticipates selling
          the Units only to  Investors  residing in Arkansas  who it  reasonably
          believes meet the definition of "accredited  investor" 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  are  nonaccredited
          investors.  Certain  institutions  and the following  individuals  are
          "accredited investors":

          (1) An individual  whose net worth (or joint net worth with his or her
          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 or her 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.

          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 Federal and applicable state securities laws.

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


                                                        15
<PAGE>

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

          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. 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  (a  copy of  which  is  available  upon
          request to the General Partner).

How to Invest

          Investors  who  meet  the   qualifications   for   investment  in  the
          Partnership and who wish to subscribe for Units may do so as follows:

          a. By completing,  dating,  signing and acknowledging the Subscription
          Agreement  and  the  Counterpart  Signature  Page  to the  Partnership
          Agreement (the forms of which are included in the Subscription  Packet
          accompanying this Memorandum);

          b. By completing,  dating and signing the Purchaser Questionnaire (the
          form of which is included in the Subscription Packet accompanying this
          Memorandum);

          c. By having any purchaser  representative  who has acted on behalf of
          the Investor in connection with this Offering complete,  date and sign
          the  Purchaser  Representative  Questionnaire  (a  copy  of  which  is
          available upon request to the General Partner);

          d. By completing, dating and signing the Purchaser Financial Statement
          (in the form included in the Subscription Packet), or in lieu thereof,
          substituting the Investor's own personal executed financial statement,
          as long as such substitute  statement contains the same information as
          in  the  form  provided,  and  attaching  to the  Purchaser  Financial
          Statement or substitute  statement,  as the case may be, pages one and
          two of the Investor's  most recently  filed Form 1040 U.S.  Individual
          Income Tax Return;

          e. If the  Investor  is  financing  of a portion of the Unit  purchase
          price with a Limited  Partner Loan, by completing  and signing (on the
          front  and the  back),  but not  dating,  a Limited  Partner  Note and
          signing the form of Note Addendum  attached thereto (the form of which
          Limited  Partner Note (including the Note Addendum) is included in the
          Subscription  Packet  and  is  attached  as  Exhibit  A  to  the  Bank
          Commitment);


                                                        16
<PAGE>

          f. If the  Investor  is  financing  of a portion of the Unit  purchase
          price with a Limited  Partner Loan, by completing and signing (but not
          dating) the Loan and Security Agreement (the form of which is included
          in the  Subscription  Packet and is  attached as Exhibit B to the Bank
          Commitment);

          g. If the  Investor  is  financing  of a portion of the Unit  purchase
          price with a Limited  Partner Loan, by completing and signing (but not
          dating) the Security  Agreement  (the form of which is included in the
          Subscription  Packet  and  is  attached  as  Exhibit  C  to  the  Bank
          Commitment);

          h. If the Investor is financing a portion of the Unit  purchase  price
          with a Limited  Partner Loan, by completing  and signing two copies of
          the UCC-1 (the form of which is included in the Subscription  Packet);
          and

          i. By delivering or mailing all of the foregoing together with a check
          in the amount of $16,111 per Unit  subscribed  for, or $2,500 per Unit
          subscribed  for if the  investor  is  financing  a portion of the Unit
          purchase   price   through  a  Limited   Partner   Loan,   payable  to
          "First-Citizens  as Escrow  Agent for  Litho  L.P.-Arkansas  I" to the
          Sales Agent at 2008 Litho Place, Fayetteville, North Carolina 28304.

          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.

Restrictions on Transfer of Units

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


                                                        17
<PAGE>

          Any   assignment  of  Units  or  the  right  to  receive   Partnership
          Distributions  in respect of Units will not release the assignor  from
          any  liabilities   connected  with  the  assigned   Units,   including
          liabilities  under any Limited  Partner Loan. 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."

                                               PLAN OF DISTRIBUTION
          Subscriptions  for Units will be  solicited  by  MedTech  Investments,
          Inc., the Sales Agent,  which 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" any
          or all basis. The Sales Agent is not obligated to purchase any Units.

          The Sales  Agent is a North  Carolina  Corporation  that was formed on
          December 23, 1987, and became a member of the National  Association of
          Securities  Dealers on March 15, 1988. The Sales Agent will be engaged
          in other  similar  offerings on behalf of the General  Partner and its
          Affiliates during the pendency of this offering and in the future. The
          Sales Agent is a wholly owned subsidiary of Prime, which also owns all
          the stock of the General  Partner.  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 other commissions will
          be paid in connection with this Offering. Subject to the conditions as
          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  $7,500.  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 or her decision to purchase Units.

                                                        18
<PAGE>

          The  subscription  period  will  commence  on the date hereof and will
          terminate at 5:00 p.m.,  Little Rock,  Arkansas  time, on December 30,
          1998, (or earlier,  in the discretion of the General Partner),  unless
          extended at the  discretion  of the General  Partner for an additional
          period not to exceed 180 days.

          The  Partnership  seeks by this Offering to sell a maximum of 20 Units
          for a maximum of an  aggregate  of $322,220 in cash  ($317,220  net of
          Sales Agent Commissions). The Partnership has set no minimum number of
          Units to be sold in this Offering.  The  subscription  funds, and Loan
          documents,  if any, received from each Investor will be held in escrow
          (which,  in the case of cash subscription  funds,  shall be held in an
          interest  bearing  escrow  account  with the Bank)  until  either  the
          Investor's  subscription is accepted by the Partnership  (and approved
          by the  Bank  in  the  case  of  financed  purchases  of  Units),  the
          Partnership  rejects the  subscription  or the Offering is terminated.
          Upon the receipt and acceptance of an Investor's subscription,  which,
          if the  Investor  intends to  finance a portion  of the Unit  purchase
          price with a Limited Partner Loan, will be conditioned upon the Bank's
          approval of the Loan, the Investor will be admitted to the Partnership
          as a  Limited  Partner.  Upon  admission  as a  Limited  Partner,  the
          Investor's  subscription  funds will be  released  from  escrow to the
          Partnership,  and the Loan Documents,  if any, will be released to the
          Bank which will pay the proceeds from the Limited  Partner Note to the
          Partnership.  In  the  event  a  subscription  is  not  accepted,  all
          subscription  funds (without  interest),  the Loan Documents and other
          subscription documents held in escrow will be promptly returned to the
          rejected  Investor.  The Offering will terminate on December 30, 1998,
          unless it is  sooner  terminated  by the  General  Partner,  or unless
          extended for an additional  period not to exceed 180 days.  See "Terms
          of the Offering - Subscription Period; Closing."


                                                BUSINESS ACTIVITIES

General

          The Partnership was formed to (i) acquire a Mobile  Lithotripsy System
          and  operate it at  various  locations  primarily  in  Arkansas,  (ii)
          improve the provision of health-care in the Partnership's service area
          by taking advantage of both the technological  innovations inherent in
          the LithostarTM and the  Partnership's  quality  assurance and outcome
          analysis  programs,  and (iii) make cash distributions to its Partners
          from  revenues  generated by the  operation of the Mobile  Lithotripsy
          System.  The  Partnership  owns and  operates  two Mobile  Lithotripsy
          Systems in the Service Area and has contracted with 17 hospitals,  and
          medical centers and ambulatory surgical centers to provide lithotripsy
          services for a per procedure fee.

Treatment Methods for Kidney Stone Disease

          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.  Approximately 75% of all
          urinary

                                                        19
<PAGE>

          stones  pass  spontaneously,  usually  within  one to two  weeks,  and
          require  little or no  clinical or  surgical  intervention.  All other
          kidney  stones,  however,  require  some form of medical  or  surgical
          treatment.  A number of methods  are  currently  used to treat  kidney
          stones.  These methods include drug therapy,  cystoscopic  procedures,
          endoscopic procedures,  laser procedures,  open surgery,  percutaneous
          lithotripsy and  extracorporeal  shock wave  lithotripsy.  The type of
          treatment a urologist  chooses  depends on a number of factors such as
          the size of the stone,  its location in the urinary system and whether
          the  stone is  contributing  to other  urinary  complications  such as
          blockage or infection.  The  extracorporeal  shock wave  lithotripter,
          introduced  in the  United  States  from  West  Germany  in 1984,  has
          dramatically changed the course of kidney stone disease treatment. 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.

