Name of Prospective Investor                           Memorandum Number











                  TEXAS LITHOTRIPSY LIMITED PARTNERSHIP I L.P.


              A Limited Partnership Formed Under the Laws of Texas

                    CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

                             up to $251,500 in Cash

                    20 Units of Limited Partnership Interest
                           at $12,575 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 December 9, 1998

                  TEXAS LITHOTRIPSY LIMITED PARTNERSHIP I L.P.

                             up to $251,500 in Cash

                 up to 20 Units of Limited Partnership Interest
                           at $12,575 in Cash per Unit

Texas Lithotripsy  Limited  Partnership I L.P., a Texas 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  $12,575  in  cash.  See  "Terms  of the
Offering."  Each Unit will represent an initial 0.83%  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.  The  LithostarsTM are installed in a self-propelled  Coach and a mobile
Trailer  (collectively,  each  Coach/Trailer with the  installed  LithostarTM is
referred to herein as a "Mobile Lithotripsy System") enabling the Partnership to
provide  lithotripsy  services at various locations  throughout south Texas (the
"Service Area").

The  Partnership  intends to use the  proceeds  of this  Offering  primarily  to
finance  the  cost  of  upgrading  one of  the  LithostarsTM, and  the  cost  of
reconditioning the Coach and renting a loaner Mobile Lithotripsy System from the
General  Partner  or  its  Affiliates   during  the  time  the  Coach  is  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 January 20, 1999 (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)                       $ 12,575       $     250             $ 12,275
Total Maximum(4)                  $251,500       $   5,000             $246,500

(See Footnotes on Back of Cover Page)

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

<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  ($12,575) 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 $10,075 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 Form of 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  upgrading  one of the
     LithostarsTM by installing a higher  intensity  shock head, and the cost of
     reconditioning  the Coach and renting a loaner  Mobile  Lithotripsy  System
     from the  General  Partner  or its  Affiliates  during  the time one of the
     Partnership's  Mobile  Lithotripsy  Systems  is out of  service  due to the
     reconditioning  of the Coach. See "Use of Proceeds." The Partnership  seeks
     by this  Offering to sell up to 20 Units for an aggregate of up to $251,500
     in cash ($246,500 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,  which is  headquartered  in Raleigh,
     North  Carolina  and has  approximately  330 offices in Virginia  and North
     Carolina, until the acceptance of the Investor's subscription

                                                        ii
<PAGE>

          (and  approval by the Bank if the  Investor is  financing a portion of
     the Unit purchase price through a Limited  Partner Loan),  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  as  provided  herein,  such  Investor  will be admitted to the
     Partnership as a Limited Partner, provided that acceptance of subscriptions
     by an Investor that elects to finance a portion of his or her Unit purchase
     price  is  conditioned  upon  approval  by the  Bank of his or her  Limited
     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  January  20,  1999,  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  STATE
          REGISTRATION  PROVIDED BY THE NATIONAL  SECURITIES MARKETS IMPROVEMENT
          ACT OF 1996. 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


                                                        iii
<PAGE>

          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 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

                                                        iv
<PAGE>

          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  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 "TERMS OF 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.
                                                  ______________



                                                         v
<PAGE>

          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 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>

                                      Page

                                TABLE OF CONTENTS

                                                                          Page

RISK FACTORS...................................................................1
         Operating Risks.......................................................1
         Tax Risks.............................................................7
         Other Investment Risks................................................9

THE PARTNERSHIP...............................................................12

TERMS OF THE OFFERING.........................................................13
         The Units and Subscription Price.....................................13
         Acceptance of Subscriptions..........................................13
         Limited Partner Loans ...............................................14
         Subscription Period; Closing.........................................15
         Offering Exemption...................................................15
         Suitability Standards................................................16
         How to Invest........................................................17
         Restrictions on Transfer of Units....................................18

PLAN OF DISTRIBUTION..........................................................19

BUSINESS ACTIVITIES...........................................................20
         General  ............................................................20
         Treatment Methods for Kidney Stone Disease...........................20
         The LithostarTM......................................................21
         The Coach and Trailer................................................22
         Anticipated Partnership Expenditures.................................22
         Acquisition of Additional Assets.....................................22
         Hospital Contracts...................................................22
         Management...........................................................23
         Employees............................................................24

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

COMPENSATION AND REIMBURSEMENT TO THE
         GENERAL PARTNER AND ITS AFFILIATES...................................26

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

FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER...............................29



