Name of Prospective Investor                                   Memorandum Number

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                FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP -
                                SOUTH CAROLINA II

          A Limited Partnership Formed Under the Laws of South Carolina

                    CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
                             up to $500,880 in Cash
                    40 Units of Limited Partnership Interest
                           at $12,522 in Cash per Unit

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

                            MEDTECH INVESTMENTS, INC.

                              Exclusive Sales Agent

                                2008 Litho Place

                       Fayetteville, North Carolina 28304

                                 1-800-682-7971


<PAGE>


                The Date of this Memorandum is November 17, 1999

                FAYETTEVILLE LITHOTRIPTERS LIMITED PARTNERSHIP -

                                SOUTH CAROLINA II

                             up to $500,880 in Cash

                 up to 40 Units of Limited Partnership Interest

                            at $12,522 Cash per Unit

                  Fayetteville   Lithotripters   Limited   Partnership  -  South
Carolina II, a South Carolina 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 40 Units
(the "Units") of limited partnership interest in the Partnership, at a price per
Unit of $12,522 in cash. See "Terms of the  Offering."  Each Unit will represent
an initial 0.5% economic interest in the Partnership.  See "Risk Factors - Other
Investment  Risks - Dilution of Limited  Partners'  Interests."  The Partnership
owns and operates a Lithostar(TM)  second generation  extracorporeal  shock-wave
lithotripter  for  the  lithotripsy  of  kidney  stones.  The  Lithostar(TM)  is
installed in a self-propelled Coach (collectively,  the Coach with the installed
Lithostar(TM) is referred to herein as the "Mobile Lithotripsy System") enabling
the Partnership to provide lithotripsy  services at various locations throughout
northwestern  South  Carolina and  southwestern  North  Carolina  (the  "Service
Area").

                  The  Partnership  intends  to use  the  net  proceeds  of this
Offering (after deduction of expenses  payable by the Partnership)  primarily to
make  distributions to the persons who were Partners of the Partnership prior to
the  commencement of the Offering.  See "Sources and Applications of Funds." 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 1,
2000 (or  earlier  upon the sale of all 40  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 the health care
industry is undergoing  significant  government  regulatory  reforms.  See "Risk
Factors" and "Terms of the Offering - Suitability Standards."

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


                           Cash                 Selling              Net Cash
                       Offering Price        Commissions(1)          Proceeds(2)
                       --------------        -----------             --------
Per Unit(3)                $ 12,522                $ 100               $ 12,422
Total Maximum(4)           $ 500,880               $ 4,000             $ 496,880

(See Footnotes on Back of Cover Page)

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


<PAGE>


WINSTON 966198v1                                         vi

(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 $100 commission for
         each Unit sold and will  reimburse  the  Sales  Agent for its  Offering
         costs (not to exceed  $4,000).  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  "Sources and  Applications  of Funds." The price per
         Unit  ($12,522) 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,  which is  headquartered in Raleigh,  North Carolina,  and has
         approximately  370 offices  throughout the  southeastern  United States
         (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 $10,022 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 Loan Commitment as Exhibits A, B and
         C, respectively, which is attached hereto as Appendix C and the UCC-1'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.  In the event the Offering is oversubscribed,  Units will
         be allocated  first to Investors in such amounts that after the Closing
         of the Offering  each  Investor  will own up to a 2.5%  interest in the
         Partnership,   and  then  any   remaining   Units  will  be   allocated
         proportionately among all Investors.

 (4)      Offering  proceeds  will  first  be  used  by the  Partnership  to pay
          Offering  costs and expenses (up to $33,000) and the  remainder of the
          proceeds will be  distributed  to the persons who were Partners of the
          Partnership  prior to the  commencement of the Offering.  See "Sources
          and Applications of Funds." The Partnership  seeks by this Offering to
          sell  up to 40  Units  for an  aggregate  of up to  $500,880  in  cash
          ($496,880 net of Sales Agent's  commissions).  All subscription  funds
          and Loan Documents will be held in an interest  bearing escrow account
          with the Bank until the acceptance of the Investor's subscription (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 1,
          2000, 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."

            [The remainder of this page is intentionally left blank.]


<PAGE>



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

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

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

o                 The Units are subject to restrictions on  transferability  and
                  resale  and may  not be  transferred  or  resold  without  the
                  consent of the  general  partner and  satisfaction  of certain
                  other  conditions  including the  availability of an exemption
                  under  the  Securities  Act  of  1933  and  applicable   state
                  securities  laws. See "Risk Factors - Other Investment Risks -
                  Limited  Transferability  and Illiquidity of Units." No public
                  or  other  market  exists  or  will  develop  for  the  Units.
                  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.

o                 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,
                  the Sales Agent or any of their 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,   such
                  Investor's investment,  tax or other advisors, and accountants
                  and/or legal counsel.

o                 No  offering  literature  in  whatever  form  will  or  may be
                  employed  in the  offering of Units,  except  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.

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



<PAGE>


                                TABLE OF CONTENTS


RISK FACTORS..................................................................1
------------
         Operating Risks......................................................1
         ---------------
         Tax Risks............................................................7
         ---------
         Other Investment Risks..............................................13
         ----------------------

THE PARTNERSHIP..............................................................16
---------------

TERMS OF THE OFFERING........................................................16
---------------------
         The Units and Subscription Price....................................16
         --------------------------------
         Acceptance of Subscriptions.........................................17
         ---------------------------
         Limited Partner Loans...............................................17
         ---------------------
         Subscription Period; Closing........................................18
         ----------------------------
         Offering Exemption..................................................18
         ------------------
         Suitability Standards...............................................19
         ---------------------
         How to Invest.......................................................20
         -------------
         Restrictions on Transfer of Units...................................20
         ---------------------------------

PLAN OF DISTRIBUTION.........................................................21
--------------------

BUSINESS ACTIVITIES..........................................................22
-------------------
         General  22
         -------
         Treatment Methods for Kidney Stone Disease..........................22
         ------------------------------------------
         The Lithostar(TM)...................................................22
         -----------------
         The Coach...........................................................23
         ---------
         Acquisition of Additional Assets....................................23
         --------------------------------
         Hospital Contracts..................................................24
         ------------------
         Operation of the Mobile Lithotripsy System..........................25
         ------------------------------------------
         Management..........................................................25
         ----------
         Employees and Benefits..............................................26
         ----------------------

THE GENERAL PARTNER..........................................................26
-------------------

COMPENSATION AND REIMBURSEMENT TO THE........................................28
-------------------------------------

GENERAL PARTNER AND ITS AFFILIATES...........................................28
----------------------------------

CONFLICTS OF INTEREST........................................................30
---------------------

FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER..............................31
-----------------------------------------------

COMPETITION..................................................................31
-----------
         Affiliated Competition..............................................31
         ----------------------
         Other Competition...................................................32
         -----------------

REGULATION...................................................................33
----------
         Federal Regulation..................................................33
         ------------------
         State Regulation....................................................40
         ----------------

PRIOR ACTIVITIES.............................................................42
----------------

SOURCES AND APPLICATIONS OF FUNDS............................................44
---------------------------------

FINANCIAL CONDITION OF THE PARTNERSHIP.......................................44
--------------------------------------

MANAGEMENT'S DISCUSSION AND..................................................45
---------------------------

ANALYSIS OF THE RESULTS OF OPERATIONS........................................45
-------------------------------------
         Nine Months Ended September 30, 1999 and September 30, 1998.........45
         -----------------------------------------------------------
         Year Ended December 31, 1998 and December 31, 1997..................45
         --------------------------------------------------
         Year Ended December 31, 1997 and December 31, 1996..................45
         --------------------------------------------------

SUMMARY OF THE PARTNERSHIP AGREEMENT.........................................46
------------------------------------
         Nature of Limited Partnership Interest..............................46
         --------------------------------------
         Profits, Losses and Distributions...................................46
         ---------------------------------
         Management of the Partnership.......................................48
         -----------------------------
         Powers of the General Partner.......................................48
         -----------------------------
         Rights and Liabilities of the Limited Partners......................49
         ----------------------------------------------
         Restrictions on Transfer of Partnership Interests...................49
         -------------------------------------------------
         Dissolution and Liquidation.........................................50
         ---------------------------
         Optional Purchase of Limited Partner Interests......................51
         ----------------------------------------------
         Dilution Offerings..................................................51
         ------------------
         Noncompetition Agreement and Protection of Confidential
                 Information.................................................52

         Arbitration.........................................................52
         -----------
         Power of Attorney...................................................52
         -----------------
         Reports to Limited Partners.........................................53
         ---------------------------
         Records  53
         -------

LEGAL MATTERS................................................................53
-------------

ADDITIONAL INFORMATION.......................................................53
----------------------

GLOSSARY 54


<PAGE>


                                   APPENDICES

 Appendix A  AGREEMENT  OF LIMITED  PARTNERSHIP  OF  FAYETTEVILLE  LITHOTRIPTERS
 LIMITED  PARTNERSHIP  - SOUTH  CAROLINA  II  Appendix B LOAN  COMMITMENT  (WITH
 EXHIBITS)  Appendix C FORM OF OPINION OF WOMBLE  CARLYLE  SANDRIDGE  & RICE,  A
 PROFESSIONAL LIMITED LIABILITY COMPANY Appendix D NOTES TO FINANCIAL STATEMENTS


<PAGE>


WINSTON 966198v1                                         59
WINSTON 966198v1
                                  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 its business cannot
be accurately  predicted.  The benefits of an investment in the Partnership also
depend on many  factors  over which the  Partnership  has no control,  including
competition,  technological  innovations rendering the Mobile Lithotripsy System
less  competitive  or  obsolete,  and  other  matters.  The  Partnership  may be
adversely  affected by various  changing  local  factors  such as an increase in
local unemployment, a change in general economic conditions, changes in interest
rates and  availability  of  financing,  and other  matters  that may render the
operation of the Mobile  Lithotripsy  System  difficult or  unattractive.  Other
factors that may adversely affect the operation of the Mobile Lithotripsy System
are  unforeseen  increased  operating  expenses,   energy  shortages  and  costs
attributable thereto, uninsured losses and the capabilities of the Partnership's
management personnel.

