LOAN AGREEMENT

         This Loan Agreement  (this  "Agreement") is entered into as of the 1st
day of September, 1999, by and between Prime Medical Operating, Inc., a Delaware
corporation,  and Prime/BDR  Acquisition,  L.L.C., a Delaware limited  liability
company.

                                                   Definitions:

EFFECTIVE DATE:                 September 1, 1999

     BORROWER:  Prime/BDR  Acquisition,  L.L.C.,  a Delaware  limited  liability
          company
     BORROWER'S  ADDRESS:  1301 Capital of Texas Highway,  Suite C-300,  Austin,
Texas 78746
     LENDER: Prime Medical Operating, Inc., a Delaware corporation
     LENDER'S ADDRESS: 1301 Capital of Texas Highway, Suite C-300, Austin, Texas
78746
NOTES:

     Working  Capital  Note:  Promissory  Note (Line of  Credit) in the  maximum
principal  amount of $200,000 (the "Working Capital Maximum  Principal  Amount")
dated  September  ___, 1999,  executed by Borrower,  and payable to the order of
Lender as provided therein (the "Working Capital Note").
     Development  Facility  Notes:  Promissory  Notes in the  aggregate  maximum
original principal amount not to exceed  $40,000,000 (the "Development  Facility
Maximum  Principal  Amount"),  executed by Borrower  and payable to the order of
Lender as provided therein (the "Development Facility Notes"). Collectively, the
Working Capital Notes and the Development  Facility Notes are referred to herein
as the "Notes."
     SECURITY AGREEMENTS: All documents,  agreements and instruments hereinafter
or herewith  executed by Borrower,  LASIK Investors,  L.L.C., a Delaware limited
liability  company ("LASIK") or any Target Center securing this Agreement or the
obligations under any of the Notes.
          LOAN  DOCUMENTS:   This  Agreement,  the  Working  Capital  Note,  the
     Development  Facility  Notes,  the  Security  Agreements,   and  all  other
     documents,   agreements,   and  instruments  now  or  hereafter   existing,
     evidencing,  securing,  or  otherwise  relating to this  Agreement  and any
     transactions  contemplated by this Agreement, as any of the foregoing items
     may be modified or supplemented from time to time.
INDEBTEDNESS:  All present and future indebtedness,  obligations and liabilities
of Borrower to Lender,  all present  and future  indebtedness,  obligations  and
liabilities  of any Target Center to Lender,  and all renewals,  extensions  and
modifications  of either of the foregoing,  arising  pursuant to any of the Loan
Documents  and all  interest  accruing  thereon,  and  all  other  fees,  costs,
expenses, charges and attorneys' fees payable, and covenants performable,  under
any of the Loan Documents (including without limitation this Agreement).

          DEFINED  TERMS:  Terms not  otherwise  defined  herein  shall have the
     meaning  provided in that certain  Contribution  Agreement  dated effective
     September 1, 1999, by and among Barnet Dulaney Eye Center,  P.L.L.C., David
     D. Dulaney,  M.D.,  Ronald W. Barnet,  M.D., Mark Rosenberg,  Prime Medical
     Services, Inc., Lender, Borrower, LASIK and Prime/BDEC Acquisition,  L.L.C.
     (the "Contribution  Agreement").  For the purposes hereof the terms "Target
     Centers"  and  "Target  Center"  shall  have the  meaning  set forth in the
     Contribution Agreement, but shall include, upon the acquisition of a Target
     Center  by  Borrower  or any  subsidiary  or  affiliate  of  Borrower,  the
     subsidiary or affiliate utilized to make such acquisition.
                                                    AGREEMENT:

          Borrower has requested from Lender the credit accommodations described
     below, and Lender has agreed to provide such credit  accommodations  on the
     terms and conditions  contained  herein.  Therefore,  for good and valuable
     consideration,  the receipt and  sufficiency  of which  Lender and Borrower
     acknowledge, Lender and Borrower hereby agree as follows:
                                                     ARTICLE I
                                             THE WORKING CAPITAL LOAN

          1.1 The  Working  Capital  Loan.  Lender  agrees to lend and  Borrower
     agrees to  borrow an amount  not to  exceed  the  Working  Capital  Maximum
     Principal Amount on the terms and conditions set forth herein (the "Working
     Capital  Loan").  The Working Capital Loan will be evidenced by the Working
     Capital Note. ------------------------

