<PAGE>

                                SECOND AMENDMENT
                                       TO
                             1993 STOCK OPTION PLAN
                                       OF
                          PRIME MEDICAL SERVICES, INC.


     Prime Medical Services, Inc., a Delaware corporation, formerly known as New
PMSI, Inc. (the "Corporation"), hereby adopts this second amendment (this
"Amendment") to its 1993 Stock Option Plan (the "Plan") effective for all
purposes as of ___________, 1997 (the "Effective Date").

                                R E C I T A L S

     WHEREAS, on October 12, 1993 the Corporation adopted the Plan, which was
subsequently amended by that certain First Amendment (the "First Amendment")
dated effective June 18, 1997, a copy of which is attached hereto as Exhibit-A;
and

     WHEREAS, the Corporation's Board of Directors have approved an amendment to
the Plan, as contained herein, pursuant to which (i) the Plan may be
administered by either the Board of Directors or a committee of the Board duly
appointed under the terms of the Plan and comprised solely of non-employee
directors, and (ii) the holders of Non-Incentive Options (as defined in the
Plan) may assign or transfer such Options with the approval of the Board of
Directors or its appointed committee; and
<PAGE>

     WHEREAS, the Corporation desires to amend and restate the Plan to reflect
the incorporation of the First Amendment and this Amendment, and to delete all
references therein to "New PMSI, Inc." and substitute the Corporation's current
name in place thereof.

     NOW, THEREFORE, in consideration of, and pursuant to, the foregoing, the
Corporation hereby adopts this Amendment to the Plan as follows:

     1.  Section 1.7 of the Plan is hereby amended to read in its entirety as
follows:

               1.7.  "Non-Employee Directors" shall mean directors who meet the
         definition of "Non-Employee Directors" under Rule 16b-3 under the Act.

     2.  Section 3.1 of the Plan is hereby amended to read in its entirety as
follows:

               3.1.  Administrator.  An administrative body designated by the
                     -------------
         Board of Directors shall administer the Plan (the "Administrator").
         The Board of Directors may designate itself as the Administrator or
         appoint two or more Non-Employee Directors to a committee which shall
         serve as the Administrator.

                                       2
<PAGE>

     3.  All sections of the Plan (inclusive of section headings) are amended to
replace the term "Committee" or "Committee's" with "Administrator" or
"Administrator's", respectively.

     4.  Section 6.5 of the Plan is hereby amended to delete the second sentence
thereof and to add, in its place, the following sentences:

         Incentive Options shall not be transferable other than by will or the
         laws of descent and distribution. Non-Incentive Options shall not be
         transferable other than by will or the laws or descent and
         distribution, or upon the express prior written consent of the
         Administrator in each instance.

     5.  The Plan is hereby amended to remove all references to "New PMSI, Inc."
and to replace each such reference with "Prime Medical Services, Inc."

     6.  Except as specifically amended hereby, the Plan shall remain in full
force and effect in accordance with its terms.

     7.  The Plan, as amended and restated to reflect the First Amendment and
this Amendment, is attached hereto as Exhibit-B, and is hereby adopted for all
purposes.

                                       3
<PAGE>

     IN WITNESS WHEREOF, the Corporation, acting by and through its officer
hereunto duly authorized, has executed this Amendment as of the Effective Date.


                                             PRIME MEDICAL SERVICES, INC.


                                             By: /s/ Cheryl L. Williams
                                                ---------------------------
                                                Cheryl L. Williams
                                                Vice President - Finance

                                       4

<PAGE>

                          PRIME MEDICAL SERVICE, INC.

                              AMENDED AND RESTATED

                             1993 STOCK OPTION PLAN


                           Scope and Purpose of Plan
                           -------------------------

     Prime Medical Services, Inc., a Delaware corporation (the "Corporation"),
has adopted this Stock Option Plan (the "Plan") to provide for the granting of:

     (a)   Incentive Options (hereinafter defined) to certain key employees of
           the Corporation, or of its Affiliates (hereinafter defined), and

     (b)   Non-Incentive Options (hereinafter defined) to certain key employees
           and non-employee directors of the Corporation or of its Affiliates.

     The purpose of the Plan is to provide an incentive for Eligible Individuals
(hereinafter defined) to remain in the service of the Corporation or its
Affiliates, to extend to them the opportunity to acquire a proprietary interest
in the Corporation so that they will apply their best efforts for the benefit of
the Corporation, and to aid the Corporation in attracting able persons to enter
the service of the Corporation and its Affiliates.