                  Uncertainties Related to Changing Healthcare Environment.  The
healthcare  industry  has  experienced  substantial  changes  in  recent  years.
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  principal purpose
will be to  continue  to operate  the Mobile  Lithotripsy  System.  Because  the
Partnership is dependent on only one line of business and one Mobile Lithotripsy
System,  there will be  greater  risks from  unexpected  service  interruptions,
equipment breakdowns, technological developments, kidney stone treatment medical
breakthroughs, economic problems and similar matters than would be the case with
a more diversified business.

                  Impact of Insurance Reimbursement.  The prices the Partnership
will be able to charge its  patients  for the  lithotripsy  of kidney  stones is
significantly  dependent  upon the amount of  reimbursement  private health care
insurers will allow for this procedure. Most of the Partnership's patients would
pay  for  services  directly  from  private  payment  sources,   primarily  from
third-party  insurers  such as  Blue  Cross/Blue  Shield  and  other  commercial
insurers.  Coverage and payment  levels for these private  payment  sources vary
depending  upon  the  patient's  individual  insurance  policy.  The  increasing
influence of health  maintenance  organizations and other managed care companies
has resulted in pressure to reduce the  reimbursement  available for lithotripsy
procedures.  The General  Partner and some of its Affiliates  have recently been
informed by several hospitals and commercial  insurers that reimbursement  rates
must be reduced,  or the hospitals and commercial  insurers would negotiate with
competing  lithotripsy  services.   Additionally,   the  Health  Care  Financing
Administration  ("HCFA"),  which administers the Medicare program,  has proposed
rules which would reduce the reimbursement  available for lithotripsy procedures
provided at hospitals to $2,612.  This rate is lower than the typical charge for
lithotripsy services  historically charged by the Partnership.  However, in some
cases, reimbursement rates payable to Affiliates of the General Partner are less
than the proposed HCFA rate.  Because of the competitive  pressures from managed
care companies as well as threatened reductions in Medicare  reimbursement,  the
General  Partner  anticipates   reimbursement   available  for  the  lithotripsy
procedure may continue to decrease. Such decreases would have a material adverse
effect  on  Partnership  revenues.  Regarding  the  professional  fees  paid  to
physicians  who treat  patients on the Mobile  Lithotripsy  System,  the General
Partner  anticipates  that  similar  competitive  pressures  may result in lower
reimbursement  paid to  physicians,  both by private  insurers and by government
programs such as Medicare. See "Regulation."

                  Reliability   and   Efficacy   of   the   Lithotripters.   The
Lithostar(TM)  has an  eleven  year  United  States  operating  history,  having
received  premarket approval from the FDA for renal lithotripsy on September 30,
1988. This approval  followed a period of clinical testing beginning in February
1987 at four test sites in the United States,  which was preceded by substantial
clinical testing of the  Lithostar(TM) at the Urological  Clinic of the Johannes
Gutenberg  University of Mainz, West Germany. The General Partner estimates that
more than 400  Lithostar(TM)  systems  are  currently  operating  in over twenty
countries,   and  the  General  Partner  and  its  Affiliates  operate  over  30
Lithostars(TM)  in  other  ventures.  In  the  General  Partner's  opinion,  the
Lithostar(TM)  has  proven to be  reliable  and  dependable  medical  equipment;
however,  downtime  periods  necessitated  for  maintenance  or  repairs  of the
Partnership's  Mobile  Lithotripsy  System  will  adversely  affect  Partnership
revenues. In 1996, the FDA approved a new higher intensity shock-head system for
the  Lithostar(TM),  which the General Partner believes has shortened  procedure
times.  The  Partnership's  Lithostar(TM)  has been  upfitted  with the new tube
system.  Based  upon a  detailed  follow-up  study of 86,000  renal  and  51,000
ureteral  stones treated on the  Lithostar(TM)  in all of the General  Partner'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 ten and  one-half  years in its
affiliated limited partnerships,  the General Partner is of the opinion that the
Lithostar(TM)  is  presently  a very  effective  and sound  alternative  for the
treatment of renal stones.

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

                  Technological  Obsolescence.  The  history of  lithotripsy  of
kidney stones as an accepted treatment  procedure is relatively recent, with the
first clinical trials being conducted in West Germany  beginning in 1980 and the
first  premarket  approval for a renal  lithotripter  in the United States being
granted  by the  FDA in  December  1984.  Today,  lithotripsy  is the  treatment
procedure of choice for kidney stone disease,  having  replaced other  treatment
methods.  Published reports indicate that certain  researchers are attempting to
improve  a  laser  technology  to  more  easily  eradicate  kidney  stones,  and
pharmaceutical  companies and researchers  have attempted to develop 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 net
proceeds of this Offering will be  distributed  to the persons who were Partners
prior to the  commencement  of the Offering and, thus,  will not be available to
fund Partnership  expenses.  In the event of unanticipated  expenses,  it may be
necessary to supplement  Partnership  funds with the proceeds of debt financing.
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.  See  "Summary  of the  Partnership  Agreement  - Powers  of the  General
Partner."

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

     Restrictions  on  Limited  Partners.  The  Partnership  Agreement  severely
restricts the Limited Partners' ability to own interests in competing  equipment
or  ventures.  See  "Summary  of  the  Partnership  Agreement  -  Noncompetition
Agreement and Protection of Confidential  Information."  The  enforceability  of
these noncompetition agreements is generally a matter of state law. No assurance
can be given that one or more Limited Partners may not successfully compete with
the Partnership. See "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 continue to operate  legally and be profitable  may be adversely
affected by changes in governmental  regulations,  including expected changes in
reimbursement,  Medicare and Medicaid  certification  requirements,  federal and
state fraud and abuse laws,  including the federal  Anti-Kickback  Statute,  the
federal  False  Claims  Act,  federal  and  state   self-referral   laws,  state
restrictions   on  fee  splitting  and  other   governmental   regulation.   See
"Regulation."  These laws and  regulations  may  adversely  affect the  economic
viability of the Partnership.  The laws are broad in scope, and  interpretations
by courts have been limited.  Violations of these laws would subject the General
Partner and all Limited Partners to governmental scrutiny and/or prosecution for
felony  charges and  punishment  in the form of large  monetary  fines,  loss of
licensure,  imprisonment  and  exclusion  from  Medicare and  Medicaid.  Certain
provisions  of Medicare and Medicaid law limit  provider  ownership  and control
over the various health care services to which  physicians may make Medicare and
Medicaid referrals. The primary laws involved are the "Stark II" federal statute
prohibiting  financial  relationships between physicians and certain entities to
which  they  refer  patients,  and the  Anti-Kickback  Statute  which  prohibits
compensation in exchange for or to induce referrals.

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

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

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

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

                  State laws affect the  operation of the  Partnership  as well.
South Carolina has a certificate of need ("CON") law relating to the purchase of
medical  equipment  with a cost in excess of $600,000,  and North Carolina has a
CON law in connection with the purchase of a lithotripter specifically. However,
the Partnership commenced its services prior to the enactment of these CON laws.
Accordingly,  the Partnership's  services were not subject to CON review, and no
CON was or is required for the services at Contract  Hospitals.  However, if the
Partnership seeks to provide services at different facilities, then a CON may be
required. No assurance can be given that a CON would be obtained.

                  Both South  Carolina and North Carolina have  prohibitions  on
physician ownership in entities to which they refer patients. The South Carolina
law has an exception to this  prohibition  if a physician  treats his or her own
patients, and accordingly,  South  Carolina-licensed  physicians who are Limited
Partners are required to treat their own patients. The North Carolina law has an
exception to this  prohibition if the physician,  or a member of the physician's
professional   group,   treats   the   patient,    and,    accordingly,    North
Carolina-licensed  physicians  who are Limited  Partners must either treat their
own patients or must arrange for a member of their practice group to treat their
patients.  Both  states  prohibit  the  payment of  kickbacks  in  exchange  for
referrals,  and the  General  Partnership  does no  believe  these  laws will be
violated.  The South Carolina  legislature recently enacted a law requiring that
radiologic  technologists be certified,  beginning in the year 2000. The General
Partner will ensure its radiologic  technologists comply with this certification
requirement.  Various inspection and registration  requirements imposed by South
Carolina and North Carolina also apply to the Partnership's  Mobile  Lithotripsy
System.  The General  Partner  will seek to comply with such  requirements.  See
"Regulation - State Regulation."