                                                        vii
<PAGE>

COMPETITION...................................................................29
         Affiliated Competition...............................................29
         Other Competition....................................................30

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
         Ten Months Ended October 31, 1998 and October 31, 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
         Powers of the General Partner........................................50
         Rights and Liabilities of the Limited Partners.......................51
         Restrictions on Transfer of Partnership Interests....................51
         Dissolution and Liquidation..........................................52
         Noncompetition Agreement and Protection of Confidential Information..52
         Optional Purchase of Limited Partner Interests.......................53
         Dilution Offerings...................................................53
         Arbitration..........................................................54
         Power of Attorney....................................................54
         Reports to Limited Partners..........................................54
         Records  ............................................................55

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

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






                                                       viii
<PAGE>

Appendix A        AGREEMENT OF LIMITED PARTNERSHIP OF TEXAS LITHOTRIPSY
                  LIMITED PARTNERSHIP I L.P.

Appendix B        FORM OF 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 are able
to charge 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;   however,   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.  Only one of the  Partnership's
LithostarsTM has been upfitted with the new tube system.  The other  LithostarTM
is scheduled to be upgraded in 1999.  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


                                                         2
<PAGE>

     eradicate kidney stones, and pharmaceutical  companies and researchers have
attempted to develop a safe drug that can be used to dissolve  kidney  stones in
all cases. The General Partner cannot predict the outcome of ongoing research in
these  areas,  and  any one or  more  developments  could  reduce  or  eliminate
lithotripsy  as an  acceptable  procedure or treatment  method of choice for the
treatment of kidney stones.

     Partnership  Limited Resources and Risks of Leverage.  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.  Several  competing  fixed-site and mobile  lithotripters  are
currently  operating in and around the Service Area in direct  competition  with
the Partnership's Mobile


                                                         3
<PAGE>

     Lithotripsy Systems. The competing  lithotripsy service providers generally
have existing  contracts with hospitals and other facilities,  or are hospitals,
themselves.  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. There is no assurance
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


                                                         4
<PAGE>

     and/or its physician Limited Partners may be required to refund any amounts
collected from Medicare and Medicaid  patients in violation of the statute,  and
they may be  subject  to civil  monetary  penalties  and/or  exclusion  from the
Medicare and Medicaid programs.

     The Anti-Kickback Statute prohibits paying or receiving any remuneration in
exchange for making a referral for healthcare  services which may be paid for by
Medicare,  Medicaid or CHAMPUS.  The law has been broadly interpreted to include
any payments which may induce or influence a physician to refer patients. One of
the federal agencies that enforces the Anti- Kickback Statute has issued several
"safe harbors"  which,  if complied  with,  result in the payment or transaction
being  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
that the structure  and purpose of the  Partnership  is in  compliance  with the
Anti- Kickback  Statute,  there is no assurance 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.

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

     Regarding state law,  various  licensure  requirements  must be met for the
Partnership to provide  mobile  lithotripsy  services in Texas,  and the General
Partner  has  complied  with  such   requirements.   See   "Regulation  -  State
Regulation."

     Contract  Terms  and  Termination.  The  Partnership  provides  lithotripsy
services  to 8 Contract  Hospitals  pursuant to 8 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. Four of the Hospital Contracts are terminable 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.  The General
Partner believes it has a good relationship with the Contract Hospitals and does
not anticipate significant  terminations.  There is no assurance,  however, that
terminations  will  either  not  occur  or  that  the  resulting  impact  to the
Partnership would not have a material adverse effect on Partnership  operations.
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,  provisions  permitting  termination  in the
event certain laws or

                                                         5
<PAGE>

     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 as  herein
described or  contemplated,  and the  cancellation  of a  significant  number of
service contracts or the Partnership's inability to secure new ones could have a
material  negative  impact  on  the  financial  condition  and  results  of  the
Partnership.  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  LithostarsTM  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

                                                         6
<PAGE>

     accurately  predicted at this time.  Any such  interruption  in Partnership
operations would adversely affect Partnership revenues.

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 is 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

                                                         7
<PAGE>

     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.

     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.



                                                         8
<PAGE>

     Passive Income and Losses The General Partner expects the Partnership  will
realize  taxable  income and not  taxable  losses  during the next five years of
operation.  Nevertheless,  if it realizes taxable losses, the use of such losses
by the Limited  Partners  will  generally be limited by Code  Section 469.  Code
Section 469 provides  limitations for the use of taxable losses  attributable to
"passive  activities."  Code Section 469 operates  generally to prohibit passive
losses from being used except against income from passive activities.
 