SECTION 1. Definitions.

     1.1.  "Act" shall mean the Securities Exchange Act of 1934, as amended.

     1.2.  "Affiliates" shall mean (a) any corporation, other than the
Corporation, in an unbroken chain of corporations ending with the Corporation if
each of the corporations, other than the Corporation, owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain and (b) any corporation,
other than the Corporation, in an unbroken chain of corporations beginning with
the Corporation if each of the corporations, other than the last corporation in
the unbroken chain, owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

     1.3.  "Agreement" shall mean the written agreement between the Corporation
and a Holder evidencing the Option granted by the Corporation and the
understanding of the parties with respect thereto.

     1.4.  "Board of Directors" shall mean the board of directors of the
Corporation.

     1.5.  "Code" shall mean the Internal Revenue Code of 1986, as amended.

     1.6.  "Administrator" shall mean the Administrator appointed pursuant to
Section 3.1 to administer the Plan.

     1.7.  "Non-Employee Directors" shall mean directors who meet the definition
of "Non-Employee Directors" under Rule 16b-3 under the Act.

     1.8.  "Effective Date" shall mean the date that PMSI Acquisition
Corporation is merged with and into Prime Medical Services, Inc.
<PAGE>

     1.9.  "Eligible Individuals" shall mean (a) key employees, including
officers and directors who are also employees of the Corporation or of any of
its Affiliates, (b) non-employee directors and officers of the Corporation or of
any of its Affiliates and (c) consultants and advisors of the Corporation or of
any of its Affiliates who render bona fide services to the Corporation or to any
of its Affiliates; provided such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.

     1.10. "Fair Market Value" shall mean:

     (a)   If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange at
the date of determining the Fair Market Value, the last reported sale price on
such exchange on the last business day prior to the date in question; or

     (b)   If shares of Stock of the same class shall not be listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.10(a) and sales
prices therefor in the over-the-counter market shall be reported by the National
Association of Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ")
National Market System at the date of determining the Fair Market Value, the
last reported sale price so reported on the last business day prior to the date
in question; or

     (c)   If shares of Stock of the same class shall not be listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.10(a) and sales
prices therefor shall not be reported by the NASDAQ National Market System as
provided in Subparagraph 1.10(b), and bid and asked prices therefor in the over-
the-counter market shall be reported by NASDAQ (or, if not so reported, by the
National Quotation Bureau Incorporated) at the date of determining the Fair
Market Value, the average of the closing bid and asked prices on the last
business day prior to the date in question; and

     (d)   If shares of Stock of the same class shall not be listed or admitted
to unlisted trading privileges as provided in Subparagraph 1.10(a) and sales
prices or bid and asked prices therefor shall not be reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 1.10(b) or
Subparagraph 1.10(c) at the date of determining the Fair Market Value, the value
determined in good faith by the Administrator.

For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one which, by its
terms, will never lapse.

     1.11. "Holder" shall mean an Eligible Individual to whom an Option has
been granted.

     1.12. "Incentive Options" shall mean stock options that are intended to
satisfy the requirements of Section 422A of the Code.

     1.13. "Non-Incentive Options" shall mean stock options that do not satisfy
the requirements of Section 422A of the Code.

     1.14. "Options" shall mean either Incentive Options or Non-Incentive
Options, or both.

     1.15. "Stock" shall mean the Corporation's authorized common stock, $.01
par value, together with any other securities with respect to which Options
granted hereunder may become exercisable.

SECTION 2. Stock and Maximum Number of Shares Subject to the Plan.
           ------------------------------------------------------

     2.1.  Description of Stock and Maximum Shares Allocated.  The Stock which
           -------------------------------------------------
Options granted hereunder give a Holder the right to purchase may be unissued or
reacquired shares of Stock, as the Corporation may, in its sole and absolute
discretion, from time to time determine.
<PAGE>

     Subject to the adjustments provided for in Paragraph 6.7 hereof, the
aggregate number of shares of Stock to be issued pursuant to the exercise of all
Options granted hereunder may equal but shall not exceed 2,500,000 shares of
Stock.

     2.2.  Restoration of Unpurchased Shares.  If an Option granted hereunder
           ---------------------------------
expires or terminates for any reason during the term of this Plan and prior to
the exercise of the Option in full, the shares of Stock subject to but not
issued under such Option shall again be available for Option granted hereunder
subsequent thereto.