                  Contract  Terms  and  Termination.  The  Partnership  provides
lithotripsy  services to 11 Contract  Hospitals pursuant to 11 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
Hospital.  Most of the Hospital  Contracts  provide for  automatic  renewal on a
year-to-year  basis.  All of  the  Hospital  Contracts  with  automatic  renewal
provisions  are  terminable  without  cause upon 60 days or less  prior  written
notice by either party prior to any renewal date. One of the Hospital  Contracts
has no automatic renewal provision and will terminate within the next six months
unless renegotiated. It is expected that most new lithotripsy service contracts,
if any,  would have one-year  terms and be  automatically  renewed unless either
party  elects to cancel prior to the end of the term.  In addition,  many of the
existing contracts have, and any new contracts are expected to have,  provisions
permitting  termination in the event certain laws or regulations  are enacted or
applied to the  contracting  parties'  business  arrangements in a manner deemed
materially  detrimental to either party. See "Government  Regulation" above. 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. In addition, competing vendors may attempt to cause certain Contract
Hospitals to contract with them instead of the Partnership. The loss of Contract
Hospitals to competition  will adversely  affect  Partnership  revenues and such
effect  could  be  material.  Thus,  there  is  no  assurance  that  Partnership
operations as conducted on the date of this  Memorandum  will continue as herein
described or  contemplated,  and the  cancellation  of a  significant  number of
service contracts or the Partnership's inability to secure new ones could have a
material  negative  impact  on  the  financial  condition  and  results  of  the
Partnership.  See "Business Activities - Hospital  Contracts"and "Risk Factors -
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 System 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 System 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 Lithostar(TM),  has not assured Prime that its  Lithostars(TM)  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 Partnership's 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 uses for Partnership  purposes will be Year 2000 compliant by the end of
1999,  although  no  assurance  can be given  that such  will be the  case.  The
Partnership  currently  has no  contingency  plans in the event  that any of the
above-described  risks is realized. In the event that any of the above-described
risks are realized, or any other,  unanticipated Year 2000 Issue problems arise,
the Partnership could be forced to cease its operations for an indefinite period
of time while the Year 2000  problems  are  remedied,  at a cost which cannot be
accurately  predicted  at  this  time.  Any  such  interruption  in  Partnership
operations would adversely affect Partnership revenues.

Tax Risks

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

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

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

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

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

                  Disqualification of Employee Benefit Plans.  Purchase of Units
in the  Partnership may cause certain Limited  Partners,  certain  hospitals and
healthcare treatment centers, the Partnership, and employees of the foregoing to
be treated under Section  414(m) of the Code as being  employed in the aggregate
by a single  employer  or  "affiliated  service  group" for  purposes of minimum
coverage,  participation and other employee benefit plan requirements imposed by
the Code. In contrast, an employer not affiliated under Section 414(m) need only
consider its own  employees in  determining  whether its employee  benefit plans
satisfy  Code   requirements.   Aggregation   of   employees   could  cause  the
disqualification of the retirement plans of certain Limited Partners and related
entities.  Aggregation  could also  require  the value of the vested  retirement
benefit of a highly compensated  employee who is a participant in a disqualified
plan to be  included  in his or her gross  income,  regardless  of  whether  the
employee is a Limited  Partner.  These rules may adversely  affect Investors who
are currently involved in a medical practice joint venture,  regardless of their
purchase of Units in the  Partnership.  The  General  Partner and 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.

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

                  Partnership  Allocations.  The 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 Treasury  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. 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
declines,  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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                  Syndication  Expenses.  Section  709 of the Code  prohibits  a
partnership  from deducting or amortizing costs that are incurred to promote the
sale of partnership  interests  (i.e.,  syndication  expenses).  The Regulations
provide   definitions  for  syndication   expenses  that  must  be  capitalized.
Syndication  expenses include brokerage fees,  registration fees, legal fees for
securities  advice,  accounting  fees for preparation of  representations  to be
included  in  the  offering  materials,  and  printing  costs  of  the  offering
materials.  The  Partnership  intends to treat the entire amount  payable to the
Sales Agent as a sales  commission  for  selling  the Units,  as well as certain
other fees and expenses  allocable to the  preparation of this Memorandum and to
the offering of the Units in the Partnership,  as nondeductible,  nonamortizable
syndication expenses.

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

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

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

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," "The General Partner,"
"Competition" and "Conflicts of Interest."

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

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

                  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  Limited  Partners in the  Partnership,  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  Partner Loan could result in the  foreclosure  of the
Investor's right to receive any Partnership Distributions as well as the loss of
other  personal  assets  unrelated  to  his  Partnership  Interest.  Prospective
Investors  should  review  carefully  all the  provisions  contained in the Loan
Commitment  and the  terms of the  Limited  Partner  Note and Loan and  Security
Agreement with their counsel and financial advisors. Neither the Partnership nor
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  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  System for an
indefinite  period of time and that the Partnership  will not liquidate prior to
its  intended   termination.   Accordingly,   Investors  should  consider  their
investment in the Partnership as a long-term investment of indefinite duration.

                  Limited    Transferability    and    Illiquidity   of   Units.
Transferability of Units is severely restricted by the Partnership Agreement and
the 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 of the  Partnership 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 are a result of the  General  Partner's  gross
negligence or willful misconduct. In the opinion of the SEC, indemnification for
liabilities  arising out of the  Securities Act is contrary to public policy and
therefore is unenforceable.

                  Insurance.  Prime  maintains  active policies of insurance for
the benefit of itself and certain  affiliated  entities covering employee crime,
workers'   compensation,   business  and   commercial   automobile   operations,
professional liability, inland marine, business interruption,  real property and
commercial  liability risks.  These policies  include the  Partnership,  and the
General  Partner  believes  that  coverage  limits of these  policies are within
acceptable norms for the extent and nature of the risks covered. The Partnership
is  responsible  for its share of  premium  costs.  There are  certain  types of
losses,  however, that are either uninsurable or are not economically insurable.
For  instance,  contractual  liability is generally  not covered  under  Prime's
policies.  Should such losses occur with respect to Partnership  operations,  or
should losses exceed insurance  coverage limits,  the Partnership could suffer a
loss of the capital invested in the Partnership 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  (which the  General  Partner  may assign in its sole  discretion  to the
Partnership)  to purchase  all the  interest of a Limited  Partner who (i) dies,
(ii) becomes insolvent,  (iii) becomes  incompetent or (iv) acquires a direct or
indirect ownership  interest in a competing  venture.  Except in the case of the
death of a Limited Partner,  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 copy of the  Partnership  Agreement  attached  hereto as  Appendix A and
"Summary of the  Partnership  Agreement - Optional  Purchase of Limited  Partner
Interests."

                                 THE PARTNERSHIP

                  Fayetteville   Lithotripters   Limited   Partnership  -  South
Carolina  II, a South  Carolina  limited  partnership  (the  "Partnership")  was
organized and created under the South Carolina  Uniform Limited  Partnership Act
(the  "Act") on March 18,  1989.  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 interest in the Partnership (including a
12.33% limited partner interest held by the General Partner).  In the event that
all  40  Units  offered  hereby  are  sold,   the  General   Partner  will  hold
approximately a 16% general  partner  interest in the  Partnership,  the Initial
Limited  Partners will hold  approximately a 64% limited partner interest in the
Partnership  and the Investors  who purchase the Units offered  hereby (the "New
Limited  Partners")  will hold  approximately  an aggregate  20% interest in the
Partnership.  The  Percentage  Interests of the General  Partner and the Initial
Limited Partners (aggregate) will decrease by 0.1% and 0.4%,  respectively,  for
each Unit sold. The principal address of the Partnership and the General Partner
is 2008 Litho Place, Fayetteville, North Carolina 28034. The telephone number of
the Partnership and the General Partner is (800) 682-7971.

                              TERMS OF THE OFFERING

The Units and Subscription Price

                  Fayetteville   Lithotripters   Limited   Partnership  -  South
Carolina II, a limited  partnership  formed under the laws of the State of South
Carolina,  hereby  offers  an  aggregate  of up to 40 Units of  limited  partner
interest in the Partnership (the "Units").  Each Unit represents an initial 0.5%
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  Partnership  proposes to offer Units to the Initial  Limited
Partners  as  well  as  to  new   investors.   In  the  event  the  Offering  is
oversubscribed,  Units will be allocated first to Investors in such amounts that
after the Closing of the Offering  each  Investor will own up to a 2.5% interest
in  the   Partnership,   and  then  any   remaining   Units  will  be  allocated
proportionately among all Investors.  The price for each Unit is $12,522 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.  Proceeds  will then be  distributed  to the persons who were  Limited
Partners  prior  to  the  commencement  of  this  Offering.   See  "Sources  and
Applications of Funds."

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 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  rejects  or  reduces  an  Investor's
subscription as provided above,  the Investor's cash Unit purchase price and the
principal  amount of his Limited Partner Note will be  proportionately  refunded
and  reduced,  as the  case  may  be.  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 alone or in part with such funds and with
the proceeds of a Limited  Partner  Loan.  Financing  under the Limited  Partner
Loans was  arranged  by the  Partnership  with the Bank as  provided in the 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 forms of which are attached to the Subscription
Packet (collectively,  the "Loan Documents"). In no event may the maximum amount
borrowed  per Unit exceed  $10,022.  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, 2000 (assuming the
Closing occurs in December 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  which is attached
hereto as Appendix B.