     Upon the  taxable  disposition  to an  unrelated  party of all of a passive
activity,  or a substantial  part of a passive activity that may be treated as a
separate activity,  any unused deferred loss allocable to that passive activity,
or to that  substantial  part of the  passive  activity  that  is  treated  as a
separate  activity,   can  be  used  to  reduce  any  gain  realized  upon  such
disposition,  with any excess loss  available  for  deduction  first against any
other passive  income and then in full against any other income or gain from any
source.

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

     Taxable Income The Partnership  Agreement provides that in each year of the
Part nership,  annual  Distributions may be made to the Partners.  Excluded from
the definition of cash available for  Distributions,  however,  is the amount of
funds  necessary  to amortize  Partnership  debts and to maintain  certain  cash
reserves deemed necessary by the General Partner. The Partnership may also incur
significant capital costs that may have to be paid out of Partnership  revenues.
Thus,  taxable  income may very well exceed  cash  available  for  distribution.
Because of the  circumstances  outlined  above,  if Partnership  cash flow falls
substantially  below a certain  level,  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 cash 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. 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

                                                         9
<PAGE>

     devoting   substantial   time  and  effort  to  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 or she will not be liable
for the liabilities of the Partnership in excess of his investment,  his ratable
share  of  undistributed   profits  and  any  Distribution   received  from  the
Partnership if the Limited  Partner knew at the time of the  Distribution  that,
after giving effect to the  Distribution,  all  liabilities of the  Partnership,
other than liabilities to Partners with respect to their  Partnership  interests
and  liabilities  for which the  recourse  of  creditors  is limited to specific
property of the limited partnership,  exceed the fair value of the assets of the
Partnership,  except  that  the fair  value of  property  that is  subject  to a
liability  for which  recourse of creditors is limited  shall be included in the
Partnership  assets  only to the  extent  that the fair  value of such  property
excludes such liability.

     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 the  Limited  Partnership  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 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


                                                        10
<PAGE>

     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.

     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, and such course of conduct did not constitute willful misconduct or
gross negligence.  Therefore, the Limited Partners may have a more limited right
of  action  against  the  General  Partner  in the event 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

                                                        11
<PAGE>

     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  insolvent  or (iii)  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

     Texas Lithotripsy  Limited  Partnership I L.P., a Texas limited partnership
(the  "Partnership")  was organized and created under the Texas Revised  Limited
Partnership  Act  (the  "Act")  on June 5,  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 26.5% limited partner interest held
by the General Partner and a 13% limited partner  interest held by Affiliates of
the General  Partner).  In the event that all 20 Units offered  hereby are sold,
the General Partner will hold  approximately  a 17% general partner  interest in
the  Partnership,  the Initial  Limited  Partners will hold  approximately a 67%
limited partner interest in the Partnership and the Investors who purchase the

                                                        12
<PAGE>

     Units offered  hereby (the "New Limited  Partners")  will hold an aggregate
16.67%  interest in the  Partnership.  The  Percentage  Interests of the General
Partner and Initial Limited Partners  (aggregate) will decrease by approximately
0.166% and 0.664%,  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

     Texas Lithotripsy  Limited Partnership I L.P., a limited partnership formed
under the laws of the State of Texas,  hereby offers an aggregate of 20 Units of
limited partner interest in the Partnership (the "Units").  Each Unit represents
an initial 0.83% 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 $12,575 in cash payable
at subscription;  however, certain qualified Investors may fund a portion of the
purchase price through  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 upgrade one of the
Partnership's   LithostarsTM  (estimated  at  $75,000),   to   recondition   the
Partnership's  Coach  (estimated  at $50,000)  and to pay for a "loaner"  Mobile
Lithotripsy   System   during  the  time  the   Partnership's   Coach  is  being
reconditioned (estimated at $8,750 loaner per week for a seven week 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 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

                                                        13
<PAGE>

     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 or she 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
$10,075.  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
January 1999), 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
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

                                                        14
<PAGE>

     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 January 20, 1999 (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 state registration provided by the
National Securities Markets  Improvement Act of 1996. The suitability  standards
set forth below have been established in order to comply with the terms of these
offering exemptions.


                                                        15
<PAGE>

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 Texas 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 up to 35 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.