SECTION 3. Administration of the Plan.
           --------------------------

     3.1.  Administrator.  An administrative body designated by the Board of
           -------------
Directors shall administer the Plan (the "Administrator"). The Board of
Directors may designate itself as the Administrator or appoint two or more Non-
Employee Directors to a committee which shall serve as the Administrator.

     3.2.  Meetings and Actions of Administrator.  The Administrator shall hold
           -------------------------------------
its meetings at such times and places as it may determine.  All decisions and
determinations of the Administrator shall be made by the majority vote or
decision of all of its members present at a meeting; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Administrator shall be as fully effective as if it had been made at a
meeting duly called and held.  The Administrator may make any rules and
regulations for the conduct of its business that are not inconsistent with the
provisions hereof and with the bylaws of the Corporation as it may deem
advisable.

     3.3.  Administrator's Powers.  Subject to the express provisions hereof,
           ----------------------
the Administrator shall have the authority, in its sole and absolute discretion,
(a) to adopt, amend, and rescind administrative and interpretive rules and
regulations relating to the Plan; (b) to determine the terms and provisions of
the respective Agreements (which need not be identical), including provisions
defining or otherwise relating to (i) subject to Section 6 of the Plan, the term
and the period or periods and extent of exercisability of the Options, (ii) the
extent to which the transferability of shares of Stock issued upon exercise of
Options is restricted, and (iii) the effect of approved leaves of absence
(consistent with any applicable regulations of the Internal Revenue Service);
(c) to accelerate the time of exercisability of any Option that has been
granted; (d) to construe the respective Agreements and the Plan; and (e) to make
all other determinations and perform all other acts necessary or advisable for
administering the Plan, including the delegation of such ministerial acts and
responsibilities as the Administrator deems appropriate.  The Administrator may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any Agreement in the manner and to the extent it shall deem expedient
to carry it into effect, and it shall be the sole and final judge of such
expediency.  The Administrator shall have full discretion to make all
determinations on the matters referred to in this Paragraph 3.3; such
determinations shall be final, binding and conclusive.

SECTION 4. Eligibility and Participation.
           -----------------------------

     4.1.  Eligible Individuals.  Options may be granted hereunder only to
           --------------------
persons who are Eligible Individuals at the time of the grant thereof.
Notwithstanding any provision contained herein to the contrary, a person shall
not be eligible to receive an Incentive Option hereunder unless he is an
employee of the Corporation or an Affiliate, nor shall a person be eligible to
receive an Incentive Option hereunder if he, at the time such Option  is
granted, would own (within the meaning of Sections 422A and 425 of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
or value of all classes of stock of the Corporation or of an Affiliate unless at
the time such Incentive Option is granted the exercise price per share of Stock
is at least one hundred and ten percent (110%) of the Fair Market Value of each
share of Stock to which the Incentive Option relates and the Incentive Option is
not exercisable after the expiration of five years from the date it is granted.

     4.2.  No Right to Option.  The adoption of the Plan shall not be deemed to
           ------------------
give any person a right to be granted an Option.
<PAGE>

SECTION 5. Grant of Options and Certain terms of the Agreements.
           ----------------------------------------------------

     Subject to the express provisions hereof, the Administrator shall determine
which Eligible Individuals shall be granted Options hereunder from time to time.
In making grants, the Administrator shall take into consideration the
contribution the potential Holder has made or may make to the success of the
Corporation or its Affiliates and such other considerations as the Administrator
may from time to time specify.  The Administrator shall also determine the
number of shares subject to each of such Options, and shall authorize and cause
the Corporation to grant Options in accordance with such determinations.

     The date on which the Administrator completes all action constituting an
offer of an Option to an individual, including the specification of the number
of shares of Stock to be subject to the Option, shall be the date on which the
Option covered by an Agreement is granted, even though certain terms of the
Agreement may not be at such time determined and even though the Agreement may
not be executed until a later time.  In no event, however, shall an Optionee
gain any rights in addition to those specified by the Administrator in its
grant, regardless of the time that may pass between the grant of the Option and
the actual execution of the Agreement by the Corporation and the Optionee.

     Each Option granted hereunder shall be evidenced by an Agreement, executed
by the Corporation and the Eligible Individual to whom the Option is granted,
incorporating such terms as the Administrator shall deem necessary or desirable.
More than one Option may be granted hereunder to the same Eligible Individual
and be outstanding concurrently hereunder.  In the event an Eligible Individual
is granted both one or more Incentive Options and one or more Non-Incentive
Options, such grants shall be evidenced by separate Agreements, one for each of
the Incentive Option grants and one for each of the Non-Incentive Option grants.