          1.2  Revolving  Line of Credit.  Subject to and in  reliance  upon the
     terms,  conditions,  representations and warranties  hereinafter set forth,
     Lender agrees to make advances (the "Working Capital Advances") to Borrower
     from  time to  time  during  the  period  from  the  Effective  Date to and
     including the one year  anniversary  of the Effective  Date (the  "Maturity
     Date"),  in an aggregate  amount not to exceed the Working  Capital Maximum
     Principal   Amount.   Each   Working   Capital   Advance   must  be  either
     ------------------------  $10,000 or a higher integral multiple of $10,000.
     Funds  borrowed  and repaid may be  reborrowed,  so long as all  conditions
     precedent to Working  Capital  Advances are met. The purpose of the Working
     Capital  Advances is to provide  funds to Borrower for working  capital and
     for other general business purposes of Borrower.
          1.3 Interest and Repayment.  Borrower  shall pay the aggregate  unpaid
     principal  amount of all Working  Capital  Advances in accordance  with the
     terms of the Working  Capital Note  evidencing the  indebtedness  resulting
     from  such  Working  Capital  Advances.  Interest  on the  Working  Capital
     Advances  shall be due and payable in the manner and at the times set forth
     in the Working  Capital Note,  with final  maturity of the Working  Capital
     Note being on or before the Maturity Date. ----------------------

          1.4 Making Advances. Each Working Capital Advance shall be made within
     two business  days of written  notice (or  telephonic  notice  confirmed in
     writing) given by noon (Austin,  Texas time) on a business day of Lender by
     Borrower to Lender specifying the amount and date thereof (which may be the
     same  business  day) and if sent by wired funds,  at Lender's  option,  the
     wiring  instructions  of the  deposit  account  of  Borrower  to which such
     Working Capital Advance is to be deposited. ---------------

          1.5  Payments  and  Computations.  Borrower  shall  make each  payment
     hereunder and under the Working  Capital Note on the day when due in lawful
     money of the United  States of America to Lender at  Lender's  Address  for
     Payment in same day funds.  All  repayments  of  principal  on the  Working
     Capital Note shall be in a minimum amount of $1,000,  or a higher  integral
     multiple of $1,000. All computations of interest shall be made by Lender on
     the   basis  of  the   actual   number   of  days   (including   the  first
     -------------------------  day but excluding the last day) in the year (365
     or 366,  as the  case  may be)  elapsed,  but in no  event  shall  any such
     computation  result in an amount of interest  that would cause the interest
     contracted for, charged or received by Lender to be in excess of the amount
     that would be payable at the Highest Lawful Rate, as herein defined.
                                                    ARTICLE II
                                          THE DEVELOPMENT FACILITY LOANS

          2.1 The Development Facility. Subject to the terms of the Contribution
     Agreement  and  the  terms,  conditions,   representations  and  warranties
     hereinafter  set forth,  Lender  agrees to lend Borrower from time to time,
     the amounts necessary to acquire or develop Target Centers, in an aggregate
     amount not to exceed the  Development  Facility  Maximum  Principal  Amount
     (collectively, the "Development Facility Loans"). ------------------------

         2.2 Development  Facility Loans.  Each  Development  Facility Loan will
finance  up to 100% of the  purchase  price  (or  development  cost) of a Target
Center being acquired (or developed) by Borrower.  The parties  acknowledge that
the grant of any Development Facility Loan does not create any obligation on the
part of Lender to extend further Development Facility Loans. Additionally,  each
Development  Facility Loan is subject in all respects to Lender  obtaining prior
written  approval from the bank  syndication  under its or its parent  company's
outstanding  borrowing  facilities  and  the  execution  and  delivery  of  such
guarantees by Borrower as may be required by such bank syndication.  Pursuant to
the Contribution Agreement, each Development Facility Loan must be (a) evidenced
by a separate Development Facility Note executed by Borrower, (b) secured by all
of LASIK's  ownership  interest in Borrower as  evidenced by an  Assignment  and
Security  Agreement  executed by LASIK,  and (c)  accompanied  by Assignment and
Security Agreements executed by Borrower. In addition, if Borrower is acquiring,
directly or indirectly, a one hundred percent (100%) interest in a Target Center
(hereinafter  referred to as a "100% Target Center"),  Borrower shall cause such
Target Center to execute a security agreement,  acceptable in form and substance
to  Lender,  granting  to Lender or one of  Lender's  subsidiaries  the  highest
available priority security interest in all of the assets of such Target Center.

          2.3 Interest and  Repayment.  Borrower and Target Center shall pay the
     unpaid principal amount under each Development  Facility Note in accordance
     with the terms of the respective  Development  Facility  Note.  Payments of
     interest and principal on each  Development  Facility Note shall be due and
     payable  in the  manner  and at  the  times  set  forth  in the  respective
     Development Facility Note. ----------------------

                                   ARTICLE III
      CONDITIONS TO WORKING CAPITAL ADVANCES AND DEVELOPMENT FACILITY LOANS

          3.1  Conditions  Precedent to Initial  Working  Capital  Advance.  The
     obligation of Lender to make its initial Working Capital Advance is subject
     to the condition precedent that Lender shall have received on or before the
     day of such  Working  Capital  Advance  the  following,  each  in form  and
     substance satisfactory to Lender and properly executed by Borrower or other
     appropriate  parties:  (a)  the  Working  Capital  Note  duly  executed  by
     Borrower,  and  (b)  such  other  documents,  opinions,   certificates  and
     ------------------------------------------------------- evidences as Lender
     may reasonably request.