     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

                                                        16
<PAGE>

     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 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 Form of Bank Commitment);

     f. If the Investor is financing a portion of the Unit purchase price with a
Limited  Partner Loan, by completing and signing,  but not dating,  the Loan and
Security

                                                        17
<PAGE>

     Agreement (the form of which is included in the Subscription  Packet and is
attached as Exhibit B to the Form of Bank Commitment);

     g. If the Investor is financing 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 Form of 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 $12,575 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 Texas I
L.P." 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.

     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

                                                        18
<PAGE>

     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.

     The subscription period will commence on the date hereof and will terminate
at  5:00 p.m.,  Austin,  Texas time,  on January 20, 1999,  (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.

                                                        19
<PAGE>

     The Partnership  seeks by this Offering to sell a maximum of 20 Units for a
maximum  of an  aggregate  of  $251,500  in cash  ($246,500  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
January 20, 1999,  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 the Mobile  Lithotripsy  Systems
and operate it at various  locations  primarily in south Texas, (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  Systems.  The Partnership  owns and operates two Mobile
Lithotripsy  Systems in the Service Area and has contracted with 8 hospitals and
medical 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 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

                                                        20
<PAGE>


     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 Lithostar  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 one of
the  Partnership's  LithostarsTM  and is  scheduled to be installed in the other
LithostarTM in 1999. 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  over 30  LithostarsTM  in other  limited
partnerships  sponsored by the General Partner and its  Affiliates,  the General
Partner has found that the  LithostarTM  can fragment 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 stones,  even impacted  stones,  thereby  rendering  ureteroscopy
practically obsolete as a treatment of first choice.



                                                        21
<PAGE>

The Coach and Trailer

     The  Partnership's  Coach and Trailer, each of which houses a  LithostarTM,
were acquired by the Partnership in 1991 and early 1998, respectively. The Coach
and the Trailer have each been completely  upfitted for the  LithostarTM and its
clinical  operations.  Service  for the Coach and the  Trailer 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
Unit.

Anticipated Partnership Expenditures

     The Partnership's  LithostarTM that has not been upgraded with the new high
intensity  shock  head,  is  scheduled  to  receive  such  upgrade in 1999 at an
estimated  cost of $75,000.  The General  Partner  anticipates  that the upgrade
process  will be brief  and will not  interfere  with the  Partnership's  normal
lithotripsy service. The Partnership's Coach is scheduled to be reconditioned in
1999 at an estimated cost of $50,000. The Partnership's  Trailer is scheduled to
be  reconditioned  in 2003 at an estimated cost of $65,000.  The  reconditioning
payments  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  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 the Coach and Trailer are being  Reconditioned,  the  Partnership  will
likely rent a replacement  Mobile Lithotripsy System from the General Partner or
its Affiliates at an estimated per week rate of $8,750.  Any necessary  Coach or
Trailer  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 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 8  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.
Four of the Hospital Contracts


                                                        22
<PAGE>

     are also  terminable  without  cause at any time by  either  party on short
notice, generally 90 days or less. The Contract Hospitals are:

AMI Brownsville Medical Center, Brownsville
Citizens Medical Center, Victoria
Doctors Regional Medical Center, Corpus Christi
Knapp Medical Center, Weslaco
McAllen Medical Center, McAllen
Mercy Regional Medical Center, Laredo
Spohn Hospital, Corpus Christi
Valley Baptist Medical Center, Harlingen

     The terms of certain  Hospital  Contracts  prohibit  the  Partnership  from
expanding  operations into certain areas of south Texas not currently  served by
the Partnership.

     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 south Texas.

     The  Partnership  or the hospital  charges 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%


                                                        23
<PAGE>

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
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 2001.  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 two registered
technicians, two registered nurses and one driver.


                               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


                                                        24
<PAGE>


     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,  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 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.



                                                        25
<PAGE>

                      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.  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 2001.  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 26.5% (before  dilution) limited partner interest in
the  Partnership,  and  Affiliates  of the General  Partner own an aggregate 13%
limited  partner  interest  in the  Partnership.  Both  groups are  entitled  to
Distributions on account

                                                        26
<PAGE>

     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 Coach and Trailer. It is anticipated that the General
Partner will cause the Partnership to contract with AK Associates,  an Affiliate
of the General Partner,  to recondition the  Partnership's  Coach and Trailer in
1999 and 2003,  respectively,  at an  estimated  cost of  $50,000  and  $65,000,
respectively. 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 Coach and Trailer are
being  reconditioned  at an  estimated  per  week  price  of  $8,750  per  unit.
Reconditioning  is  expected  to take six to  eight  weeks.  Accordingly,  it is
anticipated  that the  Partnership  will pay an  aggregate  of  $122,500  to the
General  Partner and its  Affiliates  for loaner units over the next four years.
The Partnership may require  additional loaner units or rental time in the event
any of the Partnership's Mobile Lithotripsy Systems experience  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