     Each Agreement may contain or otherwise provide for conditions giving rise
to the forfeiture of the Stock acquired pursuant to an Option granted hereunder
or otherwise and such restrictions on the transferability of shares of the Stock
acquired pursuant to an Option granted hereunder or otherwise as the
Administrator in its sole and absolute discretion shall deem proper or
advisable.  Such conditions giving rise to forfeiture may include, but need not
be limited to, the requirement that the Holder render substantial services to
the Corporation or its Affiliates for a specified period of time.  Such
restrictions on transferability may include, but need not be limited to, options
and rights of first refusal in favor of the Corporation and shareholders of the
Corporation other than the Holder of such shares of Stock who is a party to the
particular Agreement or a subsequent holder of the shares of Stock who is bound
by such Agreement.  In addition, no Option may be exercisable for a period of
more than ten years from the date the Option is granted.

SECTION 6. Terms and Conditions of Options.
           -------------------------------

     All Options granted hereunder shall comply with, be deemed to include, and
shall be subject to the following terms and conditions:

     6.1.  Number of Shares.  Each Agreement shall state the number of shares of
           ----------------
Stock to which it relates.

     6.2.  Exercise Price.  Each Agreement shall state the exercise price per
           --------------
share of Stock.  The exercise price per share of Stock subject to an Incentive
Option shall not be less than the greater of (a) the par value per share of the
Stock or (b) 100% of the Fair Market Value per share of the Stock on the date of
the grant of the Option.  The exercise price per share of Stock subject to a
Non-Incentive Option shall be determined by the Administrator upon the granting
of the Non-Incentive Option.

     6.3.  Automatic Options.  Notwithstanding Paragraph 6.2, on the Effective
           -----------------
Date the persons then holding unexercised options granted pursuant to the 1990
Stock Option Plan and Second Amended and Restated Stock Option Plan of Prime
Medical Services, Inc. ("Prime Plans"), shall automatically be granted Non-
Incentive Options under the Plan covering the same number of shares of Stock, at
the same exercise price and for the same term as set forth in the options
granted to such persons under the Prime Plans.  The grant of such Non-Incentive
Options shall be in cancellation of such options granted to such persons under
the Prime Plans.
<PAGE>

     6.4.  Medium and Time of Payment, Method of Exercise, and Withholding
           ---------------------------------------------------------------
Taxes.  The exercise price of an Option shall be payable upon the exercise of
the Option in cash or by certified or cashier's check payable to the order of
the Corporation, or, with the consent of the Administrator, with shares of Stock
of the Corporation owned by the Holder, including a multiple series of exchanges
of such Stock, or with the consent of the Administrator, by a combination of
cash and such shares.  Exercise of an Option shall not be effective until the
Corporation has received written notice of exercise.  Such notice must specify
the number of whole shares to be purchased and be accompanied by payment in full
of the aggregate exercise price of the number of shares purchased.  The
Corporation shall not in any case be required to sell, issue, or deliver a
fractional share of Stock with respect to any Option.

     The Administrator may, in its discretion, require a Holder to pay to the
Corporation at the time of exercise of an Option or portion thereof the amount
that the Corporation deems necessary to satisfy its obligation to withhold
Federal, state or local income or other taxes incurred by reason of the
exercise.  Where the exercise of an Option does not give rise to an obligation
to withhold Federal income or other taxes on the date of exercise, the
Corporation may, in its discretion, require a Holder to place shares of Stock
purchased under the Option in escrow for the benefit of the Corporation until
such time as Federal income or other tax withholding is no longer required with
respect to such shares or until such withholding is required on amounts included
in the gross income of the Holder as a result of the exercise of an Option or
the disposition of shares of Stock acquired pursuant thereto.  At such later
time, the Corporation, in its discretion, may require a Holder to pay to the
Corporation the amount that the Corporation deems necessary to satisfy its
obligation to withhold Federal, state or local income or other taxes incurred by
reason on the exercise of the Option or the disposition of shares of Stock.
Upon receipt of such payment by the Corporation, such shares of Stock shall be
released from escrow to the Holder.