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

                  If the  prospective  Investor  is  approved by the Bank and is
acceptable to the General Partner, the Escrow Agent will, upon acceptance of the
Investor's  subscription by the General  Partner,  release the Loan Documents to
the Bank and the Bank will pay the  proceeds of the Limited  Partner Note to the
Partnership to fund a portion of the Investor's  Unit purchase.  The prospective
Investor  will  have  substantial  exposure  under  the  Limited  Partner  Note.
Regardless  of  the  results  of the  Partnership's  operations,  a  prospective
Investor will remain liable to the Bank under his Limited Partner Note according
to its terms. The Bank can accelerate the entire principal amount of the Limited
Partner Note in the event the Bank in good faith believes the prospect of timely
payment or  performance  by the  prospective  Investor  is  impaired or the Bank
otherwise in good 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 Loan."

Subscription Period; Closing

                  The  subscription  period will commence on the date hereof and
will  terminate at 5:00 p.m.,  Eastern  time,  on January 1, 2000 (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.

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 "Risk Factors - Other  Investment Risks - Limited
Transferability  and  Illiquidity  of Units." An Investor  should not purchase a
Unit if the Investor does not have resources  sufficient to bear the loss of the
entire amount of the purchase price, including any portion financed. 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 South  Carolina  and North
Carolina 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 is severely restricted
by the Partnership Agreement and the Subscription Agreement. See "Summary of the
Partnership Agreement - Restrictions on Transfer of Partnership Interests."

                  Investors  who 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 by  following  the
instructions  included in the Subscription  Packet accompanying this Memorandum.
All  information  provided  by  Investors  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.  Such assignment may constitute an event of default under
such loan.  An  assignee,  whether by sale or  otherwise,  will acquire only the
rights of the assignor in the profits and capital of the Partnership and not the
rights of a Limited Partner,  unless such assignee becomes a substituted Limited
Partner.  An assignee may not become a substituted  Limited  Partner without (i)
either the  written  consent of the  assignor  and the General  Partner,  or the
consent of all 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
Agreement - 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 $100 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
$4,000.  The Partnership has agreed to indemnify the Sales Agent against certain
liabilities, including liabilities under the Securities Act.

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

                  The  subscription  period will commence on the date hereof and
will terminate at 5:00 p.m.,  Eastern time, on January 1, 2000, (or earlier,  in
the discretion of the General Partner), unless extended at the discretion of the
General Partner for an additional period not to exceed 180 days.

                  The Partnership seeks by this Offering to sell a maximum of 40
Units for a maximum of an aggregate of $500,880 in cash  ($496,880  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 by the Partnership (and, if
applicable,  the Bank),  the Investor will be admitted to the  Partnership  as a
Limited  Partner.  In connection with his admissions 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.  A subscription  may be rejected in part, in
which  case a portion  of the  subscription  funds  (without  interest)  and any
Limited  Partner  Note will be  returned  to the  Investor.  The  Offering  will
terminate  on January 1, 2000,  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   System  and  operate  it  in   northwestern   South  Carolina  and
southwestern  North  Carolina,  (ii) improve the provision of health-care in the
Partnership's  service  area  by  taking  advantage  of both  the  technological
innovations  inherent  in  the  Lithostar(TM)  and  the  Partnership's   quality
assurance and outcome analysis  programs,  and (iii) make cash  distributions to
its partners from revenues  generated by the operation of the Mobile Lithotripsy
System.  The Partnership owns and operates the Mobile  Lithotripsy System in the
Service  Area and has  contracted  with the 11  Contract  Hospitals  to  provide
lithotripsy services.

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  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 Lithostar(TM)

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

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

The Coach

                  The  Partnership's  Coach,  which houses a Lithostar(TM),  was
acquired by the Partnership in 1989. The Coach has been completely  upfitted for
the Lithostar(TM) and its clinical operations. Service for the Coach is obtained
on an as-needed  basis.  The General  Partner  estimates that  expenditures  for
maintenance and repair have been incurred at a rate of approximately $15,000 per
year per Unit. In 1999,  the Coach  underwent a complete  reconditioning,  which
included  removal and  reinstallation  of the  lithotripter,  replacement of the
interior floors, cabinets and wall covering,  exterior body work, repainting and
re-decaling the exterior and service to the expanding wall slideouts.

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 the  Partnership's  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 to provide
lithotripsy  services at 7 hospitals  in South  Carolina,  and at 4 hospitals in
North Carolina. The Contract Hospitals are:

                           Angel Community Hospital
                           Laurens County Hospital
                           Margaret R. Pardee Memorial Hospital

                           Mary Black Health System,
                            LLC (d/b/a Mary Black Memorial Hospital)
                           Oconee Memorial Hospital
                           Park Ridge Hospital
                           St. Francis Hospital, Inc.
                           St. Luke's Hospital
                           Self Memorial Hospital Center
                           Spartanburg Regional Medical Center

                  Eight of the  Hospital  Contracts  grant the  Partnership  the
exclusive  right  to  deliver  lithotripsy  services  to the  relevant  Contract
Hospital.  The Hospital Contracts require the Partnership to make a lithotripter
available  at the  facilities  as agreed  to by the  Contract  Hospital  and the
Partnership.  The  Partnership  generally also provides a technician and certain
ancillary  services such as scheduling and disposable medical products necessary
for the lithotripsy  procedure.  Nine of the Hospital Contracts provide that the
Partnership  will  bill  and  collect  for  services  rendered  to  patients  of
commercial insurance programs, while the Contract Hospital will bill and collect
for  services  rendered  to  patients  of the  Medicare,  Medicaid  and  CHAMPUS
programs.  Under two of the Hospital  Contracts,  the Contract  Hospital instead
agrees to pay the  Partnership  a fixed  amount to lease the Mobile  Lithotripsy
System and related support staff and supplies.

                  Ten of the Hospital  Contracts  have initial  terms of between
one and three years and automatically  renew for successive  one-year terms. One
of the Hospital Contracts has no automatic renewal provisions and will terminate
within the next six  months.  The  Hospital  Contracts  with  automatic  renewal
provisions  are all  terminable  upon 60 days prior written  notice prior to any
renewal date.  Many of the Hospital  Contracts  also have, and any new contracts
are expected to have, provisions permitting the termination in the event certain
laws or regulations are enacted or applied to the contracting  parties' business
arrangements  in a manner deemed  materially  detrimental  to either party.  See
"Risk Factors - Operating Risks - Contract Terms and  Termination."  The General
Partner believes it has a good relationship with many of the Contract Hospitals.
There is no assurance,  however, that one or more of the Contract Hospitals will
not  terminate  in the future.  See "Risk  Factors - Operating  Risks - Contract
Terms and Termination."

                  Reimbursement  Agreements.  The General Partner has negotiated
third-party reimbursement agreements with certain national and local payors. The
national  agreements are negotiated by the General  Partner and apply to all the
lithotripsy  partnerships  with which the  General  Partner is  affiliated.  The
General Partner has also negotiated  third-party  reimbursement  agreements with
local payors in the Service Area, including with Blue Cross/Blue Shield of South
Carolina,  Blue  Cross/Blue  Shield  of North  Carolina,  Doctors  Health  Plan,
Physicians Health Plan and Healthsource of South Carolina.  Some of the national
and local payors have agreed to pay a fixed price for the lithotripsy  services.
For  others,  the General  Partner  has agreed to accept a specified  percentage
discount from the  Partnership's  normal fee (with the discount  ranging nine to
twenty-five percent). Generally the agreements may be terminated by either party
on 90 days' notice.  The national and local  reimbursement  agreements that have
been  negotiated or  renegotiated  in the past two to four years almost entirely
provide for lower  reimbursement  rates for lithotripsy  services than the older
agreements.

Operation of the Mobile Lithotripsy System

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

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  System on behalf of the  Partnership  in
exchange  for a  monthly  management  fee  equal  to  the  greater  of  7.5%  of
Partnership  Cash Flow per month or $8,000  per  month.  See  "Compensation  and
Reimbursement to the General Partner and its Affiliates." The General  Partner's
services under the Management  Agreement  include making available any necessary
training  of  physicians  in  the  proper  use  of  the  lithotripsy  equipment,
monitoring  technological  developments  in renal  lithotripsy  and advising the
Partnership of these developments,  arranging  continuing education programs for
qualified   physicians   who  use  the   lithotripsy   equipment  and  providing
advertising, billing, accounts collection, equipment maintenance, medical supply
inventory and other incidental services necessary for the efficient operation of
the  Mobile  Lithotripsy  System.  Costs  incurred  by 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 second year renewal term. Thereafter,  it will be
automatically   renewed  for  one  additional  term  unless  terminated  by  the
Partnership  or the General  Partner.  The General  Partner has also appointed a
local Medical Director and a Physician  Advisory Board made up of representative
local  physicians.  The General Partner  consults with the Medical  Director and
Physician  Advisory Board from time to time, as needed, on matters including the
Partnership's Quality Assurance Program,  utilization review,  outcome analysis,
patient scheduling and certain Partnership expenditures.