                                                        27
<PAGE>

     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  Coach and Trailer  and rental  payments  in  connection  with the
provision of loaner  Mobile  Lithotripsy  Systems  during the time the Coach and
Trailer 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,  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.  Several  Affiliates of the General  Partner
currently operate separate lithotripsy services businesses in Texas. 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


                                                        28
<PAGE>

     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  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

     The Partnership faces competition from  lithotripters  placed in service in
Texas, and, to a lesser extent,  from lithotripters  located in adjacent states,
including  lithotripters owned by other partnerships affiliated with the General
Partner. The General Partner has organized the following limited partnerships in
Texas:  (i) Texas  Lithotripsy  Limited  Partnership II L.P. ("Texas II"), which
operates  primarily  in the Fort  Worth  area;  (ii) Texas  Lithotripsy  Limited
Partnership  III L.P.,  which  operates  in the San  Antonio  area;  (iii) Texas
Lithotripsy  Limited Partnership IV, L.P. ("Texas IV"), which operates primarily
in the Dallas area; (iv) Texas Lithotripsy Limited Partnership V, L.P.,


                                                        29
<PAGE>

     which operates primarily in northwestern  Texas; and (iv) Texas Lithotripsy
Limited  Partnership VI L.P.,  which operates  primarily in the Austin and Round
Rock areas.  The General Partner has also organized  Fayetteville  Lithotripters
Limited  Partnership-Louisiana  I, which  operates  throughout  Louisiana and in
Beaumont, Texas, and Fayetteville Lithotripters Limited  Partnership-Arkansas I,
which operates throughout Arkansas and northeast Texas. Another Affiliate of the
Partnership,  Texas  ESWL/Laser  Lithotripter,  Ltd.  ("ESWL")  provides  mobile
lithotripsy services in certain areas of Texas. Texas II, Texas IV and ESWL will
merge as of January 1, 1999,  and the  surviving  entity will  attempt to expand
operations  outside  the  service  areas  currently  served  by the  constituent
partnerships. Although the General Partner anticipates that the Partnership will
continue to operate  primarily in the Service Area, the actual itinerary for the
Mobile Lithotripsy System is expected to be influenced by the number of patients
in  particular  areas  and pad site  arrangements  with  various  hospitals  and
outpatient  surgical  centers.  See  "Business  Activities  -  Operation  of the
LithostarTM Mobile System."
Other Competition

     Several  hospitals and other  facilities in the Service Area have access to
lithotripters which are in direct competition with the Partnership.  In McAllen,
McAllen  Regional  Medical  Center  operates  a  fixed-base   Dornier  unit.  In
Edinburgh,  Bruce  Enterprises  provides  a  transportable  lithotripter  (brand
unknown) at Edinburgh Hospital. In Alice, Alice Physicians and Surgeons Hospital
operates a Medstone unit. Other hospitals,  ambulatory  surgery centers or other
facilities may offer extracorporeal shock-wave lithotripsy services of which the
General Partner is not aware.

     The terms of certain  Hospital  Contracts  prohibit  the  Partnership  from
expanding  operations into certain areas of south Texas not currently  served by
the Partnership.

     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 Partnership's LithostarsTM
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  Litho's
expertise in training physicians in the low-intensity lithotripsy technique. See
"Proposed Activities - Description of the LithostarTM."

     No assurances can be given 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


                                                        30
<PAGE>

     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.

     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 Texas 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.

                                   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 is subject to federal government  oversight
because 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

                                                        31
<PAGE>

     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 are not 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.

     The General  Partner may make the Mobile  Lithotripsy  System  available at
ambulatory surgery centers.  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 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 charge for the procedure.  Medicare  reimbursement is not be 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

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<PAGE>

     limitations  on future  physician  reimbursement  increases  tied to annual
expenditure   targets  legislated   annually  by  Congress  or  set  based  upon
recommendation  of the  Secretary  of the U.S.  Department  of Health  and Human
Services. Medicare has in the past, with regard to other Part B services such as
cataract implant surgery,  imposed significant reductions in reimbursement based
upon changes in technology.  HCFA has produced a lengthy report which  concludes
that professional fees for lithotripsy are overvalued. Thus, future decreases in
reimbursement are probable.

