|EXHIBIT 10.4
|------------

# PRIME MEDICAL
SERVICES, INC.1301 S. Capital of
Texas Highway, Suite C-300Austin, Texas 78746

July 9, 2003

Robert W. Bachman11609
Swinford LaneMokena, IL 60448

Dear Mr. Bachman:

This
letter agreement evidences the agreement between Prime Medical Services, Inc., a Delaware
corporation (Prime), and you regarding Primes
repurchase of up to 364,075 shares of common stock of Prime owned by you on the date of
this letter agreement (the Shares).

For
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, Prime and you agree as follows:

1.    
          Purchase. Subject to the terms hereof, at the Closing (as defined below),
          Prime hereby agrees to acquire from you, and you agree to sell to Prime, 121,358
          of the Shares (such shares, the Purchased
          Shares) for an aggregate purchase price of $855,573.90 (the
          Purchase Price). The closing of the purchase
          and sale of the Purchased Shares (the Closing)
          shall occur on July 24, 2003. The Purchase Price shall be paid upon
          the Closing in cash by Prime by wire transfer of immediately available funds to
          you, in accordance with your wire transfer instructions provided to Prime in
          writing. You shall deliver the Purchased Shares to Prime at the Closing, free
          and clear of any and all liens, claims, security interests, pledges, mortgages,
          restrictions or encumbrances of any kind
          (Encumbrances), other than those restrictions
          arising from applicable federal and state securities laws. At the Closing, you
          shall also deliver to Prime (a) a certificate or certificates representing the
          Purchased Shares registered in your name (the Share
          Certificates), together with a duly executed stock power
          endorsed to Prime, (b) a certificate making representations and warranties to
          Prime substantially similar to your representations and warranties contained in
          this letter agreement, and (c) any other transfer-related documents Prime
          reasonably requests. At the Closing, Prime shall deliver to you a copy of an
          instruction letter (in a form reasonably acceptable to the parties) delivered by
          Prime to its transfer agent instructing the transfer agent to deliver to you one
          or more certificates (in amounts directed by you in writing) for the balance of
          any Shares represented by the Share Certificates but not included in the
          Purchased Shares.

2.    
          Right.

(a)    
          You may require (the Right) Prime to acquire up
          to 121,358 of the Shares on June 30, 2004 and up to 121,359 of the Shares on
          June 30, 2005 at a purchase price of $7.05 per Share. Prime further agrees that,
          within 15 days of the date of this letter agreement, its Chief Executive Officer
          shall request in good faith (with his recommendation for approval) that
          Primes board of directors authorize an increase in the per Share purchase
          price for Shares to be acquired on June 30, 2004 from $7.05 to $7.40 per Share
          and for Shares to be acquired on June 30, 2005 from $7.05 to $7.75 per Share,
          provided, you acknowledge and agree that Primes board of directors
          is under no obligation to approve such request and neither Prime nor any of its
          directors, officers, agents or representatives has given or hereby gives (and
          none of them is authorized to give) any representation or assurance that such
          approval will be obtained. If approval for the per Share price increases is
          obtained, Prime agrees that it will promptly notify you of such approval, and in
          such event you and Prime agree to promptly amend this letter agreement to
          reflect such increases.





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(b)    
          The Right may only be exercised one time with respect to 2004 and one time with
          respect to 2005. To exercise the Right with respect to a particular year, you
          shall provide an irrevocable written notice to the Chief Executive Officer of
          Prime of such exercise and the number of Shares to be acquired upon such
          exercise on or before June 15 of such year. To the extent you do not exercise
          the Right with respect to a particular year in accordance with the terms hereof,
          the Right with respect to such year to the extent not exercised shall terminate.
          To the extent you exercise the Right with respect to a particular year in
          accordance with the terms hereof, the closing of such exercise shall occur on
          June 30 of such year (or if such day is not a business day, then the first
          business day after June 30 of such year), the purchase price shall be paid in
          immediately available funds at such closing by wire transfer in accordance with
          your wire transfer instructions provided to Prime in writing, and the acquired
          Shares shall be delivered to Prime at such closing free and clear of any and all
          Encumbrances, other than those restrictions arising from applicable federal and
          state securities laws. In addition, at such closing, you shall deliver to Prime
          (a) a certificate or certificates representing the acquired Shares
          registered in your name, together with a duly executed stock power endorsed to
          Prime, (b) a certificate making representations and warranties to Prime
          substantially similar to your representations and warranties contained in this
          letter agreement, and (c) any other transfer-related documents Prime
          reasonably requests.