Employees and Benefits

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

                               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 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             Vice President
                           Cheryl Williams           Vice President and Director
                           Thomas J. Driber, Ph.D.   Vice President
                           Stan Johnson              Vice President
                           David Vela, M.D.          Vice President
                           Philip J. Gallina         Secretary and Treasurer
                           James D. Clark            Assistant Secretary

     Supervision  of  the  day-to-day   management  and  administration  of  the
Partnership 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 and Chief  Executive  Officer 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 its Board of Directors.  He also
serves as the Chief Executive  Officer of the General Partner.  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 was recently  appointed a Vice  President of the
General  Partner and served as Chief  Financial  Officer of the General  Partner
from 1991 to 1998. In August,  1986, Mr. Terry joined The May Department  Stores
Company at their  corporate  headquarters  in St.  Louis,  where he held several
financial management  positions until October,  1987, when he was transferred to
one of May's largest divisions,  Caldor,  Inc., as Vice President of Finance. He
remained in that  capacity  until June,  1990,  when he became  Chief  Operating
Officer for the 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.

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

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

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

     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.

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

                      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 System. 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
"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 are  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 second  five-year  renewal  term.  The  Management  Agreement  will be
automatically  renewed for up to one additional successive five-year term unless
it is earlier terminated by the Partnership or 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
System,  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 12.33%  (before  dilution)  limited  partner
interest in the Partnership. The General Partner is entitled to Distributions on
account of such interest.  See "Summary of the Partnership  Agreement - Profits,
Losses and Distributions" and the Partnership  Agreement attached as Appendix A.
The General  Partner will also receive its  proportionate  share of the Offering
proceeds distributed to existing Limited Partners. See "Sources and Applications
of Funds."

                  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 $100 for each  Unit sold (up to an
aggregate of $4,000).  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  $4,000.  See  "Plan  of
Distribution" and "Conflicts of Interest."

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

                  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 the Partnership's operations were at the
time  expected to enable  repayment of such loan in  accordance  with its terms,
lower than anticipated  revenues and/or greater than anticipated  expenses could
result in the  Partnership's  failure to make  payments of principal or interest
when due  under  such a loan  and the  Partnership's  equity  being  reduced  or
eliminated.  In such  event,  the  Limited  Partners  could  lose  their  entire
investment.

                              CONFLICTS OF INTEREST

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

                  The General Partner and its Affiliates will receive management
fees and broker-dealer sales commissions,  respectively,  in connection with the
business  operations of the  Partnership  and the sale of the Units that will be
paid  regardless  of  whether  any sums  hereafter  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.  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.  The General Partner is planning other limited
partnership offerings that would operate lithotripsy businesses in other states.
See "Competition."

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

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

                 FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER

                  The General  Partner is  accountable  to the  Partnership as a
fiduciary and  consequently  must  exercise  good faith in handling  Partnership
affairs.  This is a rapidly  developing and changing area of the law and Limited
Partners who have questions  concerning the duties of the General Partner should
consult with their counsel. Under the Partnership Agreement, the General Partner
and its  Affiliates  have no liability to the  Partnership or to any Partner for
any loss suffered by the  Partnership  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

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

Affiliated Competition

                  The Partnership faces competition from lithotripters operating
in  South  Carolina  and  North  Carolina,   including  lithotripters  owned  by
Affiliates  of the General  Partner.  The  General  Partner  has  organized  and
currently  operates  two  limited  partnerships  in  South  Carolina  and  North
Carolina:  Fayetteville  Lithotripters  Limited  Partnership - South Carolina I,
which operates in the eastern and coastal areas of South Carolina;  and Carolina
Lithotripsy,  a limited  partnership  which operates in eastern North  Carolina.
Other  Affiliates of the General  Partner  operate in Tennessee and other nearby
states.

Other Competition

                  Hospitals  and other  facilities  in and near the Service Area
have access to lithotripters  which are in competition with the Partnership.  To
the best knowledge of the General Partner, lithotripsy services are available at
Anderson Area Medical Center in Anderson,  South Carolina,  at Palmetto  Baptist
Medical  Center  in  Easley,   South   Carolina,   at  Rutherford   Hospital  in
Rutherfordton,  North Carolina,  and at Harris Regional Hospital in Sylva, North
Carolina.  In addition,  the General  Partner is aware of a Medstone  unit which
operates in Spartanburg,  South Carolina,  as well as other  lithotripters which
operate in Columbia, South Carolina and Asheville, North Carolina.

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

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

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

                  There  is  no  assurance   that  new   competing   lithotripsy
operations will not open in the future or that  innovations in  lithotripters or
other  treatment  methods  of  kidney  stone  disease  will not make the  Mobile
Lithotripsy System competitively obsolete. See "Risk Factors - Operating Risks -
Technological  Obsolescence."  The General  Partner and its  Affiliates  are not
prohibited from engaging in any business  arrangement  that may compete with the
Partnership. There is no assurance the Partnership can successfully compete with
existing  providers,  including  facilities  that offer  traditional  methods of
treatment for kidney stone disease. See "Business Activities - Treatment Methods
for Kidney Stone Disease."

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

                                   REGULATION

Federal Regulation

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

                  Reimbursement.   The   Partnership   is   subject  to  federal
government oversight as the Partnership 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.  The Balanced  Budget Act of 1997  required the Health Care
Financing  Administration  ("HCFA"),  the agency that  administers  the Medicare
program,  to establish a prospective  payment system for outpatient  procedures.
One of the goals of the  prospective  payment  system was to lower medical costs
paid by the Medicare program. HCFA issued proposed regulations in September 1998
which  would  reduce  the  reimbursement  rate  currently  paid for  lithotripsy
procedures performed on Medicare patients at hospitals to a base rate of $2,612.
The  base  rates  includes  anesthesia  and  sedation,  equipment  and  supplies
necessary  for the  procedure,  but does not  include the  treating  physician's
professional   fee.  The  base  rate  is  subject  to  adjustment   for  various
hospital-specific  factors. The General Partner believes the lower reimbursement
rate will be  implemented  in the latter  half of the year 2000.  In some cases,
reimbursement  rates payable to Affiliates of the General  Partner are less than
the proposed HCFA rate.

                  The General  Partner retains the discretion to, in the future,
make the Mobile  Lithotripsy  System  available at ambulatory  surgery  centers.
Medicare does not currently  reimburse for  lithotripsy  procedures  provided at
ambulatory  surgery centers.  However,  HCFA issued proposed rules in June, 1998
which include  lithotripsy among those procedures provided at ambulatory surgery
centers  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.  The June 1998
proposed rules assign a Medicare reimbursement rate of $2,107 if the lithotripsy
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 customary
charge for the procedure  currently being charged by the  Partnership.  Medicare
reimbursement  is not be expected to constitute a majority of the  Partnership's
revenues.  However, the Medicare program has historically influenced the setting
of reimbursement standards by commercial insurers.  Therefore,  reduced rates of
Medicare  reimbursement for lithotripsy services may result in lower payments by
commercial  insurers  for  the  same  services.  As  was  discussed  previously,
competitive  pressures from health  maintenance  organizations and other managed
care  companies has in some cases already  resulted in decreasing  reimbursement
rates from commercial insurers.  See "Risk Factors - Operating Risks - Impact of
Insurance  Reimbursement." No assurances can be given that HCFA will not seek to
reduce its  proposed  reimbursement  rates even more to avoid  paying  more than
commercial  insurers.  The General Partner  anticipates that  reimbursement  for
lithotripsy procedures, and therefore overall Partnership revenues, may continue
to decline.

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

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

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

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

                  This  interpretation   adopted  by  the  General  Partner  was
consistent  with the informal view of those  representatives  of the Health Care
Financing  Administration  responsible for regulatory  guidance concerning Stark
II.  Based  upon this  reasonable  interpretation  of Stark II, by  referring  a
patient to a hospital  furnishing the  outpatient  lithotripsy  services  "under
arrangements"  with the Partnership,  a physician investor in the Partnership is
not  making a referral  to an entity  (the  hospital)  in which he or she has an
ownership interest.

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

                  HCFA  acknowledges  in its commentary to the Proposed Stark II
Regulations  that  physician  overutilization  of  lithotripsy  is unlikely  and
specifically solicits comments on whether there should be a regulatory exception
for lithotripsy.  HCFA has received a substantial  volume of comments in support
of a regulatory exception for lithotripsy.  HCFA representatives have informally
acknowledged  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.  The General  Partner will  continue to work
through  the  American   Lithotripsy   Society  to  encourage  the  adoption  of
legislation  supportive of urologists'  ability to lawfully  maintain  ownership
interests  in  ventures  that  provide  lithotripsy  services  to all  of  their
patients.  Additionally,  the General Partner will continue to carefully  review
the Proposed Stark II Regulations and accompanying HCFA commentary,  and explore
other  alternative  plans of  operations  that would  allow the  Partnership  to
operate in compliance with Stark II and its final regulations.

                  HCFA's  adoption of the current  Proposed Stark II Regulations
as final or a  reviewing  court's  interpretation  of the  Stark II  statute  in
reliance on the Proposed  Stark II  Regulations  and in a manner  adverse to the
Partnership operations would mean that the Partnership and its physician Limited
Partners would be in violation of Stark II. In such circumstance, it is possible
the  Partnership  may be given the  opportunity to restructure its operations to
bring  them into  compliance.  The  Partnership  and/or  the  physician  Limited
Partners may not be permitted the  opportunity  to  restructure  operations  and
thereby avoid an obligation  to refund any amounts  collected  from Medicare and
Medicaid   patients  in  violation  of  the   statute.   Further,   under  these
circumstances  the  Partnership and physician  Limited  Partners may be assessed
with  substantial  civil  monetary  penalties  and/or  exclusion  from providing
services reimbursed by Medicare and Medicaid.