The LithostarTM

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

     The  LithostarTM was designed with a view towards  substantially  improving
          early  lithotripsy  technology.  See "Proposed  Activities - Treatment
          Methods  for  Kidney  Stone   Disease  -   Extracorporeal   Shock-Wave
          Lithotripsy."   Technological   improvements   incorporated  into  the
          LithostarTM  include an improved work station, a shock-wave  component
          that  has  eliminated  the  need for both  water  bath  treatment  and
          disposable electrodes, and an excellent stone localization and imaging
          system.  Based  upon  its  experience  in its  affiliated  lithotripsy
          ventures,  the General  Partner  believes  that most  patients  can be
          treated  with the  LithostarTM  without  anesthesia  of any kind.  The
          General  Partner also  believes  that  LithostarsTM  upfitted with the
          higher  intensity   shock-head  system  experience   somewhat  shorter
          treatment durations.

     Based upon  its   experience   with  30  LithostarsTM   in  other   limited
          partnerships sponsored by the General Partner and its Affiliates,  the
          General  Partner has found that the  LithostarTM can crush most kidney
          stones  without  anesthesia,  cystoscopy  or the insertion of ureteral
          catheters.  Because of the General  Partner's  belief in the  superior
          imaging  of  the  LithostarTM,   the  General  Partner  believes  that
          lithotripsy  with the  LithostarTM  provides  for  treatment  of lower
          ureteral

                                                        20
<PAGE>

          stones,   even  impacted  stones,   thereby   rendering   urethroscopy
          practically obsolete as a treatment of first choice.

The Calumet Coaches

     The  Calumet Coach is a  self-propelled  motor vehicle  manufactured by the
          Calumet  Coach Company of Calumet City,  Illinois.  The  Partnership's
          Calumet Coach which houses its first  LithostarTM  was first placed in
          operation  by the  Partnership  in 1990 and its  Calumet  Coach  which
          houses the second  LithostarTM  was first  placed in operation in 1982
          and acquired by the Partnership in 1996. The Calumet Coach Company has
          manufactured  self-propelled  coaches  upfitted  for the  provision of
          various medical  services for since the early 1980's.  It is estimated
          by the  manufacturer  that it  currently  has over 200  self-propelled
          medical service  coaches in operation.  The coaches have housed CT and
          other  imaging   equipment,   as  well  as  lithotripsy   machines  of
          manufacturers other than Siemens.

          The Calumet Coach has been completely upfitted for the LithostarTM and
          its  clinical  operations.  In the  procedure  mode,  with  slide-outs
          expanded,  the interior  square  footage is  approximately  276 square
          feet.  The coach is easy to drive and can be  operated  by a radiology
          technician, thus there is no need for an additional or special driver.

          Service for the Calumet Coaches is obtained on an as-needed basis. The
          General Partner estimates that expenditures for maintenance and repair
          have been  incurred  at a rate of  approximately  $15,000 per year per
          Coach.

Anticipated Partnership Expenditures

          Both of the Partnership's Coaches are scheduled to be reconditioned in
          1999 and 2000, respectively at an estimated cost of $50,000 per Coach,
          which  amount  would be paid to AK  Associates,  an  Affiliate  of the
          General  Partner engaged in the selling and  refurbishment  of medical
          equipment trailers and coaches. See "Compensation and Reimbursement to
          the General  Partner and its  Affiliates."  Reconditioning  of a Coach
          typically  takes  six to eight  weeks  and  consists  of  removal  and
          reinstallation  of  the  lithotripter,  replacement  of  the  interior
          floors,  cabinets and wall coverings,  exterior body work,  repainting
          and  re-decaling the exterior and service to the expanding wall slide-
          outs.  During the time a Coach is being  refurbished,  the Partnership
          would likely rent a  replacement  Mobile  Lithotripsy  System from the
          General  Partner or its  Affiliates  at an estimated per month rate of
          $35,000.  Any necessary Coach maintenance is likely to be performed by
          an Affiliate of the General Partner at commercially  reasonable rates.
          See  "Compensation  and  Reimbursement  to the General Partner and its
          Affiliates."

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) an  additional  Mobile
          Lithotripsy System or (ii) any other assets related to

                                                        21
<PAGE>

          the  provision  of  lithotripsy  services,  the General  Partner  may,
          without  the consent of the Limited  Partners,  establish  reserves or
          borrow funds on behalf of the Partnership to acquire such assets,  and
          may use  Partnership  assets  and  revenues  to secure  and repay such
          borrowings.  Any additional borrowing by the Partnership will serve to
          increase the risks associated with leverage.

Hospital Contracts

          The Partnership  has entered into Hospital  Contracts with 17 Contract
          Hospitals  to operate the Mobile  Lithotripsy  Systems at the Contract
          Hospitals.  Most of the Hospital Contracts have an initial term of one
          year and  automatically  renew for successive  one-year periods unless
          the  Partnership  or the hospital  delivers to the other party written
          notice of its  decision  not to renew the  agreement  at least 60 days
          prior  to the  anticipated  termination  date.  Most  of the  Hospital
          Contracts  are  terminated  without  cause  by  either  party on short
          notice, generally 90 days or less. The Contract Hospitals are:


AMI National Park Medical Center, Hot Springs
BEC Surgery Center, Hot Springs
Baptist Medical Center, Little Rock
Baptist Memorial Medical Center, Little Rock
Baxter County Regional Hospital, Mountain Home
Conway Regional Hospital, Conway
Jefferson Regional Medical Center, Pine Bluff
The Medical Center of South Arkansas, El Dorado
Ouachita County Hospital, Camden
Physicians Surgery Center, Little Rock
Rebsaman Regional Medical Center, Jacksonville
Saline Memorial Hospital, Benton
Sparks Regional Medical Center, Fort Smith
St. Bernard's Regional Medical Center, Jonesboro
St. Joseph's Regional Health Center, Hot Springs
White County Memorial Hospital, Searcy
White River Medical Center, Batesville


                                                        22
<PAGE>

          The Hospital  Contracts  require  each  hospital to provide the Mobile
          Lithotripsy Systems with site pad space, utility hookups, nonphysician
          medical personnel and billing and accounting  services in exchange for
          the  right  to  collect  a fee  from  each  patient  who  undergoes  a
          Lithotripsy  procedure  at  that  hospital.  The  General  Partner  is
          attempting to negotiate similar  agreements with additional  hospitals
          or outpatient surgical centers located in Arkansas.

          The  Partnership  or hospital  charge a lithotripsy  technology fee to
          each patient  treated with a  LithostarTM  which is separate and apart
          from any  professional  fee charged by the  physician who performs the
          lithotripsy  procedure.  The  technology  fee received from  privately
          insured patients averages  approximately $3,500 while the fee received
          from government  program patients is  significantly  less. There is no
          assurance  that these fee levels can be maintained as the  lithotripsy
          fees charged by the  Partnership  or hospitals  are largely  dependent
          upon the amount of  reimbursement  private  health care  insurers will
          allow for this procedure.  In addition, most of the Hospital Contracts
          provide  that  the  fee  charged  to  public  program  payors  by  the
          Partnership for use of the lithotripter  must at all times be equal to
          or less than the lowest amount the  Partnership  charges any privately
          insured   patient.   See  "Risk  Factors  -  Dependence  on  Insurance
          Reimbursement."

Management

          The  Partnership   has  entered  into  a  management   agreement  (the
          "Management  Agreement")  with the General Partner whereby the General
          Partner is obligated to supervise and  coordinate  the  management and
          administration of the operation of the Mobile  Lithotripsy  Systems on
          behalf of the  Partnership  in exchange for a monthly  management  fee
          equal to the  greater  of 7.5% of  Partnership  Cash Flow per month or
          $8,000 per month. See  "Compensation  and Reimbursement to the General
          Partner and its Affiliates." The General Partner's  services under the
          Management  Agreement include training physicians in the proper use of
          the  LithostarsTM,   monitoring  technological developments  in  renal
          lithotripsy  and  advising  the  Partnership  of  these  developments,
          arranging  continuing  education programs for qualified physicians who
          use the  LithostarsTM  and  providing  advertising,  billing, accounts
          collection,  equipment maintenance, medical supply inventory and other
          incidental  services  necessary  for the  efficient  operation  of the
          Mobile Lithotripsy  Systems.  Costs incurred by the General Partner in
          performing  its  duties  under  the   Management   Agreement  are  the
          responsibility of the Partnership.  The General  Partner's  engagement
          under the  Management  Agreement is as an  independent  contractor and
          neither the Partnership nor its Limited Partners have any authority or
          control  over the  method  or  manner  in which  the  General  Partner
          performs its duties under the  Management  Agreement.  The  Management
          Agreement  is in the first  5-year  renewal  term and will be up for a
          second renewal for an additional  five-year term in 2000.  Thereafter,
          it  will  be  automatically  renewed  for an  additional  term  unless
          terminated by the Partnership or the General Partner.