     6.5.  Term, Time of Exercise, and Transferability of Options.  In addition
           ------------------------------------------------------
to such other terms and conditions as may be included in a particular Agreement
granting an Option, an Option shall be exercisable during a Holder's lifetime
only by the Holder or by the Holder's guardian or legal representative.
Incentive Options shall not be transferable other than by will or the laws of
descent and distribution. Non-Incentive Options shall not be transferable other
than by will or the laws of descent and distribution, or upon the express prior
written consent of the Administrator in each instance.  The provisions of the
remainder of this paragraph shall apply to the extent a Holder's Agreement does
not expressly provide otherwise.  If a Holder ceases to be an Eligible
Individual, the Option shall terminate ninety days after such Holder ceases to
be an Eligible Individual.  Notwithstanding the foregoing, if a Holder ceases to
be an Eligible Individual by reason of (a) disability (as defined in Section
105(d)(4)), or (b) death, then the Holder shall have the right for twelve months
after the date of disability or death to exercise an Option to the extent such
Option is exercisable on the date of his disability.

     That portion of the Option which is not exercisable on the date the Holder
ceases to be an Eligible Individual shall terminate and be forfeited to the
Corporation on the date of such cessation.

     Notwithstanding any other provision of this Plan, no Incentive Option shall
be exercisable after the expiration of ten years from the date it is granted, or
the period specified in Paragraph 4.1, if applicable.  The Administrator shall
have authority to prescribe in any Agreement that the Option evidenced thereby
may be exercised in full or in part as to any number of shares subject thereto
at any time or from time to time during the term of the Option, or in such
installments at such times during said term as the Administrator may prescribe.
Except as provided above and unless otherwise provided in any Agreement, an
Option may be exercised at any time or from time to time during the term of the
Option.  Such exercise may be as to any or all whole (but no fractional) shares
which have become purchasable under the Option.

     Within a reasonable time or such time as may be permitted by law after the
Corporation receives written notice that the Holder has elected to exercise all
or a portion of an Option, such notice to be accompanied by payment in full of
the aggregate Option exercise price of the number of shares of Stock purchased,
the Corporation shall issue and deliver a certificate representing the shares
acquired in consequence of the exercise and any other amounts payable in
consequence of such exercise.  In the event that a Holder exercises both an
Incentive Option, or portion thereof, and a Non-Incentive Stock Option, or a
portion thereof, separate Stock certificates shall be issued, one for the Stock
subject to the Incentive Option and one for the Stock subject to the Non-
Incentive Stock Option.  The number of the shares of Stock transferable due to
an exercise of an Option under this Plan shall not be increased due to the
passage of time, except as may be provided in an Agreement.  However, this
number of such shares of
<PAGE>

Stock which are transferable may increase due to the occurrence of certain
events which are fully described in Paragraph 6.7.

     Nothing herein or in any Option granted hereunder shall require the
Corporation to issue any shares upon exercise of any Option if such issuance
would, in the opinion of counsel for the Corporation, constitute a violation of
the Securities Act of 1933, as amended, or any similar or superseding statute or
statutes, or any other applicable statute or regulation, as then in effect.  At
the time of any exercise of an Option, the Corporation may, as a condition
precedent to the exercise of such Option, require from the Holder of the Option
(or in the event of his death, his legal representatives, heirs, legatees, or
distributees) such written representations, if any, concerning his intentions
with regard to the retention or disposition of the shares being acquired by
exercise of such Option and such written covenants and agreements, if any, as to
the manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by such Holder (or
in the event of his death, his legal representatives, heirs, legatees, or
distributees), will not involve a violation of the Securities Act of 1933, as
amended, or any similar or superseding statute or statutes, or any other
applicable state or federal statute or regulation, as then in effect.
Certificates for shares of Stock, when issued, may have the following or similar
legend, or statements of other applicable restrictions, endorsed thereon, and
may not be immediately transferable:

     The shares of Stock evidenced by this certificate have been issued to the
     registered owner in reliance upon written representations that these shares
     have been purchased for investment.  These shares have not been registered
     under the Securities Act of 1933, as amended, or any applicable state
     securities laws, in reliance upon an exception from registration.  Without
     such registration, these shares may not be sold, transferred, assigned or
     otherwise disposed of unless, in the opinion of the Corporation and its
     legal counsel, such sale, transfer, assignment or disposition will not be
     in violation of the Securities Act of 1933, as amended, applicable rules
     and regulations of the Securities and Exchange Commission, and any
     applicable state securities laws.