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

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

     The Limited Partners receive cash Distributions from the Partnership. Since
some of the Limited  Partners are  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,  U.S. v. Kats, 871 F.2d 105 (9th Cir. 1989),  and
cited favorably by the First Circuit in U.S. v. Bay State Ambulance and Hospital
Rental Service, Inc., 874 F.2d 20 (1st Cir. 1989).


                  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.  This Offering and the business
of the Partnership do not comply with any Safe Harbor.

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

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

                  The Health Insurance Portability and Accessability Act of 1996
directed  the OIG to respond to requests  for advisory  opinions  regarding  the
effect of the  Anti-Kickback  Statute on  proposed  business  transactions.  The
General  Partner has not  requested  the OIG to review this Offering and, to the
best knowledge of the General  Partner,  the OIG has not been asked by anyone to
review offerings of this type.  Federal  regulatory  authorities  could take the
position in future advisory opinions that business  transactions similar to this
Offering  are a means  to  illegally  influence  the  referral  patterns  of the
prospective  physician  Limited  Partners.  Because there is no legal  precedent
interpreting  circumstances  identical  to these  facts,  it is not  possible to
predict how this issue would be resolved if litigated.

                  Whenever an offering of ownership  interests is made available
to  persons  with the  potential  to refer  patients  for  services,  there is a
possibility  that the OIG,  HCFA or other  government  agencies or officials may
question whether the ownership  interests are being provided in return for or to
induce referrals by the new owners.  Remuneration,  which  government  officials
have said can include the provision of an opportunity to invest in a facility to
which a person refers patients for services,  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  Limited  Partners  for any
referrals of patients  (including  the  requirement  that all  distributions  of
earnings  to  Limited  Partners  be  made  in  proportion  to  their  investment
interest), the Partnership's  utilization review and quality assurance programs,
the fact that  lithotripsy  is a therapeutic  treatment the need of which can be
objectively determined, and the existence in the General Partner's view of valid
business  reasons to engage in this  transaction,  form the basis in part of the
General Partner's belief that this Offering is appropriate.

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

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

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

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

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

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

State Regulation

                  South  Carolina.  The South  Carolina  Certificate of Need and
Health Facility  Licensure Act requires a certificate of need ("CON") to acquire
medical  equipment if the total  project cost exceeds  $600,000.  However,  this
requirement  did not  take  effect  until  1993,  and the  Partnership's  Mobile
Lithotripsy  System was acquired and services at hospitals were initiated before
1993.   Accordingly,   to  the  best  knowledge  of  the  General  Partner,  the
Partnership's  lithotripsy services are not subject to CON requirements,  having
been "grandfathered in" under the existing law. If in the future the Partnership
enters into any new Hospital Contracts, a new CON would possibly be required. By
requiring a CON for the acquisition of medical equipment where the total project
cost exceeds $600,000,  South Carolina's CON law favors existing  providers such
as the  Partnership.  The General  Partner can give no assurance  that the South
Carolina CON law will  continue to favor the  Partnership's  Mobile  Lithotripsy
System in the Service Area. Any amendments,  adjustments or modifications to the
CON law could  adversely  affect the  Partnership.  Other  states have  recently
repealed CON laws or permitted CON laws to expire,  and the General  Partner can
give no assurance  that such South Carolina will not repeal its CON law or allow
its CON law to expire, which could adversely affect the Partnership.

                  A South Carolina statute requires licensure of freestanding or
mobile  technology.  However,  the  Division  of Health  Licensing  of the South
Carolina Department of Health and Environmental  Control has never enforced this
statutory licensure  requirement,  issued regulations or implemented the statute
in any way. The General  Partner is monitoring the status of this issue,  and if
the mobile  technology  licensure  requirement  should  ever be  implemented  or
enforced,  the  General  Partner  will seek to ensure the  Partnership's  Mobile
Lithotripsy System becomes licensed if required.

                  South Carolina's Provider  Self-Referral Act of 1993 generally
prohibits  physicians from referring patients to entities in which the physician
has an ownership  interest.  However,  there is an  exception  if the  physician
"directly  provides  the  health  care  services  within  the  entity or will be
personally involved in the provision,  supervision,  or direction of care to the
referred patient."  Accordingly,  physician Limited Partners who are licensed in
South Carolina must treat their own patients.

                  The  Provider  Self-Referral  Act of  1993  also  contains  an
anti-kickback  prohibition.  It  prohibits  paying or  receiving  kickbacks  for
referring or soliciting  patients,  and is similar to the federal  Anti-Kickback
Statute  discussed  above. For the same reasons the General Partner believes the
federal  Anti-Kickback  Statute  is not  violated  by  this  Offering  or by the
business of the  Partnership,  the General  Partner  believes the South Carolina
anti-kickback  prohibition is not violated.  South Carolina prohibits unlicensed
persons  from  practicing  medicine,  and  prohibits  licensed  physicians  from
assisting  unlicensed persons to practice medicine.  As all lithotripsy services
will be provided by or under the direction of licensed  physicians,  the General
Partner does not believe these prohibitions will be violated.

                  In 1999,  the South Carolina  legislature  enacted the Medical
Radiation  Health  and  Safety  Act.  Beginning  in the  year  2000,  radiologic
technologists  must be certified by a state  regulatory  agency (which as of the
date of this Offering has not been  established).  Radiologic  technologists who
are certified by the American Registry of Radiologic  Technologists will qualify
for state  certification.  The  General  Partner  will  ensure  that  radiologic
technologists  who are employed by or provide  services for the  Partnership and
its patients meet the state certification requirement.

                  North Carolina.  North Carolina requires a certificate of need
("CON") to acquire lithotripters and initiate lithotripsy services. However, the
CON  requirement  did not take effect  until  1993,  and the  Partnership  began
providing  services at the four  hospitals  it serves in North  Carolina  before
1993.  Therefore,  the  Partnership  did not need a CON to  commence or continue
providing  lithotripsy  services  at  these  hospitals.  If in  the  future  the
Partnership enters into any new Hospital Contracts,  a new CON would possible be
required. For the same reasons discussed above with regard to the South Carolina
CON law, any amendments,  adjustments or modifications to the North Carolina CON
law could adversely affect the Partnership.

                  North  Carolina  law  regulates  referrals  by  physicians  to
entities in which the  physicians  are  investors.  Such referrals are generally
prohibited.  However,  there is an  exception  if the patient is referred  for a
service  which is  provided  by,  or under  the  personal  supervision  of,  the
referring physician or by a member of the referring  physician's group practice.
Therefore, physicians who are Limited Partners must treat their own patients, or
have a member of their group practice treat their patients.

                  Kickbacks are prohibited  under North  Carolina law.  Licensed
health care  providers  (including  physicians)  are  prohibited  from paying or
receiving  compensation for referring patients. For the same reasons the General
Partner  believes the federal  Anti-Kickback  Statute  (discussed  above) is not
violated by this  Offering or by the  business of the  Partnership,  the General
Partner believes the North Carolina  anti-kickback  prohibition is not violated.
Among  these  reasons  include  the facts  that the  Partnership  bills only for
technical  and  not  professional  fees  (which  are the  responsibility  of the
treating  physician),  and that the  Partnership's  distributions of profits are
based  strictly  on  investors'  ownership  interests  (and not on the  basis of
referrals of services provided by the Partnership).

                  The North Carolina Medical Board has issued a policy statement
in which it  condemns  fee-splitting.  Fee  splitting,  according  to the  North
Carolina  Medical Board,  is the receipt of money in return for  referrals.  The
General Partner  believes the Partnership does not violate (and does not ask its
physician  Limited  Partners to violate) the Medical  Board's policy  statement.
Except for the initial capital contribution,  there is no payment by a physician
to the  General  Partner  or the  Partnership.  As  discussed  in the  preceding
paragraph,  payments by the Partnership to physician  Limited Partners are based
solely on the percentage of investment interest they have in the Partnership.  A
bill was introduced in the 1999 session of the North Carolina  General  Assembly
which would codify the Medical  Board's policy against  fee-splitting.  The bill
did not pass, but it may be considered again in the 2000 session.

                  To the best knowledge of the General Partner,  no licensure of
the Mobile  Lithotripsy  System as a health  care  facility is required in North
Carolina.  Rather,  the  lithotripsy  services are  regulated  under the state's
oversight of the relevant Contract  Hospital.  Registration of the x-ray unit in
the Mobile Lithotripsy System is required under North Carolina law.

                  The  Partnership  has been complying and will seek to continue
to comply with all  applicable  statutory and regulatory  requirements.  Further
regulations  may be imposed in South  Carolina or North  Carolina 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  approximately  450  hospitals  and
surgery centers in 34 states, as well as delivering non-medical services related
to the operation of the lithotripters, including scheduling, staffing, training,
quality  assurance,  maintenance  and  contracting  with payors,  hospitals  and
surgery  centers,  while  medical care is rendered by  urologists  utilizing the
lithotripters.  Prime has an economic interest in 55 mobile and seven 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
twelve  acquisitions  with interests in 62 lithotripters and development of five
lithotripters.  In April 1996, Prime acquired the General  Partner.  The General
Partner and its Affiliates operate 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 37,000, or approximately 19.5%,
of the estimated 190,000 lithotripsy  procedures  performed in the United States
in 1998. Approximately 2,300 urologists utilized Prime and the General Partner's
lithotripters  in 1998,  representing  approximately  30% of the estimated 7,700
urologists in the United States.