Employees

          The  Partnership  employs  as full  time  employees  a  total  of four
          registered technicians and four registered nurses.

                                                        23
<PAGE>


                                                THE GENERAL PARTNER

          General.  The General  Partner of the  Partnership  is  Lithotripters,
          Inc., a North Carolina  corporation  formed in  November 1987  for the
          purpose  of  sponsoring  medical  service  limited  partnerships.  The
          General  Partner was founded by William R.  Jordan,  M.D. and became a
          wholly owned  subsidiary of Prime in 1996. See "Conflicts of Interest"
          and "Prior  Activities." The principal executive office of the General
          Partner is located at 2008 Litho Place,  Fayetteville,  North Carolina
          28304, and its telephone number is (800) 682-7971.

          Management.  The following  table sets forth the names and  respective
          positions  of  the  individuals  serving  as  executive  officers  and
          directors of the General  Partner,  many of whom were  shareholders of
          the  General  Partner  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               Chief Financial Officer
                  Cheryl Williams             Vice President and Director
                  Philip J. Gallina           Secretary and Treasurer

          Supervision of the day-to-day  management  and  administration  of the
          Partnership is the responsibility of the General Partner.  The General
          Partner  itself  is  managed  by a  three-member  Board  of  Directors
          composed of Dr.  Jenkins,  Mr. Shifrin and Ms.  Williams.  The General
          Partner is a wholly-owned subsidiary of Prime.

          Descriptions of the background of the executive officers and directors
          of the General Partner appear below.

          Joseph  Jenkins,  M.D.  has been  President of Prime since April 1996.
          From May 1990 until December 1991, Dr. Jenkins was a Vice President of
          the General  Partner and previously  practiced  urology in Washington,
          North Carolina.  Dr. Jenkins has been President of the General Partner
          since  1992 and was  recently  elected to is Board of  Directors.  Dr.
          Jenkins is a board certified  urologist and is a founding member,  the
          immediate  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  recently  elected a Director of the
          General Partner  following  Prime's  acquisition of all of the General
          Partner's stock. Mr. Shifrin also has served in various capacities

                                           24
<PAGE>

          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 has been Chief Financial  Officer of the General Partner
          since 1991.  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 General Partner
          and served in that capacity until April 1996.

          Cheryl  Williams  is a  Director  and Vice  President  of the  General
          Partner.   Ms.  Williams  has  been  Chief  Financial  Officer,   Vice
          President-Finance  and  Secretary  of Prime  since  October 1989.  Ms.
          Williams  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.

          Philip J.  Gallina  recently became the Secretary and Treasurer of the
          General Partner,  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.

                      COMPENSATION AND REIMBURSEMENT TO THE
                       GENERAL PARTNER AND ITS AFFILIATES

          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 continued  operation and  management  of the  Partnership  and the
          Mobile 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
          Partnership. See "Business Activities - Management and Administration"
          and "Plan of Distribution."

          1. Management Fee. Pursuant to the Management  Agreement,  the General
          Partner  has  contracted   with  the   Partnership  to  supervise  the
          management  and  administration  of the  day-to-day  operations of the
          Partnership's  lithotripsy  business  for a  monthly  fee equal to the
          greater  of $8,000 or 7.5% of  Partnership  Cash Flow per  month.  All
          costs  incurred by the General  Partner in performing its duties under
          the  Management  Agreement  are the  responsibility  of,  and are paid
          directly or reimbursed by, the Partnership. The General Partner is the
          management agent for various  affiliated  lithotripsy  ventures.  As a
          consequence,  many of the General Partner's  employees provide various
          management  and   administrative   services  for  numerous   ventures,
          including the Partnership.

                                                        25
<PAGE>

          In order to  properly  allocate  the  costs of the  General  Partner's
          employees  and other  overhead  expenses  among the entities for which
          they  provide  services,  such  costs  will be  divided  among all the
          ventures based upon the relative  number of patients  treated by each.
          The  General  Partner  believes  that the  sharing  of  personnel  and
          overhead costs among various  entities  results in  significant  costs
          savings for the Partnership. The management fee for any given month is
          payable on or before the 30th day of the next  succeeding  month.  The
          Management  Agreement  is in its first  five-year  renewal  term which
          expires  in  2000.  The  Management  Agreement  will be  automatically
          renewed for up to two additional  successive five-year terms unless it
          is earlier  terminated by the Partnership or the General Partner.  The
          General  Partner  is  reimbursed  by the  Partnership  for  all of its
          out-of- pocket costs  associated with the operation of the Partnership
          and the Mobile  Lithotripsy  Systems,  and the Partnership will pay or
          reimburse  to  the  General  Partner  all  expenses  related  to  this
          Offering. No other fees or compensation will be payable to the General
          Partner or its Affiliates for managing the Partnership  other than the
          management  fee  payable to the  General  Partner as  provided  in the
          Management Agreement. The Partnership may, however,  contract with the
          General  Partner or its Affiliates to render other services or provide
          materials to the Partnership  provided that the compensation is at the
          then  prevailing  rate  for the  type  of  services  and/or  materials
          provided.

          2.  Partnership  Distributions.  In its capacity as general partner of
          the  Partnership,  the General  Partner is entitled its  distributable
          share (20%,  before  dilution) of Partnership  Cash Flow,  Partnership
          Sales Proceeds and Partnership Refinancing Proceeds as provided by the
          Partnership Agreement.  The General Partner also owns a 20.66% (before
          dilution)  limited partner interest in the Partnership and is entitled
          to  Distributions  on account of such  interest.  See  "Summary of the
          Partnership  Agreement - Profits,  Losses and  Distributions"  and the
          Partnership Agreement attached as Appendix B.

          3. 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" any or all basis. As compensation for its services, the
          Sales Agent will receive a commission equal to $250 for each Unit sold
          (up to an aggregate of $5,000).  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 $7,500. See "Plan of Distribution" and "Conflicts
          of Interest."

          4.  Reconditioning  of  Coaches.  It is  anticipated  that the General
          Partner will cause the Partnership to contract with AK Associates,  an
          Affiliate  of  the  General  Partner,   to  recondition  each  of  the
          Partnership's Coaches in 1999 and 2000, respectively,  at an estimated
          per Coach cost of $50,000.  In addition,  it is  anticipated  that the
          General  Partner  will  cause the  Partnership  to  contract  with the
          General Partner or its affiliates to rent "loaner" Mobile  Lithotripsy
          Systems   during  the  time  the   Partnership's   Coaches  are  being
          reconditioned  at an  estimated  per month  price of $35,000 per unit.
          Reconditioning is expected to take six to eight weeks. Accordingly, it
          is anticipated  that the Partnership will pay an aggregate of $140,000
          to the General  Partner and its  Affiliates  for loaner units over the
          next two years. The Partnership may require additional loaner units or
          rental time in the event any of the Partnership's  Mobile  Lithotripsy
          Systems experience

                                                        26
<PAGE>

          substantial down time for other maintenance or repairs.  See "Business
          Activities - Anticipated Partnership Expenditures."

          5. 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.

                              CONFLICTS OF INTEREST

          The  operation  of the  Partnership  involves  numerous  conflicts  of
          interest  between  the  Partnership  and the  General  Partner and its
          Affiliates.  Because  the  Partnership  is  operated  by  the  General
          Partner,   such  conflicts  are  not  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 Partnership's investment objectives and policies. The
          General  Partner,  its Affiliates and employees of the General Partner
          will in good faith continue to 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.

          The General  Partner and its Affiliates  will receive  management fees
          and  broker-dealer  sales  commissions in connection with the business
          operations of the  Partnership  and the sale of the Units that will be
          paid  regardless of whether any sums  hereinafter  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 other services or provide materials to the Partnership provided
          that the  compensation  is at the then prevailing rate for the type of
          services and/or materials provided. It is anticipated that the General
          Partner and/or its Affiliates will receive fees for reconditioning the
          Partnership's  Coaches  and rental  payments  in  connection  with the
          provision of loaner  Mobile  Lithotripsy  Systems  during the time the
          Coaches are being reconditioned. The General Partner will also receive
          interest  on  loans,  if  any,  it  makes  to  the  Partnership.   See
          "Compensation  and  Reimbursement  to  the  General  Partner  and  its
          Affiliates."