     6.6.  Limitation on Aggregate Value of Shares That May Become First
           -------------------------------------------------------------
Exercisable During Any Calendar Year Under an Incentive Option.  Except as is
--------------------------------------------------------------
otherwise provided in the second paragraph of Paragraph 6.7 hereof, with respect
to any Incentive Option granted under this Plan, the sum of:

     (a)  the aggregate Fair Market Value of shares of Stock subject to such
          Incentive Option that first become purchasable in a calendar year
          under such Incentive Option, and

     (b)  the aggregate Fair Market Value of shares of Stock or stock of any
          Affiliate (or a predecessor of the Corporation or an Affiliate)
          subject to any other incentive stock option (within the meaning of
          Section 422A of the Code) of the Corporation or its Affiliates (or a
          predecessor corporation of any such corporation), that first become
          purchasable in a calendar year under such incentive stock option may
          not (with respect to any Holder) exceed $100,000, with such Fair
          Market Value to be determined as of the date the Incentive Option or
          such other incentive stock option is granted.

For purposes of this Paragraph 6.6, "predecessor corporation" means (i) a
corporation that was a party to a transaction described in Section 425(a) of the
Code (or which would be so described if a substitution or assumption under such
section had been effected) with the Corporation, (ii) a corporation which, at
the time the new incentive stock option (within the meaning of Section 422A of
the Code) is granted, is an Affiliate of the Corporation or a predecessor
corporation of any such corporations, or (iii) a predecessor corporation of any
such corporations.

     6.7.  Adjustments Upon Changes in Capitalization.  Notwithstanding any
           ------------------------------------------
other provision hereof, in the event of any change in the number of outstanding
shares of Stock effected without receipt of consideration therefor by the
Corporation, by reason of a stock dividend, or split, combination, exchange of
shares or other recapitalization, merger, or otherwise, in which the Corporation
is the surviving corporation (1) the aggregate number and class of the reserved
shares, (2) the number and class of shares subject to each outstanding Option
and (3) the exercise price of each outstanding Option shall be automatically
adjusted to equitably reflect the effect thereon of such change (provided,
however, that any fractional share resulting from such adjustment may be
eliminated).  In the event of a dispute concerning such adjustment, the
Administrator has full discretion to determine the resolution of the dispute.
Such determination shall be final, binding and conclusive.  The number of
reserved shares or the number of shares
<PAGE>

subject to any outstanding Option shall be automatically reduced by any fraction
included therein which results from any adjustment made pursuant to this
Paragraph 6.7.

     The following provisions of this Paragraph 6.7 shall apply unless a
Holder's Agreement provides otherwise.  In the event of:

     (a)  a dissolution or liquidation of the Corporation,

     (b)  a merger or consolidation (other than a merger effecting a re-
          incorporation of the Corporation in another state or any other merger
          or a consolidation in which the shareholders of the surviving
          corporation and their proportionate interests therein immediately
          after the merger or consolidation are substantially identical to the
          shareholders of the Corporation and their proportionate interests
          therein immediately prior to the merger or consolidation) in which the
          Corporation is not the surviving corporation (or survives only as a
          subsidiary of another corporation in a transaction in which the
          shareholders of the parent of the Corporation and their proportionate
          interests therein immediately after the transaction are not
          substantially identical to the shareholders of the Corporation and
          their proportionate interests therein immediately prior to the
          transaction; provided, however, that the Administrator may at any time
          prior to such a merger or consolidation provide by resolution that the
          foregoing provisions of this parenthetical shall not apply if a
          majority of the board of directors of such parent immediately after
          the transaction consists of individuals who constituted a majority of
          the Board of Directors immediately prior to the transaction), or

     (c)  a transaction in which any person (other than a shareholder of the
          Corporation that already is the owner of 50% or more of the total
          combined voting power of all classes of the Corporation on the date of
          the Holder's Agreement) becomes the owner of 50% or more of the total
          combined voting power of all classes of stock of the Corporation
          (provided, however, that the Administrator may at any time prior to
          such transaction provide by resolution that this subparagraph (c)
          shall not apply if such acquiring person is a corporation and a
          majority of the board of directors of the acquiring corporation
          immediately after the transaction consists of individuals who
          constituted a majority of the Board of Directors immediately prior to
          the acquisition of such 50% or more total combined voting power)

the Administrator may, at its election, as of the effective time of such
transaction, either (1) change the number and kind of shares of stock (including
substitution of shares of another corporation) and exercise price in the manner
it deems appropriate, provided, however, that in no event may any change be made
under this Paragraph 6.7 which would constitute a "modification" within the
meaning of Section 425(h)(3) of the Code; or (2) purchase the Options from each
Holder by tendering cash equal to the Fair Market Value of the Stock represented
by the Options less the exercise price of the Options specified in each
agreement, without regard to the determination as to the periods and
installments of exercisability made pursuant to a Holder's Agreement if (and
only if) such Options have not at that time expired or been terminated.