                  Prime manages the  operations  of 62 of its 67  lithotripters.
All of its  lithotripters  are operated in connection  with hospitals or surgery
centers.  Prime operates its lithotripters  primarily through subsidiaries which
act as the  general  partner of a limited  partnership,  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 48 of its 67 operations.

                  Prime's  lithotripters  generally  range  in age  from  one to
twelve  years.  Of  its  67  lithotripters,  60  are  mobile  units  mounted  in
tractor-trailers or self-contained coaches serving locations in 34 states. Prime
also  operates  seven fixed site  lithotripters  in five states.  All of Prime's
fixed  lithotripsy units are located and operated in conjunction with a hospital
or surgery  center.  Most of these locations are in major  metropolitan  markets
where the  population  can support such an operation.  Fixed site  lithotripters
generally cannot be economically justified in other locations.

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

                  For  numerous  reasons,  including  differences  in  financial
structure,  program size,  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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<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 40 Units are sold and
other sources and their anticipated and estimated uses.

----------------------------- --------------------------------------------------
                        Sources of Funds                 Sale of 40 Units
Offering Proceeds(1)                               $ 500,880           (100.00%)
                                                   ---------           ---------
   TOTAL SOURCES                                   $ 500,880           (100.00%)
                                                   =========           =========
                      Application of Funds

Syndication Costs(2)                               $ 33,000             (6.59%)
Distributions(3)                                   $ 467,880            (93.41%)
                                                   ---------   -        --------
   TOTAL APPLICATIONS                              $ 500,880           (100.00%)
                                                   =========           =========
----------------------------- --------------------- ----------------------------


Notes to Sources and Applications of Funds Table

(1)      Assumes 40 Units are purchased by qualified investors.

(2)      Includes   $4,000  in   commissions   payable   to  the  Sales   Agent,
         reimbursement of $4,000 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.

(3)      After  payment of Offering  costs and expenses  (up to $33,000),  it is
         anticipated that the Partnership will distribute the remaining proceeds
         to the persons who were Limited  Partners of the  Partnership  prior to
         the commencement of this Offering.

                     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, 1996,  December 31, 1997 and December 31, 1998 and the  nine-month
period ended  September 30, 1999,  (ii) Balance  Sheets as of December 31, 1996,
December 31, 1997,  December 31, 1998 and  September  30, 1999,  (iii) Cash Flow
Statements for the years  December 31, 1996,  December 31, 1997 and December 31,
1998 and the nine-month  period ended  September 30, 1999 and (iv) Statements of
Partner's  Equity for the years ended  December 31, 1996,  December 31, 1997 and
December 31, 1998 and the nine-month period ended September 30, 1999.

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


<PAGE>


                           MANAGEMENT'S DISCUSSION AND

                      ANALYSIS OF THE RESULTS OF OPERATIONS

Nine Months Ended September 30, 1999 and September 30, 1998

                  Revenues. Total revenues increased $521,073 (21%) for the nine
months ended  September 30, 1999  compared to the same period in 1998  primarily
due to a 3% increase in the number of procedures performed and a decrease in the
estimate of the beginning of year allowance for  contractual  adjustments due to
the availability of improved information.

                  Operating  Expenses.  Operating expenses decreased by $148,819
(21%) for the nine months ended September 30,1999 compared to the same period in
1998.  This decrease is due  primarily to lower  depreciation  and  amortization
expense,  which  declined by $134,575 due to the  majority of the  partnership's
equipment being fully depreciated in 1999.

     Other Income  (Expenses).  Total other income  (expense),  net decreased by
$7,067 (40%) due to a decrease in interest income.

Year Ended December 31, 1998 and December 31, 1997

                  Revenues.  Total revenues  increased $52,481 (2%) for the year
ended  December  31, 1998  compared  to the same period in 1997  related to a 1%
decrease in the number of procedures performed, and a 2% increase in revenue per
case.

                  Operating  Expenses.  Operating  expenses decreased by $63,731
(6%) for the year ended  December 31, 1998  compared to the same period in 1997,
due to a decrease  of $49,891 in overhead  allocation  related to the decline in
overhead costs incurred by Litho and a $19,984 decline in equipment  maintenance
and repair,  which declined due to the  renegotiation  of the equipment  service
contracts.

     Other Income  (Expenses).  Total other income  (expense),  net increased by
$2,313 (10%) due to the increase in interest income.

Year Ended December 31, 1997 and December 31, 1996

                  Revenues.  Total revenues  increased $96,846 (3%) for the year
ended  December  31, 1997  compared  to the same period in 1996  related to a 7%
increase in the number of procedures performed, and a 4% decrease in revenue per
case.

                  Operating  Expenses.  Operating  expenses increased by $20,810
(2%) for the year ended  December 31, 1997  compared to the same period in 1996,
due to an increase of $23,265 in depreciation and  amortization  expense related
to equipment acquired in December 1996.

     Other Income  (Expense).  Total other income  (expense),  net  decreased by
$11,389 (34%) due to the decrease 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 $12,522 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  Partner
Loans." No Limited Partner will have any liability for the debts and obligations
of the  Partnership by reason of being a Limited Partner except to the extent of
(i) his or her 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  to the extent that,  after giving effect to the  Distribution,  all
liabilities of the Partnership,  other than liabilities to parties on account of
their Partnership Interests,  exceed the fair value of the Partnership assets as
provided  by the  Act or  other  applicable  law.  See  "Risk  Factors  -  Other
Investment   Risks  -   Limited   Partners'   Obligation   to   Return   Certain
Distributions."  See also Form of Legal  Opinion of Womble  Carlyle  Sandridge &
Rice, a Professional Limited Liability Company, 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.

                  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 the General Partner's accrued but undistributed  Partnership Cash Flow as of
the date the New Limited Partners are admitted to the  Partnership.  New Limited
Partners will be entitled only to  Partnership  Cash Flow that accrues after the
date of their admission to the Partnership as Limited Partners

                  (b) Distribution  Upon  Dissolution.  Upon the dissolution and
termination  of the  Partnership,  the General  Partner or, if there is none,  a
representative  of the  Limited  Partners,  will  liquidate  the  assets  of the
Partnership. The proceeds of such liquidation will be applied and distributed in
the  following  order of  priority:  (a) first,  to the payment of the debts and
liabilities of the Partnership,  and the expenses of liquidation; (b) second, to
the creation of any reserves which the General Partner or the  representative of
the  Limited  Partners  may deem  reasonably  necessary  for the  payment of any
contingent or unforeseen liabilities or obligations of the Partnership or of the
General  Partner arising out of or in connection with the business and operation
of the Partnership;  and (c) third, the balance,  if any, will be distributed to
the Partners in accordance with the Partners' positive capital account balances.
Any General Partner with a negative  capital account  following the distribution
of liquidation  proceeds or the  liquidation of its interest must  contribute to
the  Partnership an amount equal to such negative  capital  account on or before
the end of the  Partnership's  taxable  year (or, if later,  within  ninety days
after  the  date of  liquidation).  Any  capital  so  contributed  shall  be (i)
distributed to those Partners with positive  capital accounts until such capital
accounts  are  reduced  to  zero,   and/or  (ii)  used  to  discharge   recourse
liabilities.

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

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  System,  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

                  1.  General.   The  General   Partner  may,  in  its  absolute
discretion,  borrow  money,  acquire,  encumber,  hold title to,  pledge,  sell,
release or otherwise  dispose of, all or any part of the  Partnership's  assets,
when and upon such  terms as it  determines  to be in the best  interest  of the
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 for other than Partnership  purposes;  (ii) admitting Limited
Partners except as provided in the Partnership  Agreement;  (iii) performing any
act (other than an act required by the Partnership Agreement or any act taken in
good faith  reliance upon Counsel's  opinion) which would,  at the time such act
occurred,  subject any Limited  Partner to liability as a general partner in any
jurisdiction;  and (iv) performing any act in  contravention  of the Partnership
Agreement or which would make it impossible to carry on the ordinary business of
the Partnership.

                  2.       Tax Matters.

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

                  (ii) Tax Matters Partner. The Partnership Agreement designates
the General  Partner as the Tax Matters  Partner (as defined in Section  6231 of
the Code) and authorizes it to act in any similar  capacity under state or local
law.  As the Tax Matters  Partner,  the General  Partner is  authorized  (at the
Partnership's  expense):  (i) to represent the  Partnership  and Partners before
taxing authorities or courts of competent  jurisdiction in tax matters affecting
the  Partnership or Partners in their  capacity as Partners;  (ii) to extend the
statute of limitations for assessment of tax deficiencies  against Partners with
respect to adjustments to the Partnership's federal, state or local tax returns;
(iii) to execute any agreements or other documents relating to or affecting such
tax matters, including agreements or other documents that bind the Partners with
respect to such tax matters or  otherwise  affect the rights of the  Partnership
and Partners; and (iv) to expend Partnership funds for professional services and
costs associated therewith.  In its capacity as Tax Matters Partner, the General
Partner shall oversee the  Partnership  tax affairs in the manner which,  in its
best  judgment,  are in the  interests of the  Partners.  Moreover,  the General
Partner will, in its sole discretion,  not make an election pursuant to Treasury
Regulation 301.7701.3 to be treated as an association taxable as a corporation.