3.    
          Certain Events. In the event of any reorganization, recapitalization,
          merger, stock split, stock dividend, combination, spin-off, liquidation,
          exchange or similar event affecting Primes common stock between the date
          of this letter agreement and (a) the Closing or (b) the date of any subsequent
          purchase and sale of Shares pursuant to Section 2 (an
          Adjustment Event), then the term
          Shares shall be deemed to refer to and include the Shares, as well
          as all other securities and property received by you in respect thereof or in
          exchange therefor as a result of the Adjustment Event, and the amount to be paid
          by Prime (or its successor as a result of the Adjustment Event) shall be
          proportionately adjusted so that the total amount to be paid by Prime at the
          Closing or in respect of any purchase and sale pursuant to Section 2
          remains unchanged.

4.    
          Representations and Warranties by You. You represent and warrant to Prime
          that:

(a)    
          you have full legal capacity to enter into this letter agreement and to perform
          all of your obligations set forth in this letter agreement;

(b)    
          your execution of this letter agreement and your performance of all of your
          obligations set forth in this letter agreement do not require any third-party
          consent or approval;

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(c)    
          your execution of this letter agreement and your performance of all of your
          obligations set forth in this letter agreement do not and will not conflict with
          or violate any law, rule, regulation or agreement applicable to you, this letter
          agreement or the transactions described herein;

(d)    
          you have no direct or indirect interest in or beneficial ownership of any
          securities of Prime or any of its subsidiaries, except for (i) the Shares,
          (ii) approximately 12,763 shares of Prime common stock owned by you that
          are not included in the Shares, (iii) stock options to acquire 83,000
          shares of Prime common stock, granted pursuant to Primes Amended and
          Restated 1993 Stock Option Plan (the Stock
          Options), and (iv) shares of Prime common stock you
          hold in your Prime 401(k) plan account;

(e)    
          other than this letter agreement, there is no option, warrant, right, call,
          proxy, agreement, or understanding of any nature whatsoever that directly or
          indirectly calls for the sale, pledge or other transfer or disposition of any of
          the Shares, any interest therein or any rights with respect thereto, or relates
          to the voting, disposition, exercise, or control of the Shares or obligates you
          to grant, offer or enter into any of the foregoing; and

(f)    
          you are the sole record owner and beneficial owner of the Shares, you hold good
          and valid title to the Shares free and clear of any Encumbrances (except
          restrictions arising from applicable federal and state securities laws), and the
          sale by you of the Purchased Shares and the delivery of the certificates
          representing the Purchased Shares to Prime pursuant hereto will transfer to
          Prime good and valid title to the Purchased Shares.

5.    
          Representations and Warranties by Prime. Prime represents and warrants to
          you that:

(a)    
          Prime has valid and legal authority to enter into this letter agreement and to
          perform all of its obligations set forth in this letter agreement;

(b)    
          Primes execution of this letter agreement and its performance of all of
          its obligations set forth in this letter agreement do not require any
          third-party consent or approval; and

(c)    
          Primes execution of this letter agreement and Primes performance of
          all of its obligations set forth in this letter agreement do not and will not
          conflict with or violate any law, rule, regulation or agreement applicable to
          Prime, this letter agreement or the transactions described herein.

6.    
          Other.

(a)    
          All expenses incurred by the parties hereto in connection with the preparation
          and negotiation of this letter agreement shall be borne solely and entirely by
          the party that has incurred such expenses.