     The Medicaid program in Texas 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 Texas 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 Texas Medicaid program, to limit Medicaid coverage for
certain otherwise  eligible  persons.  The General Partner does not believe this
legislation  significantly  impacts 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 Texas Medicaid program has taken or will take such steps.

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

     Following  the  passage of the Stark II  legislation  effective  January 1,
1995,  the  General  Partner  determined  that the  statute 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' 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

                                                        33
<PAGE>

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.

     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 I  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.

     HCFA's adoption of the current  Proposed Stark II Regulations as final or a
reviewing  court'  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

                                                        34
<PAGE>

     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  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.

                                                        35
<PAGE>

     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' professional fee, such a referral is
simply a referral to oneself, and that in such situations, both the professional
service fee and the profit  distribution  from the associated  facility fee that
are  generated  from the referral may warrant  protection.  HCFA stated that its
primary  concern  regarding  the  above  referral  situation  was the  investing
physician' 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'
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'  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

                                                        36
<PAGE>

     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 the Partnership might
constitute  a violation of this law must be  determined  in each case based upon
the specific facts involved.  The various mechanisms in place to avoid providing
a  financial  benefit to  prospective  Limited  Partners  for any  referrals  of
patients  (including  the  requirement  that all  distributions  of  earnings to
Limited Partners be made in proportion to their investment  interest),  the fact
lithotripsy  is a  therapeutic  treatment  the need of which can be  objectively
determined,  and the existence in the General  Partner'  view of valid business
reasons  to engage in this  transaction,  form the basis in part of the  General
Partner' 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'   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
do 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

                                                        37
<PAGE>


     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'  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'  operations  in  a  fashion  similar  to  the  Stark  II  and  the
Anti-Kickback laws discussed above.

     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

     Texas no longer  requires a certificate of need for the  acquisition or use
of major medical equipment or the establishment of clinical health services. Nor
does Texas  impose  licensure  requirements  for the  provision  of  lithotripsy
services. However, the lithotripter must be registered with the Texas Department
of Health,  Bureau of Radiation  Control,  and radiologic  technologists must be
certified by the state.  The Partnership has been complying and will continue to
comply with these requirements.


                                                        38
<PAGE>

     Texas law prohibits paying or accepting any money for soliciting  patients.
To the best knowledge of the General Partner, the Partnership does not engage in
any payment practices  prohibited by Texas law. The Texas  legislature  recently
passed  the  Treatment   Facilities   Marketing  Act,  which  prohibits  certain
solicitation  and remuneration  practices,  but it applies only to mental health
and chemical dependency facilities and not to lithotripsy services.

     The  Partnership  will seek to comply  with all  applicable  statutory  and
regulatory requirements. Further regulations may be imposed in Texas 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  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 over 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.


                                                        39
<PAGE>

     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.

     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)                           $251,500               (100.00%)
   TOTAL SOURCES                               $251,500               (100.00 %)
                      Application of Funds
Upgrade of LithostarTM                         $ 75,000               (  29.82%)
Reconditioning of Coach(2)                       50,000               (  19.88%)
Loaner Rental Costs(2)                           61,250               (  24.35%)
Reserves(3)                                      27,750               (  11.03%)
Syndication Costs(4)                             37,500               (  14.91%)
   TOTAL APPLICATIONS                          $251,500               (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 in 1999 the Partnership will upgrade one of its
LithostarsTM with a high intensity shockhead at an estimated cost of $75,000. It
is  further  anticipated  that  in 1999  the  General  Partner  will  cause  the
Partnership to contract with AK Associates, an Affiliate of the General Partner,
to recondition the Partnership's  Coach at an estimated cost of $50,000.  During
the  time  the  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 week cost of
$8,750.  The table assumes that each  refurbishment  will take seven weeks.  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."



                                                        41
<PAGE>

     (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 or upgrade.
 
     (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 October 31, 1998,
(ii) Balance Sheets as of December 31, 1996, December 31, 1997 and as of October
31,  1998,  (iii) Cash Flow  Statements  for the year ended  December  31, 1995,
December 31, 1996,  December 31, 1997 and for the period ended  October 31, 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 October 31, 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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                                                        45
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                                                        46
<PAGE>

                           MANAGEMENT'S DISCUSSION AND
                      ANALYSIS OF THE RESULTS OF OPERATIONS

Ten Months Ended October 31, 1998 and October 31, 1997

     Revenues.  Total revenues  increased $136,380 (7%) for the ten months ended
October 31, 1998  compared to the same period in 1997 related to an 15% increase
in the number of procedures  performed primarily due to the addition of a second
lithotripter in early 1998. In addition, the Partnership  experienced a decrease
in revenue per case.