          The General  Partner and its  Affiliates  will devote as much of their
          time to the  business  of the  Partnership  as in  their  judgment  is
          reasonably  required.  Principals  of the  General  Partner  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,
                                                        27
<PAGE>

          have  sufficient  resources  to be  capable of fully  discharging  the
          General  Partner's  and  its  Affiliates'   responsibilities   to  the
          Partnership.  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
          Partnership  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 employees of the General Partner
          engage in  medical  service  activities  for their own  accounts.  See
          "Prior Activities." The General Partner may serve as a general partner
          of other limited  partnerships that are similar to the Partnership and
          does not intend to devote its entire  financial,  personnel  and other
          resources to the Partnership.  Except as provided by law, none of such
          entities or their respective Affiliates is prohibited from engaging in
          any  business  or  arrangement  that  may be in  competition  with the
          Partnership.  An affiliate of the General Partner,  Prime Lithotripter
          Operations,  Inc.  d/b/a  Tennessee  Valley  Lithotripter,  operates a
          lithotripsy  services  venture  that  provides  services  to  Arkansas
          Methodist  Hospital in  Paragould,  Arkansas.  The General  Partner is
          planning  other  limited  partnership  offerings  that  would  operate
          lithotripsy businesses in other states. See "Competition."

          The Sales Agent is MedTech Investments, Inc., which is an Affiliate of
          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 Partnership 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 Prime.

                 FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER

          The General  Partner is accountable to the  Partnership as a fiduciary
          and  consequently  must  exercise  good faith in handling  Partnership
          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 have no
          liability to the  Partnership  or to any Partner for any loss suffered
          by the  Partner  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 Partnership and such course of conduct did
          not constitute gross  negligence or willful  misconduct of the General
          Partner or its Affiliates.  Accordingly,  Limited Partners have a more
          limited  right  of  action  than  they  otherwise   would  absent  the
          limitations  set  forth  in the  Partnership  Agreement.  The  General
          Partner and its  Affiliates  will be  indemnified  by the  Partnership
          against any losses, judgments,  liabilities, expenses and amounts paid
          in settlement of any claims  sustained by them in connection  with the
          Partnership, provided that the same were not the result of gross

                                                        28
<PAGE>

          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 Partnership
          pursuant  to  the  foregoing  provisions,  the  Partnership  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.

                                   COMPETITION

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

Affiliated Competition

          Affiliates of the General Partner presently provide mobile lithotripsy
          services in Arkansas and in  surrounding  states.  Prime  Lithotripter
          Operations, Inc., d/b/a Tennessee Valley Lithotripter, provides mobile
          lithotripsy  services at  Arkansas  Methodist  Hospital in  Paragould,
          though its primary  operations are in Tennessee.  Other  Affiliates of
          the General Partner provide mobile lithotripsy  services in the states
          surrounding Arkansas.

Other Competition

          The Partnership  faces  competition  from other  lithotripsy  services
          offered in the geographic area served by the Partnership.  To the best
          knowledge  of  the  General  Partner,   Medstone   provides  a  mobile
          lithotripter  at  University  Hospital  of  Arkansas  in Little  Rock,
          Washington  Regional  Medical  Center  in  Fayetteville,   at  Central
          Arkansas Hospital in Searcy,  Crawford Memorial Hospital in Van Buren,
          Bates Medical  Center in  Bentonville,  White River Medical  Center in
          Batesville  (where the Partnership also operates a Mobile  Lithotripsy
          System)  and in  Texarkana.  A  mobile  lithotripter  (brand  unknown)
          provide  services at North  Arkansas  Medical  Center in  Harrison.  A
          Dornier  MFL-5000  provides  fixed-base  services at St.  Vincent's in
          Little Rock. Tenet Hospital  provides a mobile Lithostar at St. Mary's
          Regional Medical Center in Russellville  and at Methodist  Hospital in
          Jonesboro.  A mobile  Lithostar  provides  services  at Baxter  County
          Regional  Hospital  in  Mountain  Home  (where  the  Partnership  also
          operates its Mobile Lithotripsy System).  Other hospitals,  ambulatory
          surgery  centers  or other  healthcare  facilities  in and  around the
          Service  Area,  including  Missouri,  may  provide  or have  access to
          lithotripsy services, whether fixed-base or mobile.

          Other  hospitals  in the Service  Area served by the  Partnership  may
          operate   lithotripters   which  are  not  extracorporeal   shock-wave
          lithotripters   but  rather   use   lasers  or  are   electrohydraulic
          lithotripters.  The General  Partner  believes both these machines are
          qualitatively inferior to the

                                                        29
<PAGE>

          LithostarTM because the machines are limited to treatment of stones in
          the ureter and because anesthesia is required prior to treatment.  The
          LithostarTM  can be used on stones in locations  other than the ureter
          and no anesthesia is required  generally.  See "Proposed  Activities -
          Treatment Methods for Kidney Stone Disease".

          The  General  Partner  is  generally  unfamiliar  with the cost of the
          lithotripsy procedures offered by the Partnership's  competitors.  The
          General Partner  believes the Partnership has a competitive  advantage
          over  many  competitors  because  the  LithostarTM  is technologically
          superior to many other  lithotripters.  This competitive  advantage is
          further  enhanced  by the  General  Partner's  expertise  in  training
          physicians in the low-intensity  lithotripsy technique.  See "Proposed
          Activities - Description of the LithostarTM".

          There is no assurance that new competing  lithotripsy clinics will not
          open in the  future  or that  innovations  in  lithotripters  or other
          treatments  of  kidney  stone  disease  will not make the  LithostarTM
          competitively   obsolete.  See  "Risk  Factors  -  Operating  Risks  -
          Technological Obsolescence".  In addition, the General Partner and its
          Affiliates  are not restricted  from engaging in lithotripsy  ventures
          unassociated   with  the  Partnership   which  may  compete  with  the
          Partnership.

          The General  Partner  recently  proposed to the Limited  Partners  for
          approval an amendment to the Partnership  Agreement designed to expand
          the  prohibition  on  competition by Limited  Partners;  however,  not
          enough Limited Partners voted to adopt the amendment,  and the General
          Partner withdrew it.

     Siemens is under no obligation to the General Partner or the Partnership to
          refrain from selling LithostarTM  systems to urologists,  hospitals or
          other persons for use in Arkansas or elsewhere.  In addition,  several
          medical  equipment  manufacturers  are expected to offer  lower-priced
          lithotripters for sale, which 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. Lithotripters can be obtained
          from manufacturers other than Siemens. The General Partner is familiar
          with many of the  lithotripters  offered  by other  manufacturers  and
          believes  that while some may be offered  for a lower  purchase  price
          than the LithostarTM,  their higher operating costs, particularly with
          respect  to   electrode   replacement   costs  not  present  with  the
          LithostarTM, make them more expensive than the LithostarTM in the long
          run.  Potential  competitors  also  have  access  to  newer  and  less
          expensive  lithotripters,  including  transportable  models  which are
          capable of more  efficiently  serving  multiple sites.  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.



                                                        30
<PAGE>

                                                    REGULATION

Federal Regulation

          The  Partnership  is 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 improvement,
          loss of  reimbursement,  fines  or  exclusion  from  participation  in
          Medicare or Medicaid.  Therefore,  adverse  reviews of the Partnership
          operations  at any of the  various  regulatory  levels  may  adversely
          affect the operations and profitability of the Partnership.

          Reimbursement.  The Partnership will be subject to federal  government
          oversight as the Partnership will seek  reimbursement for its services
          to  patients  who  are  beneficiaries  of the  Medicare  and  Medicaid
          programs.  Medicare reimbursement policies are statutorily created and
          are  regulated  by the federal  government.  Currently,  the  Medicare
          program pays for renal  lithotripsy  services  under Part A (inpatient
          hospital  service)  and Part B  (outpatient  and  physician  services)
          benefits to the beneficiary.

          Medicare  has  adopted  a  prospective   payment,   diagnostic-related
          grouping  ("DRG")  based  reimbursement  system  for Part A  inpatient
          hospital services. A DRG has been established for extracorporeal shock
          wave  lithotripsy  services for renal kidney stones.  The value of the
          DRG,   and  thus  the  amount  of   reimbursement   payable   for  the
          nonprofessional  service  (nonphysician)  component of the lithotripsy
          service,  is adjusted for various  factors  including,  among  others,
          whether the  facility  is located in an urban  area,  local labor cost
          indices and case-mix for the particular  hospital or other facility at
          which the  service is  provided.  All of these  factors are subject to
          periodic  recalculation  and change  depending upon events outside the
          control of the  Partnership.  The General  Partner  believes  that the
          Partnership's  lithotripsy procedures will not generally be subject to
          the  current  DRG program  because  the DRG  program  applies  only to
          inpatient procedures,  and lithotripsy  procedures can be performed on
          an outpatient basis for most patients.