          3.2 Conditions  Precedent to Each Working Capital  Advance/Development
     Facility Loan. In addition to the  conditions  precedent  stated  elsewhere
     herein,  Lender shall not be obligated to make any Working  Capital Advance
     or        any        Development        Facility        Loan        unless:

          (a) the  representations  and  warranties  contained in Article IV are
     true and  correct in all  material  respects  on and as of the date of such
     Working Capital Advance or Development Facility Loan, as though made on and
     as of such date with such changes therein;
          (b) on the date of the Working Capital Advance or Development Facility
     Loan,  no Event of Default,  and no event which,  with the lapse of time or
     notice or both,  could  become an Event of  Default,  has  occurred  and is
     continuing;
          (c) there shall have been no material adverse change, as determined by
     Lender in its reasonable  judgment,  in the financial condition or business
     of Borrower;
          (d) there has been no breach or  threatened  breach by Borrower  under
     the  Contribution  Agreement or any  Transaction  Document (as such term is
     defined in the Contribution Agreement);
              with respect to each Development  Facility Loan, Borrower executes
the respective Development Facility Note and Borrower executes an Assignment and
Security  Agreement  in the form  attached  as  Exhibit  G3 to the  Contribution
Agreement,  and  otherwise in form and substance  acceptable  to Lender  wherein
Lender is granted a first lien perfected  security interest in all of Borrower's
or Borrower's  subsidiaries' ownership interest in the Target Center and related
acquisition documents;

              LASIK  shall  have  previously  granted  to  Lender  a first  lien
perfected  security  interest in all of LASIK's  ownership  interest in Borrower
through the execution and delivery of the Assignment  and Security  Agreement in
the form attached as Exhibit G4 to the Contribution Agreement and LASIK shall be
in compliance with all of its obligations thereunder;

          (g) if  Borrower  is using a  Development  Facility  Loan to  acquire,
     directly or  indirectly,  a 100% Target  Center,  Borrower shall cause such
     Target  Center to  execute a  security  agreement,  acceptable  in form and
     substance to Lender, granting to Lender or one of Lender's subsidiaries the
     highest  available  priority security interest in all of the assets of such
     Target Center; and
          (h)  Lender  shall  have  received  such  other  approvals,  opinions,
     documents,  certificates or evidences as Lender may reasonably  request (in
     form and substance reasonably  satisfactory to Lender). Each request for an
     Working  Capital  Advance or  Development  Facility  Loan shall be deemed a
     representation  by Borrower  that the  conditions  of this Section 3.2 have
     been met.
                                                    ARTICLE IV
                                     BORROWER'S REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants to Lender as follows:

          4.1  Good  Standing.  Borrower  is a  duly  formed  limited  liability
     company,  duly organized and in good  standing,  under the laws of Delaware
     and has the power to own its  property and to carry on its business in each
     jurisdiction in which Borrower operates. -------------

         4.2 Authority and Compliance.  Borrower has full power and authority to
enter into this  Agreement,  to make the  borrowing  hereunder,  to execute  and
deliver  the Loan  Documents  and to incur the  indebtedness  described  in this
Agreement,  all of which has been duly  authorized  by all proper and  necessary
action of its managers and members. No further consent or approval of any public
authority is required as a condition to the validity of any Loan  Document,  and
Borrower is in compliance with all laws and regulatory  requirements to which it
is subject.

          4.3 Binding  Agreement.  This  Agreement and other Loan Documents when
     issued and delivered  pursuant  hereto for value received will  constitute,
     valid and legally binding  obligations of Borrower in accordance with their
     terms. -----------------

          4.4 Litigation.  There are no proceedings pending or, to the knowledge
     of Borrower,  threatened  before any court or  administrative  agency which
     will or may have a material  adverse  effect on the financial  condition or
     operations of Borrower or any subsidiary,  except as disclosed to Lender in
     writing prior to the date of this Agreement.  To the knowledge of Borrower,
     there are no proceedings  pending or threatened  against any Target Center.
     ----------

          4.5 No Conflicting  Agreements.  There are no provisions of Borrower's
     organizational  documents  and no  provisions  of any  existing  agreement,
     mortgage,  indenture  or  contract  binding on Borrower  or  affecting  its
     property,  which would  conflict with or in any way prevent the  execution,
     delivery,   or   carrying   out  of  the  terms  of  the  Loan   Documents.
     -------------------------

          4.6  Ownership  of Assets.  Borrower  will at all times  maintain  its
     tangible property,  real and personal, in good order and repair taking into
     consideration reasonable wear and tear. -------------------