(b)    
          This letter agreement embodies the entire agreement and understanding between
          the parties with respect to the subject matter hereof and supersedes all prior
          agreements and understanding related to such subject matter. There are no
          third-party beneficiaries of this letter agreement, express or otherwise. This
          letter agreement and any rights hereunder may not be assigned by any party
          without the prior written consent of the other party, except for probative
          transfers of your rights upon your death or transfers of your rights upon a
          judicial determination that your are legally incapacitated. Subject to the prior
          sentence, this letter agreement shall be binding on and shall inure to the
          benefit of the permitted successors, assigns, heirs, executors and
          administrators of the parties. This letter agreement may not be amended or
          modified except by an instrument in writing signed by each of the parties. This
          letter agreement may be executed in counterparts, each of which shall be deemed
          an original, but all of which together shall constitute one and the same
          instrument. Signatures delivered by telecopy shall be considered for all
          purposes to be the same as original signatures and the parties agree to deliver
          original signatures to one another within 5 days.

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(c)    
          This letter agreement shall be governed by and construed in accordance with the
          laws of the State of Delaware. In the event of a material default under this
          letter agreement by either party, the non-defaulting party shall be entitled to
          recover reasonable attorneys fees and expenses that it actually incurs in
          seeking to enforce its rights and pursuing remedies under this letter agreement.

| | Sincerely,
PRIME MEDICAL SERVICES, INC.
By:__________________________________
Name:________________________________
Title:_________________________________
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

ACKNOWLEDGED AND AGREED AS OF THE
FIRST DATE ABOVE:

_______________________________Robert W. Bachman

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AMENDMENT

This
Amendment (this Amendment) dated effective as of July 24, 2003, by and between
Prime Medical Services, Inc., a Delaware corporation (Prime), and Robert W.
Bachman (Bachman), is to that certain letter agreement between Prime and
Bachman dated July 9, 2003 (the Letter Agreement).

WHEREAS,
pursuant to the Letter Agreement, Prime agreed to purchase up to 364,075 shares of its
common stock owned by Bachman (the Shares);

WHEREAS,
the Letter Agreement required that Primes Chief Executive Officer request in good
faith within fifteen (15) days of the Letter Agreement that Primes board of directors authorize an increase in the per Share
purchase price for certain of the Shares;

WHEREAS,
Primes board of directors approved an increase in the per Share purchase price for
Shares to be acquired on June 30, 2004 to $7.12 per Share and an increase in the per Share
purchase price for Shares to be acquired on June 30, 2005 to $7.19 per Share; and

WHEREAS,
the parties desire to amend the Letter Agreement in certain respects as more specifically
set forth below.

NOW
THEREFORE, in consideration of the premises and the representations, warranties and
agreements herein contained, the parties hereto agree as follows:

1.    
          Amendment to the Letter Agreement. (a) The parties hereby agree to amend Section
          2(a) of the Letter Agreement to read in its entirety as follows:

(a)    
          You may require (the Right) Prime to acquire up to 121,358 of the
          Shares on June 30, 2004 at a purchase price of $7.12 per Share and up to 121,359
          of the Shares on June 30, 2005 at a purchase price of $7.19 per Share.

2.    
          Ratification. Except as expressly amended by this Amendment, the Letter
          Agreement and the exhibits and schedules thereto shall remain in full force and
          effect, and none of the rights, interests and obligations existing and to exist
          under the Letter Agreement, as amended, are hereby released, diminished or
          impaired. The parties hereby reaffirm all covenants, representations and
          warranties in the Letter Agreement as amended hereby.

3.    
          Execution in Counterparts. For the convenience of the parties, this Amendment
          may be executed in one or more counterparts, each of which shall be deemed an
          original, but all of which together shall constitute one and the same
          instrument.

4.    
          Governing Law. This Amendment shall be governed by and construed in accordance
          with the laws of the State of Texas.

[Signature Page Follows]





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IN
WITNESS WHEREOF, the parties hereto have caused this Letter Agreement to be duly

executed effective as of the date
first above written.

| | PRIME MEDICAL SERVICES, INC.
By:        _________________________
Name:  _________________________
Title:   _________________________
_________________________
Robert W. Bachman
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------