          The  Balanced  Budget  Act  of  1997  required  HCFA  to  establish  a
          prospective  payment  system for  outpatient  procedures.  HCFA issued
          proposed  regulations on September 8, 1998.  HCFA proposes a base rate
          of  $2,612  for  outpatient  lithotripsy  procedures,  which  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  in a fashion  similar to
          the adjustments for inpatient reimbursement discussed in the preceding
          paragraph.  The proposed regulations state HCFA plans to implement the
          outpatient  prospective  payment system sometime after January 1, 2000
          (although  the  Balanced  Budget Act  contemplated  implementation  by
          January 1,  1999). The General Partner believes that implementation of
          the proposed base rate for lithotripsy procedures will have an adverse
          effect on the Partnership's revenues.

          Proposed  HCFA rules  issued on June 12, 1998  setting the  ambulatory
          surgery center rate for various procedures  include  lithotripsy among
          those  procedures  approved  for  Medicare  reimbursement.  While  the
          proposed rules had a target effective date of October 1, 1998, the

                                                        31
<PAGE>

          effective date has been postponed  indefinitely for reasons  unrelated
          to  lithotripsy  coverage.  However,  the proposed  rules'  commentary
          discusses  the  history  of  attempts  by HCFA  several  years  ago to
          authorize Medicare reimbursement for lithotripsy at ambulatory surgery
          centers.  These  attempts (in 1990 and 1991) were  enjoined by federal
          courts in litigation  initiated by the American  Lithotripsy  Society,
          which  challenged  the  reimbursement  rates proposed by HCFA ($812 in
          1990 and $1,150 in 1991). The proposal for reimbursement  contained in
          the June 1998 proposed rules assigns a Medicare  reimbursement rate of
          $2,107 for  lithotripsy if the procedure is performed at an ambulatory
          surgery center.  Whether these proposed rules will become effective to
          authorize Medicare reimbursement at ambulatory surgery centers and, if
          they do become effective, whether the proposed reimbursement rate will
          remain unchanged, is unknown to the General Partner.

          HCFA's rates under the proposed outpatient  prospective payment system
          and ambulatory surgery center reimbursement are lower than the General
          Partner's typical charges for the procedure. Medicare reimbursement is
          not expected to constitute  more than  one-third of the  Partnership's
          revenues.  However, the Medicare program has become an industry leader
          in setting  reimbursement  standards which influence private insurance
          programs.   Therefore,   implementation  of  the  proposed  outpatient
          prospective payment system or ambulatory surgery center  reimbursement
          may negatively  affect  reimbursement by private  insurance  programs,
          which could have a material adverse effect on Partnership revenues.

          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.  Thus,  changes in lithotripsy  technology
          will be subject to review by the Medicare program and potential future
          decreases  in  reimbursement  must  be  considered   probable  as  the
          lithotripsy  procedure has been identified by the Medicare  program as
          an overvalued one.

          The Medicaid  program in Arkansas 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   Arkansas   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 Arkansas 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 Arkansas  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

                                                        32
<PAGE>

          certain  physicians. 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.
          Section1395nn)("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 did not apply to
          the  Partnership's  lithotripsy  services.  Stark II  applies  only to
          ownership  interests  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.  Section  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 a
          financial relationship.

          On January 9, 1998, the Health Care Financing Administration ("HCFA"),
          the federal agency responsible for administering the Medicare program,
          published proposed regulations  interpreting the Stark II statute (the
          "Proposed  Stark II  Regulations").  The Proposed Stark II Regulations
          and  HCFA's  accompanying  commentary  apply  the  physician  referral
          prohibitions  of Stark II to the  Partnership's  typical  practice  of
          contracting  "under  arrangements"  with  hospitals  for treatment and
          billing of Medicare and Medicaid patients. Under the Proposed Stark II
          Regulations,  physician  Limited  Partner  referrals  of Medicare  and
          Medicaid patients to contracting hospitals would be prohibited because
          the  Partnership is regarded as an entity that  "furnishes"  inpatient
          and outpatient hospital services.  HCFA, however,  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 to representatives of the
          General  Partner that some form of regulatory  relief for  lithotripsy
          may be forthcoming;  however, no assurances can be made that such will
          be the case.


                                                        33
<PAGE>

          At the present time the Stark II regulations  are only  proposed,  and
          HCFA has solicited public comments on them. 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  become final in their  present
          form (or if, in the meantime, a reviewing court adopts their positions
          as the  proper  interpretation  of the  Stark  II  statute),  then the
          Partnership  may be given the opportunity to bring its operations 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 Investment
          Interests of all the Limited  Partners at their Capital Account values
          or (ii) to dissolve and liquidate the Partnership. See "Summary of the
          Partnership Agreement - Optional Purchase of Investment Interests."

          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 are in violation of Stark II. The General
          Partner  does not believe  either of the above  instances  will occur;
          however, no assurances can be made. In either instance,  however,  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.

          The  General  Partner  will  continue  to work  through  the  American
          Lithotripsy  Association  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.

          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

                                                        34
<PAGE>

          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 other  entities  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.  U.S. 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
          (1st Cir.  1989).  Since none of these  cases  involved a  lithotripsy
          syndication or joint venture such as the Partnership,  it is not clear
          how a court would apply  these  holdings to the facts  related to this
          Offering.

          The  OIG  has  indicated  that  it is  giving  increased  scrutiny  to
          healthcare  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 healthcare  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.  Any conduct that could be construed to be
          illegal after the  promulgation of the Safe Harbor  regulations  would
          have been illegal prior to the publication of the regulations.

          Prospective   Limited   Partners  should  note  that  the  anticipated
          ownership and operations of the  Partnership may not fully comply with
          any Safe Harbor;  however, the preamble to the Safe Harbor regulations
          makes  clear that the  failure to comply  with a Safe  Harbor does not
          mean the arrangement  violates the Anti-Kickback  Statute.  Although a
          separate Safe Harbor was not adopted,  HCFA noted in its commentary to
          the Safe Harbor regulations 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

                                                        35
<PAGE>

          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
          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 is unclear. 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 fraud and  abuse  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.  Thus,  federal  regulatory  authorities  could  take  the
          position  that this  Offering is 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
          may 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  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,  under such facts 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

                                                        36
<PAGE>

          distributions of earnings to Limited Partners be made in proportion to
          their  investment  interest),  the fact  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 in  compliance  with  legal
          requirements.

          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
          contemplated    operations   violate   the   Anti-Kickback    Statute.
          Consequently,  the  General  Partner  does  not  believe  that  strict
          compliance  with a Safe Harbor is  necessary  for its  operations.  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.  For the  reasons  outlined  above,  it is the
          opinion of the General  Partner that the operations of the Partnership
          will not violate the  Anti-Kickback  Statute.  A  prospective  Limited
          Partner with  questions  concerning  these matters  should seek advice
          from his or her independent counsel.

          False Claims Statutes.  The Partnership is also subject to federal and
          state laws governing the submission of claims for reimbursement. These
          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 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  provisions  (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,  upon
          audit or review,  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.

          New  Legislation.  The  General  Partner  is not  aware  of  any  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

                                                        37
<PAGE>

          legislation  adversely  affecting the  operation of the  Partnership's
          business  is  enacted,  the  General  Partner is  obligated  either to
          purchase the  Investment  Interests of all the Limited  Partners or to
          dissolve the Partnership.  See "Summary of the Partnership Agreement -
          Optional Purchase of Investment 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 entity in which it is the General Partner.

          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.

State Regulation

          In Arkansas,  there is no  certificate of need  requirement  for major
          medical  equipment or mobile health services.  Hospitals which wish to
          establish  a new  health  service  must give  notice to and obtain the
          prior  approval  of  the  Health  Facility  Services  Division  before
          instituting the new service.  The Division's review determines whether
          the hospital has adequate  policies and  procedures in place to handle
          the  service.  X-ray  machines  must  be  registered  with  the  state
          Radiation Control Division.

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

          THE GENERAL PARTNER AND THE PARTNERSHIP BELIEVE  LITHOTRIPSY  SERVICES
          WILL CONTINUE TO BE SUBJECT TO INTENSE

                                                        38
<PAGE>

          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.