     Operating Expenses.  Operating expenses increased by $170,311 (21%) for the
ten months ended  October 31, 1998  compared to the same period in 1997,  due to
costs  related to the  operation  of the second  unit,  including an increase of
$66,065 in other operating  expenses,  including  property taxes,  fuel, medical
supplies and travel costs, an increase of employee  compensation of $55,910, and
an increase in depreciation and amortization of $30,532.

     Other Income  (Expense).  Total other income  (expense),  net  increased by
$3,437 (56%) due to the increase in interest income.

Year Ended December 31, 1997 and December 31, 1996

     Revenues. Total revenues increased $47,646 (2%) for the year ended December
31, 1997  compared  to the same  period in 1996  related to a 7% decrease in the
number of procedures performed, and a increase in revenue per case.

     Operating  Expenses.  Operating  expenses decreased by $69,207 (7%) for the
year ended  December  31, 1997  compared  to the same  period in 1996,  due to a
decrease  of  $86,083  in  overhead  allocation,  which is  based on  procedures
performed,  due to the decline in procedures,  and partially offset by a $29,508
decline in other operating expenses.

     Other Income  (Expense).  Total other income  (expense),  net  decreased by
$6,164 (42%) due to the decrease in interest income.

Year Ended December 31, 1996 and December 31, 1995

     Revenues.  Total  revenues  increased  $402,126  (21%)  for the year  ended
December 31, 1996 compared to the same period in 1995, related to a 17% increase
in the number of  procedures  performed,  and a slight  increase  in revenue per
case.

     Operating  Expenses.  Operating  expenses increased by $60,991 (6%) for the
year ended  December  31, 1996  compared  to the same period in 1995,  due to an
increase  in  overhead  allocation  of  $84,764,  which is  based on  procedures
performed, due to the increase in procedures,  and partially offset by a $31,096
decline in equipment maintenance and repair.

                                                        47
<PAGE>

     Other Income  (Expense).  Other income  (expense),  net increased by $5,228
(56%) due to a increase in interest income.

                      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 $12,575 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,  other than liabilities to Partners
with  respect  to their  Partnership  Interests  and  liabilities  for which the
recourse of creditors is limited to specific property of the Partnership, exceed
the fair value of its assets,  except  that the fair value of  property  that is
subject to a liability  for which  recourse  of  creditors  is limited  shall be
included in the Partnership Assets only to the extent that the fair value of the
property  exceeds that  liability,  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

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

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

2. Distributions.

     (a) Non-liquidation  Distributions.  Partnership Cash Flow for each Year of
the Partnership,  to the extent  available,  will be distributed  within 60 days
after the end of each Year of the  Partnership,  or earlier in the discretion of
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  as of the  date  of the  Capital  Transaction  giving  rise to such
proceeds.  The New Limited Partners have no rights to receive any  distributions
in the future that are made out of the  Initial  Limited  Partners'  and 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

                                                        49
<PAGE>

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

Management of the Partnership

     The  General  Partner  has the sole  right to manage  the  business  of the
Partnership and at all times is required to exercise its  responsibilities  in a
fiduciary capacity.  The consent of the Limited Partners is not required for any
sale  or  refinancing  of  the  Mobile  Lithotripsy  Systems,  the  purchase  of
additional Mobile  Lithotripsy  Systems or the purchase of other new Partnership
assets.  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

     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  Partnership,  employ such persons as it deems
necessary for the operation of the  Partnership and deposit,  withdraw,  invest,
pay,  retain  (including  the  establishment  of reserves)  and  distribute  the
Partnership's funds. 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;  (iii) performing any act (other than an
act  required  by the  Partnership  Agreement  or any act  taken  in good  faith
reliance upon  Counsel's  opinion)  which would,  at the time such act occurred,
subject  any  Limited   Partner  to  liability  as  a  general  partner  in  any
jurisdiction; and (iv) performing any act in contravention of the

                                                        50
<PAGE>

     Partnership  Agreement  or which  would  make it  possible  to carry on the
ordinary business of the Partnership.