          4.7 Taxes.  All income  taxes and other taxes due and payable  through
     the date of this  Agreement  have been paid prior to  becoming  delinquent.
     -----

                                                     ARTICLE V
                                         BORROWER'S AFFIRMATIVE COVENANTS

         So long as Borrower may borrow under this  Agreement  and until payment
in full of the Working  Capital Note and all  Development  Facility  Notes,  and
performance of all other obligations of Borrower and Target Centers hereunder or
thereunder, Borrower covenants and agrees to do the following:

         5.1      Financial Statements.

                  (a)  Maintain,  and cause each Target  Center to  maintain,  a
         system of  accounting  satisfactory  to Lender and in  accordance  with
         generally accepted accounting principles consistently applied, and will
         permit  Lender's  officers or authorized  representatives  to visit and
         inspect  Borrower's  or  Target  Center's  books of  account  and other
         records  at such  reasonable  times and as often as Lender  may  desire
         during office hours and after  reasonable  notice to Borrower,  and pay
         the  reasonable  fees and  disbursements  of any  accountants  or other
         agents of Lender selected by Lender for the foregoing purposes.  Unless
         written notice of another location is given to Lender, Borrower's books
         and records will be located at Borrower's Address.

          (b) Furnish to Lender year end financial  statements,  of Borrower and
     each Target  Center,  to include  balance  sheet,  operating  statement and
     surplus   reconciliation,   together  with  an  officer's   certificate  of
     compliance with this Agreement  including  computations of all quantitative
     covenants, within 90 days after the end of each annual accounting period.
          (c) Furnish to Lender quarterly financial statements,  of Borrower and
     each Target Center, to include balance sheet and profit and loss statement,
     together with an officer's  certificate  of compliance  with this Agreement
     including computations of all quantitative covenants, within 45 days of the
     end of each such accounting period.
                  (d) With each balance sheet delivered under subsections (b) or
(c) of this Section 5.1, an aging of all Accounts Receivable.

          (e) Promptly provide Lender with such additional information,  reports
     or statements respecting the business operations and financial condition of
     Borrower or any Target Center,  as Lender may reasonably  request from time
     to time.
         5.2  Insurance.  Maintain,  and cause each Target  Center to  maintain,
insurance  with  responsible  insurance  companies  on  such  of its  respective
properties,  in such amounts and against such risks as is customarily maintained
by similar businesses operating in the same vicinity,  specifically to include a
policy  of fire  and  extended  coverage  insurance  covering  all  assets,  and
liability  insurance,  all  to be  with  such  companies  and  in  such  amounts
satisfactory  to Lender and to contain a mortgage  clause  naming  Lender as its
interest may appear. Evidence of such insurance will be supplied to Lender.

          5.3 Existence and Compliance.  Maintain,  and cause each Target Center
     to maintain, its organizational  existence in good standing and comply with
     all laws, regulations and governmental  requirements applicable to it or to
     any of its property, business operations and transactions. Borrower further
     agrees to provide  Lender  with  copies of all  instruments  filed with the
     Delaware Secretary of State amending and/or renewing Borrower's certificate
     of formation. ------------------------

          5.4 Adverse Conditions or Events. Promptly advise Lender in writing of
     any  condition,  event or act which  comes to its  attention  that would or
     might  materially  affect  Borrower's  or  any  Target  Center's  financial
     condition,  Lender's  rights  under  this  Agreement  or any  of  the  Loan
     Documents, and of any litigation filed against Borrower or to its knowledge
     against any Target Center. ----------------------------

         5.5      Taxes.  Pay all taxes as they become due and payable.

          5.6 Maintenance.  Maintain,  and cause each Target Center to maintain,
     all of its  respective  tangible  property  in good  condition  and repair,
     reasonable  wear and tear  excepted,  and make all  necessary  replacements
     thereof,  and preserve and maintain all licenses,  privileges,  franchises,
     certificates  and the like  necessary  for the  operation of its  business.
     -----------

          5.7  Application  of  Earnings.  Except as expressly  contemplated  in
     Section  4.3(e) of the  Contribution  Agreement,  pay all  available  funds
     toward  repayment of the Working Capital Note and any Development  Facility
     Notes,  regardless of whether  payment of such amounts  exceeds the minimum
     required  payments  under  the  Working  Capital  Note and the  Development
     Facility Notes. -----------------------

                                                    ARTICLE VI
                                           BORROWER'S NEGATIVE COVENANTS

         So long as Borrower may borrow under this  Agreement  and until payment
in full of the Working  Capital Note and all  Development  Facility  Notes,  and
performance of all other  obligations of Borrower or Target Center  hereunder or
thereunder, Borrower will not, and will cause each of the Target Centers to not,
without the prior written consent of Lender:

          6.1  Transfer of Assets.  Enter into any merger or  consolidation,  or
     sell, lease,  assign, or otherwise dispose of or transfer any assets except
     in the normal course of its business. ------------------