                                                 PRIOR ACTIVITIES

          Prime, the 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  400  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,
          regulatory  compliance  and  contracting  with payors,  hospitals  and
          surgery  centers,   while  medical  care  is  rendered  by  urologists
          utilizing  the  lithotripters.  Prime has an  economic  interest in 56
          mobile  and six  fixed  site  lithotripters,  all but two of which are
          operated by Prime or the General  Partner  and its  Affiliates.  Prime
          began providing  lithotripsy  services with an acquisition in 1992 and
          has grown rapidly since that time through a total of ten  acquisitions
          with interests in 62 lithotripters.  In April 1996, Prime acquired the
          General  Partner.  The General Partner  operates over 30 lithotripters
          serving  approximately 200 locations in 19 states.  The acquisition of
          the  General  Partner  provided  Prime with  complementary  geographic
          coverage  as well as  additional  expertise  in forming  and  managing
          lithotripsy operations.  Prime and the General Partner's lithotripters
          together performed  approximately 31,000, or approximately 17%, of the
          estimated  180,000  lithotripsy  procedures  performed  in the  United
          States in 1995.  Approximately 1,850 urologists utilized Prime and the
          General Partner's  lithotripters in 1995,  representing  approximately
          25% of the estimated 7,300 active urologists in the United States.

          Prime  manages  the   operations  of   approximately   60  of  its  62
          lithotripters.  All of its  lithotripters  are operated in  connection
          with hospitals or surgery centers. Prime operates its lithotripters as
          the general partner of a limited  partnership or through a subsidiary,
          as is the case with the General Partner affiliated partnerships. 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 33 of its 40 operations.

          Prime's lithotripters range in age from one to twelve years. Of its 62
          lithotripters,  56 are mobile  units  mounted in  tractor-trailers  or
          self-contained  coaches  serving  locations  in 34 states.  Prime also
          operates six 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.

                                                        39
<PAGE>

          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
          100,000  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,  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.

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                                                        40
<PAGE>

                        SOURCES AND APPLICATIONS OF FUNDS

          The following  table sets forth the funds  expected to be available to
          the Partnership  from this Offering if all 20 Units are sold and other
          sources and their anticipated and estimated uses.

                        Sources of Funds   Sale of 20 Units
Offering Proceeds(1)                         $322,220               (100.00%)
   TOTAL SOURCES                             $322,220               (100.00%)
                      Application of Funds
Reconditioning of Two Coaches(2)             $100,000              (  31.03%)
Loaner Rental Costs(2)                       $140,000              (  43.45%)
Reserves(3)                                  $ 44,720              (  13.88%)
Syndication Costs(4)                         $ 37,500              (  11.64%)
   TOTAL APPLICATIONS                        $322,220               (100.00%)


Notes to Sources and Applications of Funds Table

          (1) Assumes all 20 Units are purchased by qualified Investors.

          (2)  It is  anticipated  that  the  General  Partner  will  cause  the
          Partnership  to  contract  with AK  Associates,  an  Affiliate  of the
          General Partner,  to recondition each of the Partnership's  Coaches at
          an estimated cost of $50,000 per Coach.  During the time each Coach is
          reconditioned  (estimated at 6 - 8 weeks),  it is anticipated that the
          Partnership  will rent from the General  Partner or its  Affiliates  a
          "loaner" Mobile  Lithotripsy  System at an estimated per month cost of
          $35,000.  The  table  assumes  that each  refurbishment  will take two
          months.   See   "Business   Activities   -   Anticipated   Partnership
          Expenditures."  The  proceeds of this  Offering  cannot be  calculated
          until the number of Units sold has been determined at the Closing.  To
          the extent the proceeds of the Offering are  insufficient  to fund the
          costs described ABOVE, or such costs exceed the estimated amounts,  it
          is anticipated  that Partnership Cash Flow and/or the proceeds of debt
          financing will fund such costs. There is no assurance that Partnership
          Cash Flow or debt  financing  will be available for such purpose.  See
          "Risk Factors - Operating  Risks - Partnership  Limited  Resources and
          Risks of Leverage."

          (3) This amount  includes the General  Partner's  estimate of reserves
          for  unanticipated  time  overruns  in  scheduled   reconditioning  or
          unanticipated expenses in connection with the reconditioning.
 


                                                        41
<PAGE>

          (4)  Includes  $5,000  in  commissions  payable  to the  Sales  Agent,
          reimbursement of $7,500 to the Sales Agent for out-of-pocket  expenses
          incurred  in selling  the Units and  $25,000  in legal and  accounting
          costs associated with the preparation of this Memorandum.

                     FINANCIAL CONDITION OF THE PARTNERSHIP

          Set  forth on the  following  pages are the  Partnership's  internally
          prepared  accrual  based (i)  Income  Statements  for the years  ended
          December 31, 1995,  December 31, 1996,  December 31,  1997 and for the
          period ended  September 30, 1998,  (ii) Balance  Sheets as of December
          31, 1996,  December 31, 1997 and as of September 30, 1998,  (iii) Cash
          Flow  Statements  for the year ended  December 31, 1995,  December 31,
          1996,  December 31, 1997 and for the period ended  September  30, 1998
          and (iv)  Statements of Partner's  Equity for the years ended December
          31,  1995,  December 31,  1996,  December 31,  1997 and for the period
          ended September 30, 1998.

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


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                                                        42
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                                                        43
<PAGE>




                                                        44
<PAGE>




                                                        45
<PAGE>




                                                        46
<PAGE>

                           MANAGEMENT'S DISCUSSION AND
                      ANALYSIS OF THE RESULTS OF OPERATIONS

Nine Months Ended September 30, 1998 and September 30, 1997

          Revenues.  Total revenues decreased $515,000 (18%) for the nine months
          ended  September  30, 1998 compared to the same period in 1997 related
          to a 8% decline in the number of procedures  performed,  primarily due
          to  the  loss  of  two  contracts,  that  had  generated  9% of  total
          procedures for the nine months ended  September 30, 1997. In addition,
          two hospitals,  that provided  approximately  20% of the procedures in
          both periods,  renegotiated their contracts resulting in a 24% decline
          in revenue per case in the 1998 period.  In addition,  the partnership
          experienced a decline in revenue per case.

          Operating  Expenses.  Operating  expenses declined by $95,000 (8%) for
          the nine months ended  September  30, 1998 compared to the same period
          in 1997,  due to a decline in  management  fees of $40,000  related to
          lower cash flow  generated  by the lower  revenues  amounts  discussed
          above. In addition, equipment maintenance and repairs declined $30,000
          related  to the  renegotiation  of the  equipment  service  agreement.
          Overhead  allocation  declined  $22,000  due to a decline in  expenses
          allocated by the General Partner related to cost containment  programs
          enacted and fewer procedures performed.

          Other Income (Expense). Total other income (expense), net increased by
          $400 (3%) due to the slight increase in interest income.

Year Ended December 31, 1997 and December 31, 1996

          Revenues.  Total revenues  decreased  $308,000 (8%) for the year ended
          December 31, 1997  compared to the same period in 1996 related to a 4%
          decline in the number of procedures performed, and a slight decline in
          revenue per case.

          Operating  Expenses.  Operating expenses decreased by $79,000 (5%) for
          the year ended  December 31, 1997  compared to the same period in 1996
          due to an  decrease  of  $53,000  in the  overhead  allocation  by the
          General Partner due to fewer procedures performed. In addition,  other
          operating expenses declined $32,000 due to fewer procedures performed.
        
          Other Income (Expense). Total other income (expense), net increased by
          $178,000  (116%) due to the partnership  recognizing its  proportional
          share of the loss on  disposal  of the  Louisiana-Arkansas  JV unit in
          1996, that did not repeat in 1997.

Year Ended December 31, 1996 and December 31, 1995

          Revenues.  Total revenues  increased $490,000 (14%) for the year ended
          December 31, 1996 compared to the same period in 1995,  related to the
          addition of a second lithotripter in early 1996


                                                        47
<PAGE>

          Operating Expenses. Operating expenses increased by $147,000 (10%) for
          the year ended  December 31, 1996 compared to the same period in 1995,
          due to an  increase  of  $108,000  in the  employee  compensation  and
          benefits  related to the addition of a second crew to staff the second
          lithotripter  added in early 1996. In addition,  management  fees rose
          $54,000  due  to  higher  cash  flows  generated  by  higher  revenues
          collected as compared to the prior year.

          Other Income  (Expense).   Other  income  (expense),  net decreased by
          $176,000  (794%) due to the partnership  recognizing its  proportional
          share of the loss on the disposal of the Louisiana-Arkansas JV unit in
          1996.