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, other
than  liabilities  to Partners with respect to their  Partnership  Interests and
liabilities for which the recourse of creditors is limited to specific  property
of the  Partnership,  exceed the fair value of its assets,  except that the fair
value of property that is subject to a liability for which recourse of creditors
is limited shall be included in the  Partnership  assets only to the extent that
the fair value of the property  exceeds that liability,  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.
See "Limited Partner Competition and Disclosure Restrictions" below. 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.

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

                                                        51
<PAGE>


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

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

     Upon   dissolution,   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.

Noncompetition Agreement and Protection of Confidential Information

     The  Partnership  Agreement  provides  that each  Partner  (other  than the
General  Partner  and its  Affiliates)  is  prohibited  from  having a direct or
indirect  ownership  interest in a  competing  venture  (including  the lease or
sublease of competing  technology)  (the "Outside  Activities").  While they own
Partnership  Interests,  each Partner is precluded  from engaging in any Outside
Activities.  In the event that a Partner's Partnership Interest is terminated or
transferred upon the occurrence of


                                                        52
<PAGE>


     certain events as provided in the  Partnership  Agreement,  such Partner is
precluded,  for a period of two (2) years following the date of such withdrawal,
from  engaging  in any  Outside  Activity  within any  market  area in which the
Partnership  is providing  services or has provided  services  within the twelve
months preceding the withdrawal. This prohibition is in addition to the right of
the General  Partner to acquire the interest of a Partner  engaged in an Outside
Activity as provided in the  Partnership  Agreement.  See "Optional  Purchase of
Limited  Partner  Interests"  in this Section,  and the form of the  Partnership
Agreement attached hereto as Appendix B.

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

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,  insolvency or assignment for benefit of
creditors,  or (iii) 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 option to purchase such Partnership  Interest. If the
General Partner elects to exercise its option, 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  south  Texas  urologists  who  are  not  investors  in the
Partnership ("Qualified Investors"). The primary purpose of Dilution

                                                        53
<PAGE>

     Offerings  would  be (i) to raise  additional  capital  for any  legitimate
Partnership  purpose  including  upgrading the  Partnership's  Lithostar  Mobile
System and (ii) to assure the  highest  quality  of  patient  care by  admitting
Qualified  Investors to the  Partnership  who will be dedicated and motivated as
owners to follow the  Partnership s  treatment  protocol,  and  comply  with its
quality assurance and outcome analysis programs.

     Any sale of  limited  partnership  interests  in a Dilution  Offering  will
result in the 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 Laredo, Texas 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.



                                                        54
<PAGE>

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 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 Texas 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 Partnership's Coach 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.



                                                        55
<PAGE>

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

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

          Closing  Date.  5:00  p.m.,  Central  Time,  on January  20,  1999 (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.

          Coach. The Partnership's self-propelled mobile vehicle manufactured by
     the Calumet  Coach  Company,  Calumet City,  Illinois,  upfitted to house a
     LithostarTM.

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

          Contract  Hospitals.  The 8 hospitals,  medical centers and ambulatory
     surgery  centers to which the  Partnership  provides  lithotripsy  services
     pursuant to 8 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 8 separate lithotripsy services agreements the
     Partnership has entered into with the contract Hospitals.


                                                        56
<PAGE>


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

          Investors. Potential purchasers of Units.

          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
     $10,075  per Unit,  the  proceeds  of which  will be paid  directly  to the
     Partnership.  The form of the  Limited  Partner  Note  (including  the Note
     Addendum  attached  thereto) is attached as  Exhibit A  to the Form of 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 Form of
     Bank Commitment which is attached hereto as Appendix B.

          Loan Documents. The Form of 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 Coach and Trailer 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.



                                                        57
<PAGE>

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

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

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

          Offering. The offering of Units pursuant to this Memorandum.

          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.  Texas Lithotripsy  Limited  Partnership I L.P., an Texas
     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.


                                                        58
<PAGE>


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

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

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

          Partnership   Refinancing   Proceeds.   The  cash  realized  from  the
     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 0.83% 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.


                                                        59
<PAGE>

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

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

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

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

          Sales Agent.  MedTech Investments,  Inc., a registered  broker-dealer,
     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 Form of Bank  Commitment  which is attached
     hereto as Appendix B.

          Service. The Internal Revenue Service.

          Service Area. South Texas.

          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.

          Trailer. The Partnership's Trailer upfitted to house a LithostarTM. 
     The Trailer is transported from site to site by a tractor truck.


                                                        60
<PAGE>

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

          Units.  The 20 equal  limited  partner  interests  in the  Partnership
     offered  pursuant  to this  Memorandum  for a price per Unit of  $12,575 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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