          6.2 Change in Ownership or Structure.  Dissolve or liquidate; become a
     party  to  any  merger  or  consolidation;  reorganize  as  a  professional
     corporation;  acquire by purchase,  lease or otherwise all or substantially
     all of the assets or capital stock of any  corporation or other entity;  or
     sell, transfer,  lease, or otherwise dispose of all or any substantial part
     of    its     respective     property     or    assets     or     business.
     --------------------------------

          6.3 Liens.  From and after the date hereof  grant,  suffer,  or permit
     liens  on or  security  interests  in its  respective  assets,  or  fail to
     promptly pay all lawful claims, whether for labor, materials, or otherwise,
     except for purchase money security interests arising in the ordinary course
     of its respective business. -----

          6.4 Loans. Make any loans,  advances or investments to or in any joint
     venture,   corporation  or  other  entity,   except  for  the  purchase  of
     obligations  of Lender or U.S.  Government  obligations  or the purchase of
     federally-insured certificates of deposit. -----

          6.5  Borrowings.  Except for  borrowing  or  incurring  open  accounts
     payable to  unaffiliated  third parties in the ordinary course of business,
     create,  incur,  assume,  or liable in any manner for any indebtedness (for
     borrowed  money,  deferred  payment  for  the  purchase  of  assets,  lease
     payments,  as surety or  guarantor  of the debt of another,  or  otherwise)
     other than to Lender in excess of $25,000  without  Lender's  prior written
     consent. ----------

          6.6  Violate  Other  Covenants.  Violate  or fail to  comply  with any
     covenants or agreements  regarding  other debt which will or would with the
     passage of time or upon demand  cause the  maturity of any other debt to be
     accelerated. -----------------------

          6.7 Equity Redemptions or Restructurings. Apply any of its property or
     assets to the  purchase,  retirement  or  redemption  of any of its  equity
     interests    or   in    any    way    amend    its    capital    structure.
     ------------------------------------

          6.8 Character of Business. Change the general character of business as
     conducted  at the  date  hereof,  or  engage  in any type of  business  not
     reasonably  related to its  business as presently  and normally  conducted.
     ---------------------

                                                    ARTICLE VII
                                      EVENTS OF DEFAULT; NOTICE; ACCELERATION

          7.1  Events  of  Default.  If one or more of the  following  events of
     default shall occur and continue  after thirty (30) days' written notice to
     Borrower,  all  outstanding  principal plus unpaid  interest of the Working
     Capital Note and each Development Facility Note, and any other indebtedness
     of Borrower to Lender,  shall  automatically be due and payable immediately
     and Lender shall have no further  obligation to fund under this  Agreement.
     -----------------

          (a) There shall be any breach or default  shall be made in the payment
     of any  installment of principal or interest upon the Working  Capital Note
     or any Development Facility Note, when due and payable, whether at maturity
     or otherwise; or
          (b) There  shall be any  breach or  default  (other  than by Lender or
     Prime Medical  Services,  Inc.) under any Loan Document,  the  Contribution
     Agreement, or any Transaction Document (other than those certain Consulting
     Agreements  with Dr.  Dulaney,  Dr.  Barnet and Mark  Rosenberg as required
     pursuant  to  the  Contribution  Agreement),   or  any  other  certificate,
     agreement or document contemplated hereby or thereby; or
          (c) Any  representation or warranty of Borrower contained herein or in
     any financial statement, certificate, report or opinion submitted to Lender
     in connection  with the Working  Capital Loan or any  Development  Facility
     Loan, or by Borrower pursuant to the requirements of this Agreement,  shall
     prove to have been  incorrect or  misleading  in any material  respect when
     made; or
          (d) Any  judgment  against  Borrower or any  attachment  or other levy
     against  the  property  of  Borrower  with  respect  to a claim  materially
     affecting Borrower's  financial status remains unpaid,  unstayed on appeal,
     undischarged, not bonded or not dismissed for a period of 30 days; or
          (e) The  bankruptcy,  death,  or  dissolution  of any guarantor of the
     Indebtedness; or
                  (f) Borrower makes an assignment for the benefit of creditors,
         admits in writing  its  inability  to pay its debts  generally  as they
         become due, files a petition in bankruptcy, is adjudicated insolvent or
         bankrupt,  petitions or applies to any tribunal for any receiver or any
         trustee  of  Borrower  or any  substantial  part  of  their  respective
         property,   commences  any  action   relating  to  Borrower  under  any
         reorganization,  arrangement,  readjustment  of  debt,  dissolution  or
         liquidation  law  or  statute  of  any  jurisdiction,  whether  now  or
         hereafter in effect, or if there is commenced against Borrower any such
         action,  or Borrower by any act indicates its consent to or approval of
         any trustee for Borrower or any  substantial  part of its property,  or
         suffers any such receivership or trustee to continue undischarged.