Rights and Liabilities of the Limited Partners

                  The Limited  Partners do not have any right to  participate in
the management of the business of the Partnership and will not transact business
for the  Partnership.  Limited  Partners  are not  required  to make any capital
contributions  to the  Partnership  except amounts agreed by them to be paid, or
pay or be  personally  liable for, any expense,  liability or  obligation of the
Partnership,  except  to the  extent  (i) his or her  Capital  Contribution  and
liability  under a Limited  Partner Loan, if any, (ii) his or her  proportionate
share of the undistributed  profits of the Partnership,  and (iii) the amount of
any Distribution  received from the Partnership to the extent that, after giving
effect to the  Distribution,  all  liabilities  of the  Partnership,  other than
liabilities to Partners on account of their  Partnership  Interests,  exceed the
fair value of  Partnership  assets as provided by the Act.  See "Risk  Factors -
Other  Investment  Risks  -  Limited  Partners'  Obligation  to  Return  Certain
Distributions."

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 the  Partnership
Interest by or to a "tax exempt  entity"  (as  defined in Code  Section  168(h))
which would affect the method or manner in which the  Partnership may depreciate
Partnership  assets.  No  transferee  of the Units will  automatically  become a
Limited  Partner.  Admission of a  transferee  to the  Partnership  as a Limited
Partner  requires  the  fulfillment  of  other  obligations  enumerated  in  the
Partnership Agreement, including either the approval of all the Limited Partners
(except the assignor Limited  Partner) and the General Partner,  or the approval
of the assignor Limited Partner and the General  Partner.  Any transferee of the
Partnership  Interest who has not been admitted to the  Partnership as a Partner
will  not be  entitled  to  any  of the  rights,  powers  or  privileges  of his
transferor  except  the right to receive  and be  credited  or debited  with his
proportionate share of Partnership income, gains, profits,  losses,  deductions,
credits or distributions. A transferor Limited Partner will not be released from
his or her personal liability under the Limited Partner Loans,  unless otherwise
specifically  agreed by the Bank, and the sale of his or her Limited Partnership
Interest  may  constitute  an event of  default  under any  outstanding  Limited
Partner Loan.

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 South  Carolina
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.

Optional Purchase of Limited Partner Interests

                  As provided in the Partnership Agreement,  the General Partner
and the Limited  Partners have an option (which the General  Partner may, in its
sole  discretion,  assign to the  Partnership) to purchase all the interest of a
Limited  Partner in the  Partnership  upon the  occurrence  with  respect to the
Limited Partner of (i) death, (ii) bankruptcy or insolvency, (iii) incompetency,
or (iv) direct or indirect ownership of an interest in a competing venture. Upon
the occurrence of one or more of the preceding events,  the withdrawing  Limited
Partner, or his or her personal representative,  will have a brief period within
which to sell his or her entire Partnership  Interest to a purchaser approved of
by the General Partner. If the withdrawing Limited Partner is unable to sell his
or her  Partnership  Interest as  provided  above,  the General  Partner (or the
Partnership)  will then  have the first  option  to  purchase  such  Partnership
Interest and thereafter,  the remaining Limited Partners will have the option to
purchase any of the  Partnership  Interest not purchased by the General  Partner
(or the  Partnership).  Except in the case of death,  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).
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.  In the event of the death of a
Limited  Partner,   the  option  purchase  price  for  that  Limited   Partner's
Partnership  Interest is an amount  equal to the greater of (x) one and one-half
times the aggregate  distributions made with respect to the Partnership Interest
during the  twelve-month  period  ending  the last day of the month  immediately
preceding the month in which the death occurs or (y) the Limited Partner's share
of the Partnership's  book value, if any, as reflected by the Capital Account of
the Limited Partner (prorated in either case in the event that only a portion of
his Partnership Interest is being purchased.  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.  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 any  outstanding  Limited  Partner  Loan
incurred by the selling  Limited  Partner.  See "Terms of the Offering - Limited
Partner Loans."

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 Carolina and North Carolina urologists who are
not investors in the Partnership ("Qualified Investors"). The primary purpose of
Dilution  Offerings would be (i) to raise additional  capital for any legitimate
Partnership  purpose and (ii) to assure the highest  quality of patient  care by
admitting  Qualified  Investors to the  Partnership  who will be  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 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
economic  interests of the General Partner and the Initial  Limited  Partners in
the Partnership, 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 the Dilution Offering.

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 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  (or the  Partnership)  or the
Limited  Partners  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  Partnership  Agreement
attached hereto as Appendix A.

                  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.

Arbitration

                  The  Partnership  Agreement  provides  that  disputes  arising
thereunder  shall be resolved by submission to arbitration in Greenville,  South
Carolina in accordance with the provisions of South Carolina law.

Power of Attorney

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

Reports to Limited Partners

                  Within 90 days after the end of each Year of the  Partnership,
the General  Partner  will send to each person who was a Limited  Partner at any
time  during  such year such tax  information,  including,  without  limitation,
Federal Tax Schedule K-1, as will be reasonably necessary for the preparation by
such  person  of his  federal  income  tax  return,  and  such  other  financial
information as may be required by the Act.

Records

                  Proper and  complete  records and books of account are kept by
the General  Partner in which are entered fully and accurately all  transactions
and other matters relative to the Partnership's  business as are usually entered
into records and books of account maintained by persons engaged in businesses of
a like character.  The  Partnership  books and records are kept according to the
accrual  method of  accounting.  The  Partnership's  fiscal year is the calendar
year.  The books and records  are located at the office of the General  Partner,
and  are  open to the  reasonable  inspection  and  examination  of the  Limited
Partners or their duly authorized representatives during normal business hours.

                                  LEGAL MATTERS

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

                             ADDITIONAL INFORMATION

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


<PAGE>


                                    GLOSSARY

     Certain terms in this Memorandum shall have the following meanings:

     Act. The Act means the South Carolina  Uniform Limited  Partnership Act, as
in effect on the date hereof.

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

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

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

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

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

     Closing Date.  5:00 p.m.,  Eastern Time, on January 1, 2000 (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
Lithostar(TM).

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

     Contract  Hospitals.  The 11  hospitals  and  medical  centers to which the
Partnership  provides  lithotripsy  services  pursuant to 11  separate  Hospital
Contracts.

     Counsel.  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 11 separate  lithotripsy  services agreements the
Partnership has entered into with the Contract Hospitals.

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

                  Investors.  Potential purchasers of Units.
                  ---------

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

                  Limited  Partner Note.  The  promissory  note from an Investor
financing  a portion  of the Unit  purchase  price to the Bank in the  principal
amount of up to $10,022 per Unit, the proceeds of which will be paid directly to
the  Partnership.  The form of the  Limited  Partner  Note  (including  the Note
Addendum  attached  thereto)  is  attached  as  Exhibit  A to the  Form  of Loan
Commitment which is attached hereto as Appendix B.

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

     Lithostar(TM).    The   Lithostar(TM)model    extracorporeal   shock   wave
lithotripter 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 Loan Commitment which is
attached hereto as Appendix B.

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

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

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

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

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

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

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

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

                  Offering.  The offering of Units pursuant to this Memorandum.
                  --------

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

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

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

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

     Partnership.   Fayetteville   Lithotripters  Limited  Partnership  -  South
Carolina II, a South Carolina limited  partnership,  which owns and operates the
Mobile Lithotripsy System.

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

                  Partnership  Cash Flow. For the applicable  period the excess,
if any,  of (A) the sum of (i) all  gross  receipts  from  any  source  for such
period,  other than the  Partnership  loans,  Capital  Transactions  and Capital
Contributions,  and (ii) any funds released by the  Partnership  from previously
established  reserves,  over  (B) the sum of (i) all cash  expenses  paid by the
Partnership  for such  period,  (ii) the amount of all  payments of principal on
loans to such Partnership,  (iii) capital  expenditures of the Partnership,  and
(iv) such  reasonable  reserves as 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  oppositive his or her name set forth in Exhibit A to the Partnership
Agreement.  Each Unit sold pursuant to this Offering  represents an initial 0.5%
economic interest in the Partnership.  The Percentage Interest will be set forth
in Exhibit A to the Partnership Agreement or any other document or agreement, as
a percentage or a fraction or on any numerical  basis deemed  appropriate by the
General Partner.

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

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

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

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

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

     Sales Agent. MedTech Investments, Inc., a registered broker-dealer,  member
of the National  Association  of  Securities  Dealers,  Inc. and an Affiliate of
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 Loan  Commitment  which is
attached hereto as Appendix B.

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

     Service Area. Northwestern South Carolina and southwestern North Carolina.

                  Siemens.  Siemens Medical Systems, Inc. and its Affiliates.
                  -------

                  Subscription Agreement.  The Subscription Agreement,  included
in the Subscription Packet  accompanying this Memorandum,  to be executed by the
Limited Partners in connection with their purchase of Units.

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

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

     Units.  The 40 equal limited partner  interests in the Partnership  offered
pursuant to this Memorandum for a price per Unit of $12,522 in cash.

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