                      SUMMARY OF THE PARTNERSHIP AGREEMENT

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

Nature of Limited Partnership Interest

          The Investors will acquire their  interests in the  Partnership in the
          form of Units.  For each Unit purchased,  a cash payment of $16,111 is
          required.  The  entire  Unit  purchase  price  is  due  in  cash  upon
          subscription;  however,  certain  qualified  Investors  may  finance a
          portion of the purchase  price  through  Limited  Partner  Loans.  See
          "Terms  of the  Offering  - Limited  Partnership  Loans."  No  Limited
          Partner will have any liability for the debts and  obligations  of the
          Partnership by reason of being a Limited  Partner except to the extent
          of (i) his or her Capital  Contribution  and liability under a Limited
          Partner  Loan,  if any,  (ii)  his or her  proportionate  share of the
          undistributed profits of the Partnership,  and (iii) the amount of any
          Distribution  received  from  the  Partnership  at  a  time  when  its
          liabilities  exceed the fair value of its  assets as  provided  by the
          Act. See "Risk Factors - Other  Investment  Risks - Limited  Partners'
          Obligation to Return  Certain  Distributions."  See also Form of Legal
          Opinion of Womble Carlyle  Sandridge & Rice,  PLLC attached  hereto as
          Appendix C.

Profits, Losses and Distributions

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


                                                        48
<PAGE>

                  1.          Allocations of Profits and Losses.

          (a) General.  Generally,  Profits and Losses, if any, for each Year of
          the Partnership will be allocated  proportionately  among the Partners
          based on their  respective  Percentage  Interests in the  Partnership;
          provided that New Limited  Partners will be allocated only Profits and
          Losses  that  accrue  after  the  date  of  their   admission  to  the
          Partnership as Limited Partners.

          (b)  Allocations.  Profits and Losses  allocated  to a Partner will be
          allocated  at the end of the Year of the  Partnership,  and each  such
          Partner  will  receive his pro rata share of Profits and Losses  based
          upon the number of days such  Partner was a member of the  Partnership
          during the Year of the Partnership. Notwithstanding the foregoing, the
          Partnership's  "allocable  cash basis  items," as that term is used in
          Section  706(d)(2)(B)  of the Code,  will be  allocated as required by
          Section  706(d)(2)  of  the  Code  and  the  regulations   promulgated
          thereunder.

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

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

          (b)   Distribution   Upon   Dissolution.   Upon  the  dissolution  and
          termination of the  Partnership,  the General  Partner or, if there is
          none, a  representative  of the Limited  Partners,  will liquidate the
          assets of the  Partnership.  The proceeds of such  liquidation will be
          applied and distributed in the following order of priority: (a) First,
          to the payment of the debts and  liabilities of the  Partnership,  and
          the  expenses  of  liquidation;  (b)  Second,  to the  creation of any
          reserves  which  the  General  Partner  or the  representative  of the
          Limited Partners may deem reasonably  necessary for the payment of any
          contingent or unforeseen liabilities or obligations of the Partnership
          or of the General  Partner  arising out of or in  connection  with the
          business and operation of the Partnership;

                                          49
<PAGE>

          and (c)  Third,  the  balance,  if any,  will  be  distributed  to the
          Partners in accordance  with the Partners'  positive  capital  account
          balances.   Any  General  Partner  with  a  negative  capital  account
          following the distribution of liquidation  proceeds or the liquidation
          of its interest must  contribute to the Partnership an amount equal to
          such   negative   capital   account  on  or  before  the  end  of  the
          Partnership's taxable year (or, if later, within ninety days after the
          date  of  liquidation).  Any  capital  so  contributed  shall  be  (i)
          distributed  to those  Partners with positive  capital  accounts until
          such  capital  accounts  are  reduced  to zero,  and/or  (ii)  used to
          discharge recourse liabilities.

Management of the Partnership

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

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

Powers of the General Partner

                  1.          General.

          The General  Partner may, in its absolute  discretion,  borrow  money,
          acquire,  encumber,  hold title to, pledge, sell, release or otherwise
          dispose of, all or any part of the Partnership's assets, when and upon
          such terms as it  determines  to be in the best  interest  of the Part
          nership  and  employ  such  persons  as it  deems  necessary  for  the
          operation  of  the  Partnership.  The  General  Partner,  however,  is
          expressly   prohibited  from,   among  other  things:   (i) possessing
          Partnership  assets or  assigning  the  rights of the  Partnership  in
          Partnership  assets,  including the Mobile  Lithotripsy  Systems,  for
          other  than  Partnership  purposes;  (ii) admitting  Limited  Partners
          except as provided in the Partnership Agreement;  and (iii) performing
          any act (other than an act  required by the  Partnership  Agreement or
          any act taken in good faith  reliance upon  Counsel's  opinion)  which
          would,  at the time such act occurred,  subject any Limited Partner to
          liability as a general partner in any jurisdiction.

                                                        50
<PAGE>

                  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.

Rights and Liabilities of the Limited Partners

          The  Limited  Partners  do not have any  right to  participate  in the
          management  of the business of the  Partnership  and will not transact
          business  for the  Partnership.  Limited  Partners are not required to
          make any  capital  contributions  to the  Partnership  except  amounts
          agreed by them to be paid,  or pay or be  personally  liable for,  any
          expense,  liability or  obligation of the  Partnership,  except to the
          extent  (i) his or her  Capital  Contribution  and  liability  under a
          Limited Partner Loan, if any, (ii) his or her  proportionate  share of
          the undistributed profits of the Partnership,  and (iii) the amount of
          any  Distribution  received  from the  Partnership  at a time when its
          liabilities  exceed the fair value of its  assets as  provided  by the
          Act.  See  "Risk  Factors  - Limited  Partners  Obligations  to Return
          Certain Distributions."

          The Limited  Partners may not participate in or own an interest in any
          competing lithotripsy venture, except with the approval of the General
          Partner.  The  General  Partner  may elect to treat  participation  or
          ownership by a Limited  Partner in a competing  venture as an event of
          default,  and  such  Limited  Partner  may be  required  to  sell  his
          Partnership  Interest.  See  "Optional  Purchase  of  Limited  Partner
          Interests" below.


                                                        51
<PAGE>

Restrictions on Transfer of Partnership Interests

          After acquisition of Units by Investors,  no Partnership  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 Partnership  Agreement.  The
          Partnership  Agreement  contains  additional  limitations on transfer,
          including  provisions   prohibiting  transfer  that  would  cause  the
          termination  of  the  Partnership,  would  violate  federal  or  state
          securities  laws, would prevent the Partnership from being entitled to
          use any method of depreciation  which the Partnership  might otherwise
          be  entitled  to use,  or would  adversely  affect  the  status of the
          Partnership  as a  partnership  for Federal  income tax  purposes.  In
          addition,  the Partnership Agreement prohibits the holding or transfer
          of a Partnership  interest by or to a "tax exempt  entity" (as defined
          in Code  Section  168(h))  which would  affect the method or manner in
          which the Partnership may depreciate Partnership assets. No transferee
          of the Units will automatically become a Limited Partner. Admission of
          a transferee  to the  Partnership  as a Limited  Partner  requires the
          fulfillment  of  other  obligations   enumerated  in  the  Partnership
          Agreement,  including  either the approval of all the Limited Partners
          (except the assignor Limited Partner) and the General Partner,  or the
          approval of the assignor Limited Partner and the General Partner.  Any
          transferee of a Partnership  Interest who has not been admitted to the
          Partnership  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  Partnership
          income, gains, profits, losses, deductions,  credits or distributions.
          A  transferor  Limited  Partner  will not be released  from his or her
          personal  liability under the Limited Partner Loans,  unless otherwise
          specifically agreed by the Bank.

Dissolution and Liquidation

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

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

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

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

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

          5. For any other  reason which under the laws of the State of Arkansas
          would cause a dissolution.

          The retirement, resignation, bankruptcy, assignment for the benefit of
          creditors,  dissolution,  death,  disability or legal  incapacity of a
          general partner will not, however, result in a

                                                        52
<PAGE>

          termination  of the  Partnership if the remaining  general  partner or
          general  partners,  if any,  elect to  continue  the  business  of the
          Partnership,  or if no general partner  remains,  if within 90 days of
          the  occurrence  of one of such  events,  all of the Limited  Partners
          elect in  writing to  continue  the  Partnership  and,  if  necessary,
          designate a new general partner.