         7.2  Lender's  Remedies.  Upon the  occurrence  of an Event of Default,
Lender,  without notice of any kind,  except for any notice  required under this
Agreement or any other Loan Document, may, at Lender's option: (i) terminate its
obligation to fund any Working Capital Advance or any Development  Facility Loan
hereunder;  (ii) declare the Indebtedness,  in whole or in part, immediately due
and payable;  and/or (iii)  exercise any other rights and remedies  available to
Lender under this Agreement, any other Loan Document, or applicable laws; except
that upon the occurrence of an Event of Default described in subsection  7.1(f),
all the Indebtedness  shall  automatically  be immediately due and payable,  and
Lender's  obligation  to fund any  Working  Capital  Advance or any  Development
Facility Loan hereunder  shall  automatically  terminate,  without notice of any
kind (including  without limitation notice of intent to accelerate and notice of
acceleration) to Borrower or to any Target Center,  guarantor,  or to any surety
or endorser of any of the Notes, or to any other person.  Borrower,  each Target
Center,  and each guarantor,  surety,  and endorser of any of the Notes, and any
and all other parties  liable for the  Indebtedness  or any part thereof,  waive
demand,  notice  of  intent  to  demand,  presentment  for  payment,  notice  of
nonpayment,  protest,  notice of protest,  grace, notice of dishonor,  notice of
intent to accelerate maturity, notice of acceleration of maturity, and diligence
in collection.

         7.3 Right of Set-Off. Borrower hereby authorizes Lender, to the maximum
extent permitted under and in accordance with applicable laws, at any time after
the occurrence of an Event of Default which  continues  uncured,  to set-off and
apply  any and all  deposits,  funds or  assets at any time held and any and all
other  indebtedness  at any time  owing by  Lender  to or for the  credit or the
account of  Borrower  against  any and all  Indebtedness,  whether or not Lender
exercises  any  other  right  or  remedy  hereunder  and  whether  or  not  such
Indebtedness are then matured.

                                                   ARTICLE VIII
                                           GENERAL TERMS AND CONDITIONS

         8.1  Notices.  All  notices,  demands,  requests,  approvals  and other
communications  required or permitted hereunder shall be in writing and shall be
deemed to have been given when (a) presented  personally,  or (b) three (3) days
after  deposited in a regularly  maintained mail receptacle of the United States
Postal Service,  postage prepaid,  certified,  return receipt requested,  or (c)
upon receipt of confirmation after sending by facsimile transmission,  addressed
to  Borrower  or  Lender,  as the case may be, at the  respective  addresses  or
facsimile  number for notice set forth on the first page of this  Agreement,  or
such other  address or  facsimile  number as Borrower or Lender may from time to
time designate by written notice to the other.

          8.2 Entire Agreement and Modifications.  The Loan Documents,  together
     with the Contribution Agreement and Transaction  Documents,  constitute the
     entire  understanding and agreement between the undersigned with respect to
     the  transactions  arising in connection  with the Working Capital Loan and
     the  Development  Facility  Loans,  and supersede all prior written or oral
     understandings   and  agreements  between  the  undersigned  in  connection
     therewith.   No   provision   of  this   Agreement   or  the   other   Loan
     ----------------------------------  Documents may be modified,  waived,  or
     terminated  except by instrument  in writing  executed by the party against
     whom a modification,  waiver, or termination is sought to be enforced, and,
     in the case of Lender, executed by a Vice President or higher level officer
     of Lender.
          8.3  Severability.  In case any of the  provisions  of this  Agreement
     shall for any reason be held to be invalid, illegal, or unenforceable, such
     invalidity,  illegality,  or  unenforceability  shall not  affect any other
     provision hereof, and this Agreement shall be construed as if such invalid,
     illegal,  or  unenforceable  provision  had never  been  contained  herein.
     ------------

         8.4  Cumulative  Rights  and No  Waiver.  Lender  shall have all of the
rights and remedies  granted in the Loan  Documents  and  available at law or in
equity,  and these  same  rights and  remedies  shall be  cumulative  and may be
pursued separately,  successively, or concurrently against Borrower, at the sole
discretion of Lender.  Lender's  delay in exercising any right shall not operate
as a waiver thereof,  nor shall any single or partial  exercise by Lender of any
right preclude any other or future exercise thereof or the exercise of any other
right.  Any of Borrower's  covenants and  agreements may be waived by Lender but
only in  writing  signed by an  authorized  officer of Vice  President  level or
higher of Lender or any subsequent  owner or holder of any of the Notes.  Except
as otherwise  expressly  provided in this  Agreement  and in any Note,  Borrower
expressly waives any presentment,  demand, protest, notice of default, notice of
intent  to  accelerate,  notice  of  acceleration,  notice  of  intent to demand
payment,  or other notice of any kind. No notice to or demand on Borrower in any
case shall, of itself, entitle Borrower to any other or further notice or demand
in similar or other circumstances.  No delay or omission by Lender in exercising
any  power  or  right  hereunder  shall  impair  any  such  right or power or be
construed  as a waiver  thereof,  or the  exercise  of any other  right or power
hereunder.