     6.8.  Rights as a Shareholder.  A Holder shall have no right as a
           -----------------------
shareholder with respect to any shares covered by his Option until a certificate
representing such shares is issued to him.  No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Paragraph 6.7 hereof.

     6.9.  Modification, Extension and Renewal of Options.  Subject to the terms
           ----------------------------------------------
and conditions of and within the limitations of the Plan, the Administrator may
modify, extend or renew outstanding Options granted under the Plan, or accept
the surrender of Options outstanding hereunder (to the extent not theretofore
exercised) and authorize the granting of new Options hereunder in substitution
therefor (to the extent not theretofore exercised).  The Administrator may not,
however, without the consent of the Holder, modify any outstanding Options so as
to specify a higher or lower exercise price or base amount or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower exercise price.
In addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any
<PAGE>

rights or obligations under any Option theretofore granted hereunder to such
Holder under the Plan, except as may be necessary, with respect to Incentive
Options, to satisfy the requirements of Section 422A of the Code.

     6.10.  Furnish Information.  Each Holder shall furnish to the Corporation
            -------------------
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.

     6.11.  Obligation to Exercise:  Termination of Employment.  The granting of
            --------------------------------------------------
an Option hereunder shall impose no obligation upon the Holder to exercise the
same or any part thereof.  In the event of a Holder's termination of employment
with the Corporation or an Affiliate, the unexercised portion of an Option
granted hereunder shall terminate in accordance with Paragraph 6.5 hereof.

     6.12.  Agreement Provisions.  The Agreements authorized under the Plan
            --------------------
shall contain such provisions in addition to those required by the Plan
(including, without limitation, restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Administrator shall deem advisable.  Each Agreement shall
identify the Option evidenced thereby as an Incentive Option or a Non-Incentive
Option, as the case may be, and no Agreement shall cover both an Incentive
Option and a Non-Incentive Option.  Each Agreement relating to an Incentive
Option granted hereunder shall contain such limitations and restrictions upon
the exercise of the Incentive Option to which it relates as shall be necessary
for the Incentive Option to which such Agreement relates to constitute an
incentive stock option, as defined in Section 422A of the Code.

SECTION 7.  Remedies.
            --------

     7.1.   Attorneys Fees.  The Corporation shall be entitled to recover from a
            --------------
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.

     7.2.   Specific Performance.  The Corporation shall be entitled to enforce
            --------------------
the terms and provisions of this Paragraph 7, including the remedy of specific
performance, in Travis County, Texas.

SECTION 8.  Duration of Plan.
            ----------------

     No Options will be granted herein after the date that is ten years from the
earlier of (a) the date the Plan is accepted by the Board of Directors or (b)
the date the Plan is approved by the stockholders of the Corporation.

SECTION 9.  Amendment of Plan.
            -----------------

     The Board of Directors may at any time terminate or from time to time amend
or suspend the Plan; provided, however, that no such amendment shall, without
                     --------  -------
approval of the shareholders of the Corporation, except as provided in Section 7
hereof, (a) increase the aggregate number of shares of Stock as to which Options
may be granted under the Plan; (b) change the minimum Option exercise price; (c)
increase the maximum period during which Options may be exercised; or (d) extend
the effective period of the Plan.  No Option may be granted during any
suspension of the Plan or after the Plan has been terminated and no amendment,
suspension or termination shall, without a Holder's consent, adversely alter or
impair any of the rights or obligations under any Option theretofore granted to
such Holder under the Plan.

SECTION 10. General.
            -------

     10.1.  Application of Funds.  The proceeds received by the Corporation from
            --------------------
the sale of shares pursuant to Options shall be used for general corporate
purposes.

     10.2.  Right of the Corporation and Affiliates to Terminate Employment.
            ---------------------------------------------------------------
Nothing contained in the Plan, or in any Agreement, shall confer upon any Holder
the right to continue in the employ of the Corporation or any Affiliate, or
interfere in any way with the rights of the Corporation or any Affiliate to
terminate his employment any time.
<PAGE>

     10.3.  No Liability for Good Faith Determinations.  Neither the members of
            ------------------------------------------
the Board of Directors nor any member of the Administrator shall be liable for
any act, omission, or determination taken or made in good faith with respect to
the Plan or any Option granted under it, and members of the Board of Directors
and the Administrator shall be entitled to indemnification and reimbursement by
the Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect.