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

Optional Purchase of Limited Partner Interests

          As provided in the Partnership Agreement,  the General Partner and the
          Limited  Partners  have an option to  purchase  all the  interest of a
          Limited Partner in the Partnership upon the occurrence with respect to
          the Limited Partner of (i) death, (ii) bankruptcy or insolvency, (iii)
          incompetency, or (iv) direct or indirect ownership of an interest in a
          competing venture. Upon the occurrence of one or more of the preceding
          events,  the  withdrawing  Limited  Partner,  or his  or her  personal
          representative,  will have a brief period  within which to sell his or
          her entire  Partnership  Interest  to a  purchaser  approved of by the
          General Partner.  If the withdrawing Limited Partner is unable to sell
          his or her Partnership Interest as provided above, the General Partner
          will then have the first option to purchase such Partnership  Interest
          and thereafter, the remaining Limited Partners will have the option to
          purchase any of the Partnership  Interest not purchased by the General
          Partner.  If the General Partner or Limited Partners elect to exercise
          their respective  options,  the option purchase price will be equal to
          the  withdrawing  Limited  Partner's share of the  Partnership's  book
          value, if any, as reflected by such Limited  Partner's capital account
          in the  Partnership  (unadjusted  for any  appreciation in Partnership
          assets  and as  reduced  by  depreciation  deductions  claimed  by the
          Partnership for tax purposes).  The  withdrawing  Limited Partner will
          not be released from his  obligations  under any Limited  Partner Loan
          unless so agreed by the Bank. Furthermore,  sale of his or her Limited
          Partnership  Interest  may  constitute  an event of default  under the
          Limited Partner Loan, if any. See "Terms of Offering - Limited Partner
          Loans." There can be no assurance that the option  purchase price will
          represent the fair market value of a Limited Partner's interest in the
          Partnership.  Because Partnership losses,  depreciation deductions and
          Distributions  reduce capital  accounts,  and because  appreciation in
          Partnership  assets is not  reflected in capital  accounts,  it is the
          opinion of the General  Partner that the option purchase price will be
          nominal in amount.

Dilution Offerings

          The General Partner has the authority to  periodically  offer and sell
          additional limited  partnership  interests in the Partnership  through
          Dilution  Offerings to local  urologists  who are not investors in the
          Partnership ("Qualified  Investors").  The primary purpose of Dilution
          Offerings would 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

                                                        53
<PAGE>

          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.  The Percentage Interests of
          the General  Partner and the Initial  Limited  Partners,  as in effect
          prior to this Offering,  may not be diluted through Dilution Offerings
          (including  this  Offering) by more than 20% in the aggregate  without
          the  prior  written  consent  of a  Majority  in  Interest  of all the
          Partners.  Any additional limited  partnership  interests offered in a
          Dilution  Offering  will be sold for a price no lower  than their fair
          market  value  as  determined  by the  General  Partner,  in its  sole
          discretion, at the time of this Offering.

Arbitration

          The Partnership  Agreement  provides that disputes arising  thereunder
          shall  be  resolved  by  submission  to  arbitration  in  Arkansas  in
          accordance with the then prevailing  commercial  arbitration  rules of
          the American Arbitration Association.

Power of Attorney

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

Reports to Limited Partners

          Within  90 days  after the end of each  Year of the  Partnership,  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.

Records

          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

                                                        54
<PAGE>

          Partnership's  business as are usually  entered into records and books
          of  account  maintained  by  persons  engaged  in  business  of a like
          character. The Partnership books and records will be kept according to
          the  method of  accounting  determined  by the  General  Partner.  The
          Partnership's  fiscal year will be the  calendar  year.  The books and
          records will be located at the office of the General Partner, and will
          be open to the reasonable  inspection  and  examination of the Limited
          Partners  or  their  duly  authorized  representatives  during  normal
          business hours.

                                                   LEGAL MATTERS

          Certain legal matters in connection with the Units offered hereby will
          be passed upon for the Partnership by Womble Carlyle Sandridge & Rice,
          a Professional  Limited Liability  Company,  of  Winston-Salem,  North
          Carolina.  See  "Conflicts of  Interest." On the Closing Date,  Womble
          Carlyle  Sandridge & Rice, a Professional  Limited  Liability  Company
          will render an opinion, the form of which is attached as Appendix C to
          this   Memorandum,   with  respect  to  certain   federal  income  tax
          consequences  of an  investment  in  Units.  See "Tax  Aspects  of the
          Offering."

                                                     GLOSSARY

          Certain terms in this Memorandum shall have the following meanings:

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

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

          AK  Associates.  AK  Associates,  Inc., a subsidiary  of Prime.  It is
          anticipated  that the Partnership  will contract with AK Associates to
          recondition the Coaches with the proceeds of the Offering.

          Bank. First-Citizens Bank & Trust Company.

          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.


                                                        55
<PAGE>

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

          Closing  Date.  5:00 p.m.,  Central  Time,  on  December  30, 1998 (or
          earlier) in the  discretion of the General  Partner.  The Closing Date
          may be extended  for a period of up to 180 days in the  discretion  of
          the General Partner.

          Coaches.  The two self-propelled  mobile vehicles  manufactured by the
          Calumet Coach Company,  Calumet City, Illinois,  upfitted to house the
          LithostarsTM.

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

          Contract Hospitals.  The 17 hospitals,  medical centers and ambulatory
          surgery centers to which the Partnership provides lithotripsy services
          pursuant to 17 separate Hospital Contracts.

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

          Dilution Offering. The issuance,  offering and sale by the Partnership
          of additional partnership interests in the future.

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

          Escrow Agent. First-Citizens Bank & Trust Company.

          FDA. The United States Food and Drug Administration.

          Financial Statement.  The Purchaser Financial  Statement,  included in
          the Subscription Packet accompanying this Memorandum,  to be furnished
          by the  Investors  for review by 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,
          Lithotripters,  Inc., a North Carolina corporation, and a wholly owned
          subsidiary of Prime Medical Services, Inc.

          Hospital Contracts.  The 17 separate  lithotripsy  services agreements
          the Partnership has entered into with the contract Hospitals.

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

          Investors. Potential purchasers of Units.


                                                        56
<PAGE>

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

          Limited Partner Note. The promissory note from an Investor financing a
          portion of the Unit purchase price to the Bank in the principal amount
          of $13,611 per Unit,  the  proceeds of which will be paid  directly to
          the  Partnership.  The form of the Limited Partner Note (including the
          Note Addendum  attached  thereto) is attached as Exhibit A to the Bank
          Commitment which is attached hereto as Appendix B.

          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.

          LithostarTM.   The  two  LithostarTM  model extracorporeal shock  wave
          lithotripters manufactured by Siemens and owned by the Partnership.

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

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

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

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

          Mobile  Lithotripsy  Systems.  The two Coaches with the  installed and
          operational LithostarsTM owned and operated by the Partnership.

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

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




                                                        57
<PAGE>

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

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

          Offering. The offering of Units pursuant to this Memorandum.

          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. Fayetteville Lithotripters Limited Partnership - Arkansas
          I, an Arkansas limited partnership.

          Partnership   Agreement.   The  Partnership's   Agreement  of  Limited
          Partnership,  the form of which is attached  hereto as Appendix A,  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

                                                        58
<PAGE>

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

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

          Percentage Interest.  The interest of each Partner in the Partnership,
          to be  determined  in the case of each  Investor by  reference  to the
          percentage  opposite  his or her name set  forth in  Exhibit A  to the
          Partnership  Agreement.  Each  Unit  sold  pursuant  to this  offering
          represents an initial 1% economic  interest.  The Percentage  Interest
          will be set forth in  Exhibit A  to the  Partnership  Agreement or any
          other  document or agreement,  as a percentage or a fraction or on any
          numerical basis deemed appropriate by the General Partner.

          Prime.   Prime  Medical  Services,   Inc.  a  publicly  held  Delaware
          corporation and parent of the General  Partner,  AK Associates and the
          Sales Agent.

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


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          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,
          member of the National Association of Securities Dealers,  Inc. and an
          Affiliate  of certain  members  of the  General  Partner's  management
          personnel.

          SEC. The United States Securities and Exchange Commission.

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

          Security  Agreement.  The agreement to be executed in conjunction with
          the Limited  Partner  Note by an Investor  who  finances  the purchase
          price  of his  Units as  provided  herein.  The  form of the  Security
          Agreement  is attached as Exhibit C  to the Bank  Commitment  which is
          attached hereto as Appendix B.

          Service. The Internal Revenue Service.

          Service Area. The state of Arkansas.

          Siemens. Siemens Medical Systems, 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
          completed by  Investors  in  connection  with their  subscription  for
          Units.

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



                                                        60
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          Units.  The 20 equal  limited  partner  interests  in the  Partnership
          offered pursuant to this Memorandum for a price per Unit of $16,111 in
          cash.

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

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