          8.5  Form  and  Substance.  All  documents,  certificates,   insurance
     policies,  and other items  required  under this  Agreement  to be executed
     and/or  delivered  to  Lender  shall  be in form and  substance  reasonably
     satisfactory to Lender. ------------------

         8.6 Limitation on Interest: Maximum Rate. Lender and Borrower intend to
contract in strict  compliance  with  applicable  usury law from time to time in
effect.  To effectuate this intention,  Lender and Borrower  stipulate and agree
that none of the terms and provisions of any Note and any other  agreement among
such parties, whether now existing or arising hereafter, shall ever be construed
as a contract to pay interest for the use,  forbearance or detention of money in
excess of the Maximum Rate. If, from any possible  construction of any document,
interest would otherwise be payable to Lender in excess of the Maximum Rate, any
such  construction  shall be subject to the  provisions of this Section and such
document  shall be  automatically  reformed and the  interest  payable to Lender
shall be  automatically  reduced to the Maximum Rate permitted under  applicable
law,  without the  necessity of the  execution of any amendment or new document.
Neither  Borrower,  endorsers or other persons now or hereafter  becoming liable
for payment of any portion of the  principal  or interest of any Note shall ever
be liable for any  unearned  interest on the  principal  amount or shall ever be
required  to pay  interest  thereon  in excess of the  Maximum  Rate that may be
lawfully  charged under  applicable law from time to time in effect.  Lender and
any subsequent  holder of any Note expressly  disavow any intention to charge or
collect  unearned  or  excessive  interest  or finance  charges in the event the
maturity of any Note, is accelerated. If the maturity of any Note is accelerated
for any reason, whether as a result of a default under any Note, or by voluntary
prepayment,  or otherwise,  any amounts constituting interest, or adjudicated as
constituting  interest,  which  are  then  unearned  and  have  previously  been
collected  by Lender or any  subsequent  holder of any Note  shall be applied to
reduce the principal balance thereof then outstanding, or if such amounts exceed
the unpaid  balance of principal,  the excess shall be refunded to Borrower (and
Target Center,  as applicable).  In the event Lender or any subsequent holder of
any Note ever receives, collects or applies as interest any amounts constituting
interest or adjudicated as constituting  interest which would otherwise increase
the  interest to an amount in excess of the amount  permitted  under  applicable
law,  such amount  which  would be  excessive  interest  shall be applied to the
reduction of the unpaid  principal  balance of such Note,  and, if the principal
balances of such Note is paid in full,  any  remaining  excess  shall be paid to
Borrower (and Target Center, as applicable).  In determining  whether or not the
interest  paid or payable under the specific  contingencies  exceeds the Maximum
Rate allowed by applicable law, Borrower and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense,  fee or  premium,  rather  than as  interest;  (ii)  exclude  voluntary
prepayments  and the effect  thereof;  (iii)  amortize,  prorate,  allocate  and
spread,  in equal  parts,  the total  amount of interest  throughout  the entire
contemplated  term of the applicable Note (as it may be renewed and extended) so
that the interest rate is uniform  throughout  the entire term of such Note. The
terms and  provisions of this section  shall  control and supersede  every other
provision of all existing and future agreements between Lender and Borrower (and
Target Center, as applicable).  As used in this Agreement,  "Maximum Rate" means
the maximum non-usurious interest rate that at any time or from time to time may
be contracted for, taken, reserved,  charged or received on the unpaid principal
or accrued past due interest  under  applicable  law and may be greater than the
applicable  rate,  the parties hereby  stipulating  and agreeing that Lender may
contract for, take,  reserve,  charge or receive interest up to the Maximum Rate
without penalty under any applicable law; and "applicable law" means the laws of
the State of Texas or the laws of the United States of America,  whichever  laws
allow the greater interest,  as such laws now exist or may be changed or amended
or come into effect in the future.  In the event  applicable law provides for an
interest  ceiling under  Chapter One of Title 79, Texas  Revised Civil  Statutes
Annotated, as amended, that ceiling shall be the indicated rate ceiling, subject
to any right  Lender may have in the future to change the method of  determining
the Maximum Rate.