     10.4.  Information Confidential.  As partial consideration for the granting
            ------------------------
of each Option hereunder, the Agreement may, in the Administrator's sole and
absolute discretion, provide that the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax and financial advisors, or to a
financial institution to the extent that such information is necessary to secure
a loan.  In the event any breach of this promise comes to the attention of the
Administrator, it shall take into consideration such breach, in determining
whether to recommend the grant of any future Option to such Holder, as a factor
militating against the advisability of granting any such future Option to such
individual.

     10.5.  Other Benefits.  Participation in the Plan shall not preclude the
            --------------
Holder from eligibility in any other stock option plan of the Corporation or any
Affiliate or any old age benefit, insurance, pension, profit sharing,
retirement, bonus, or other extra compensation plans which the Corporation or
any Affiliate has adopted, or may, at any time, adopt for the benefit of its
employees.

     10.6.  Execution of Receipts and Releases.  Any payment of cash or any
            ----------------------------------
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such persons hereunder.  The Administrator may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.

     10.7.  No Guarantee of Interests.  Neither the Administrator nor the
            -------------------------
Corporation guarantees the Stock of the Corporation from loss or depreciation.

     10.8.  Payment of Expenses.  All expenses incident to the administration,
            -------------------
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Affiliates; provided,
however, the Corporation or an Affiliate may recover any and all damages, fees,
expenses, and/or costs arising out of any actions taken by the Corporation to
enforce its rights hereunder.

     10.9.  Corporation Records.  Records of the Corporation or its Affiliates
            -------------------
regarding the Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Administrator to
be incorrect.

     10.10. Information.  The Corporation and its Affiliates shall, upon
            -----------
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Administrator to perform its duties and functions under the
Plan.

     10.11. No Liability of Corporation.  The Corporation assumes no obligation
            ---------------------------
or responsibility to the Holder or his legal representatives, heirs, legatees,
or distributees for any act of, or failure to act on the part of, the
Administrator.

     10.12. Corporation Action.  Any action required of the Corporation shall
            ------------------
be by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
<PAGE>

     10.13.  Severability.  If any provision of this Plan is held to be illegal
             ------------
or invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein.

     10.14.  Notices.  Whenever any notice is required or permitted hereunder,
             -------
such notice must be in writing and personally delivered or sent by mail or by a
nationally recognized courier service.  Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered on the date on which it is
personally delivered, or, if mailed, whether actually received or not, on the
third business day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at the
address which such person has previously specified by written notice delivered
in accordance herewith, or, if by courier, twenty-four hours after it is sent,
addressed as described in this Section.  The Corporation or a Holder may change,
at any time and from time to time, by written notice to the other, the address
which it or he had previously specified for receiving notices.  Until changed in
accordance herewith, the Corporation and each Holder shall specify as its and
his address for receiving notices the address set forth in the Agreement
pertaining to the shares to which such notice relates.

     10.15.  Waiver of Notice.  Any person entitled to notice hereunder may
             ----------------
waive such notice.

     10.16.  Successors.  The Plan shall be binding upon the Holder, his legal
             ----------
representatives, heirs, legatees and distributees upon the Corporation, its
successors, and assigns, and upon the Administrator, and its successors.

     10.17.  Headings.  The titles and headings of Sections and Paragraphs are
             --------
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.

     10.18.  Governing Law.  All questions arising with respect to the
             -------------
provisions of the Plan shall be determined by application of the laws of the
State of Texas except to the extent Texas law is preempted by federal law.
Questions arising with respect to the provisions of an Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Agreement, except to the extent preempted by federal law and except to the
extent that Texas corporate law conflicts with the contract law of such state,
in which event Texas corporate law shall govern.  The obligation of the
Corporation to sell and deliver Stock hereunder is subject to applicable laws
and to the approval of any governmental authority required in connection with
the authorization, issuance, sale, or delivery of such Stock.

     10.19.  Word Usage.  Words used in the masculine shall apply to the
             ----------
feminine where applicable, and wherever the context of the Plan dictates, the
plural shall be read as the singular and the singular as the plural.


     IN WITNESS WHEREOF, Prime Medical Services, Inc. acting by and through its
officer hereunto duly authorized, has executed this Amended and Restated Plan on
the ____ day of _________, 1997.


                                     PRIME MEDICAL SERVICES, INC.


                                     By:/s/ Cheryl L. Williams
                                        -----------------------------------
                                        Cheryl L. Williams
                                        Vice President - Finance