          8.7  Third  Party  Beneficiary.  Borrower  acknowledges  that the bank
     syndication  under the senior credit  facility of Prime  Medical  Services,
     Inc. (as hereinafter supplemented,  modified, or replaced) is a third party
     beneficiary  to this  Agreement.  Except for the preceding  sentence,  this
     Agreement is for the sole benefit of Lender and Borrower and is not for the
     benefit of any third party. -----------------------

          8.8  Borrower  In  Control.  In no event  shall  Lender's  rights  and
     interests  under the Loan  Documents  be construed to give Lender the right
     to, or be deemed to  indicate  that  Lender is in control of the  business,
     management or properties of Borrower or any Target Center or has power over
     the daily management  functions and operating decisions made by Borrower or
     any Target Center. -------------------

          8.9 Use of  Financial  and Other  Information.  Borrower  agrees  that
     Lender shall be permitted to investigate and verify the accuracy of any and
     all information  furnished to Lender in connection with the Loan Documents,
     including without  limitation  financial  statements,  and to disclose such
     information,  or provide  copies of such  information,  to  representatives
     appointed by Lender, including independent accountants,  agents, attorneys,
     asset   investigators,    appraisers   and   any   other   persons   deemed
     --------------------------------------   necessary   by   Lender   to  such
     investigation.
         8.10  Collateral  Assignment of Loan  Documents.  Lender shall have the
right to  collaterally  assign all of its rights  under this  Agreement  and the
other Loan Documents to the third party beneficiaries  described in Section 8.7.
Lender shall have the right to disclose in confidence such financial information
regarding  Borrower as may be  necessary  to  complete  any such  assignment  or
attempted  assignment,  including without limitation,  all financial statements,
projections,  internal memoranda,  audits, reports, payment history,  appraisals
and any and all other  information and  documentation in Lender's files relating
to Borrower.  This  authorization  shall be irrevocable in favor of Lender,  and
Borrower  waives any claims  against Lender or the party  receiving  information
from Lender  regarding  disclosure of information in Lender's files, and further
waive any  alleged  damages  which may  result  from such  disclosure.  Borrower
acknowledges  that Lender intends to make a collateral  assignment of its rights
under this  Agreement  and the Loan  Documents for the benefit of one or more of
its or its  parent  company's  lenders  and will not be  authorized  to amend or
modify this  Agreement  or the Loan  Documents,  or grant  waivers of any of its
rights  thereunder  without  the prior  written  consent  of some or all of such
lenders.

          8.11 Further Assurances.  Borrower agrees to execute and deliver,  and
     cause each Target Center to execute and deliver,  to Lender,  promptly upon
     request from Lender,  such other and further documents as may be reasonably
     necessary  or  appropriate  to  consummate  the  transactions  contemplated
     herein. ------------------

          8.12 Number and Gender.  Whenever  used herein,  the  singular  number
     shall  include the plural and the plural the  singular,  and the use of any
     gender  shall  be  applicable  to  all  genders.  The  duties,   covenants,
     obligations,  and warranties of Borrower in this  Agreement  shall be joint
     and several  obligations of Borrower and of each Borrower if more than one.
     -----------------

          8.13 Captions.  The captions,  headings, and arrangements used in this
     Agreement  are for  convenience  only and do not in any way affect,  limit,
     amplify, or modify the terms and provisions hereof. --------

         8.14  Continuing  Agreement.  This is a  continuing  agreement  and all
rights,  powers,  and remedies of Lender under this Agreement and the other Loan
Documents  shall  continue  in full force and effect  until each Note is paid in
full as the same becomes due and payable and all other  Indebtedness is paid and
discharged, until Lender has no further obligation to advance moneys to Borrower
under this Agreement, and until Lender, upon request of Borrower, has executed a
written termination statement.  Furthermore,  the parties contemplate that there
may be times when no Indebtedness is owing, but notwithstanding such occurrence,
this Agreement (and all other Loan Documents) shall remain valid and shall be in
full force and effect as to subsequent Indebtedness and Advances,  provided that
Lender has not executed a written termination statement.

          8.15  Applicable  Law. This Agreement and the Loan Documents  shall be
     governed by and construed in accordance with the laws of the State of Texas
     and the laws of the United States  applicable to  transactions  within such
     state. --------------

          8.16 NO ORAL  AGREEMENTS.  THE WRITTEN LOAN  AGREEMENT  REPRESENTS THE
     FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
     OF PRIOR,  CONTEMPORANEOUS,  OR SUBSEQUENT  ORAL AGREEMENTS OF THE PARTIES.
     THERE   ARE   NO   UNWRITTEN   ORAL   AGREEMENTS   BETWEEN   THE   PARTIES.



                                             [SIGNATURE PAGE FOLLOWS]






<PAGE>




                                                 SIGNATURE PAGE TO
                                                  LOAN AGREEMENT


         EXECUTED as of 1st day of September, 1999.

                                 BORROWER:

                                            PRIME/BDR ACQUISITION, L.L.C.

                                    By:  /s/ Ronald W. Barnet, M.D.
                                    Name: Ronald W. Barnet, M.D.
                                    Title: Manager

                                 LENDER:

                                            PRIME MEDICAL OPERATING, INC.

                                    By:  /s/ Cheryl Williams
                                    Name: Cheryl Williams
                                    Title: Treasurer





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