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                             EMPLOYMENT AGREEMENT
                             --------------------


  This EMPLOYMENT AGREEMENT (this "Agreement") is by and between Prime Medical
Operating, Inc., a Delaware corporation ("Employer") and William J. Walsh, an
individual ("Employee") and shall be effective as of April 1, 1997 (the
"Effective Date").

                                   RECITALS:

  WHEREAS, Employee desires to enter into the employment of Employer, and
Employer desires to employ Employee provided that, in so doing, it can protect
its confidential information, business, accounts, patronage and goodwill.

  NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth below, the parties hereto agree as follows:

  1.  Term; Termination.
      -----------------

      1.1. Employer hereby hires Employee and Employee accepts such employment
for a two (2) year term commencing on the Effective Date.

      1.2. After expiration of the two (2) year term described in Section 1.1
above, this Agreement shall remain in full force and effect unless and until
either party gives the other at least six (6) months prior written notice of its
determination to terminate this Agreement.
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            1.3. This Agreement shall be automatically terminated on the death
of Employee or on the permanent disability of Employee if Employee is no longer
able to perform in all material respects the usual and customary duties of its
employment hereunder. For purposes hereof, any condition which in reasonable
likelihood is expected to impair Employee's ability to materially perform its
duties hereunder for a period of three (3) months or more shall be considered to
be permanent.

            1.4.  Employer may terminate this Agreement for cause if:

            (a) Employee is convicted of an offense constituting a felony or
involving moral turpitude; or

            (b) in any material or substantial way, Employee (i) violates any
rule, regulation, practice or policy of the Employer; (ii) violates any
provision of this Agreement; (iii) is materially dishonest in the performance of
its duties hereunder or engages in a material conflict of interest with the
Employer that is not fully disclosed to and approved by the President of
Employer; (iv) fails to follow reasonable instructions or directions from the
President of Employer, or any other person authorized by the Board of Directors
to give such instructions (for purposes of this Agreement, the President of
Employer and/or such other authorized persons are collectively referred to as
the "President"); or (v) fails to perform the services required pursuant to this
Agreement.
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    A notice of termination pursuant to this Section 1.4 shall be in writing and
shall state the alleged reason for termination. Employee, within not less than
fifteen (15) nor more than thirty (30) days after such notice, shall be given
the opportunity to appear before the Board of Directors of the Employer, or a
committee thereof, to rebut or dispute the alleged reason for termination. If
the Board of Directors or committee determines, by a majority of the
disinterested directors, after having given Employee the opportunity to rebut or
dispute the allegations, that such reason is indeed valid, Employer may
immediately terminate Employee's employment under this Agreement for cause.
Immediately upon giving the notice contemplated by this paragraph, Employer may
elect, during the pendency of such inquiry, to relieve Employee of Employee's
regular duties.

      1.5.  Upon termination, Employee shall be entitled to the following:

            (a) If this Agreement and Employee's employment is terminated
pursuant to Section 1.3 as a result of Employee's death or disability, or by
Employee, then Employer shall pay Employee or Employee's representative, as the
case may be, Employee's then-current base salary (excluding any bonuses and non-
cash benefits) through the effective date of termination, and Employer shall
have no further obligations hereunder.

            (b) If Employer terminates this Agreement and Employee's employment
for cause pursuant to Section 1.4, or this Agreement is terminated at the end of
its initial or any
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renewal term by either party, Employee shall not be entitled to receive any
additional salary, bonus or benefits beyond those earned or accrued as of the
effective date of the termination.

            (c) If Employer terminates this Agreement and Employee's employment
without cause other than pursuant to the provisions of Section 1.2, then
Employee shall be entitled to continue to receive the base salary that Employee
was receiving immediately prior to such action by Employer, through the end of
the then-current initial or renewal term of this Agreement.

            1.6. Any termination of this Agreement or Employee's employment
shall not release either Employer or Employee from their respective obligations
to the date of termination nor from the provisions of Section 4 hereof.

            2.   Duties of Employee.
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            2.1. During the period of employment hereunder, Employee shall
devote substantially its entire time and best efforts to the business of
Employer for the profit, benefit and advantage of Employer, and shall perform
such other services as shall be designated, from time to time, by the President
of Employer; provided, however, that this Section shall not be construed as
preventing Employee from investing its personal assets in business ventures that
do not compete with Employer or Employer's Affiliates (as hereinafter defined)
or are not otherwise prohibited by this Agreement, and spending reasonable
amounts of personal time in the management thereof. Employee shall use its best
efforts to promote the interests of Employer and Employer's Affiliates,
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and to preserve their goodwill with respect to their employees, customers,
suppliers and other persons having business relations with Employer. Employee
agrees to accept and hold all such offices and/or directorships with Employer
and Employer's Affiliates as to which Employee may, from time to time, be
elected. For purposes of this Agreement, Employer's subsidiaries, parent
companies and other affiliates are collectively referred to as "Affiliates."

        2.2. Subject to the approvals by and the ultimate supervision of the
President of Employer, Employee during the term hereof shall serve as the Senior
Vice President of a subsidiary of the Employer (the "Operating Subsidiary").
Subject to the control of the President and in compliance with its instructions
and directives, Employee, as the Senior Vice President of a subsidiary of the
Employer, shall have the responsibilities commensurate with such office and as
provided in the Operating Subsidiaries' bylaws and other governing documents.

    3.  Salary; Expense Reimbursements.
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        3.1. As compensation for Employee's service under and during the term of
this Agreement (or until terminated pursuant to the provisions hereof) Employer
shall pay Employee a salary of $12,500 per calendar month (prorated for partial
months), payable in accordance with the regular payroll practices of Employer,
as in effect from time to time. Such salary shall be subject to withholding for
the prescribed federal income tax, social security and other items as required
by law and for other items consistent with Employer's policy with respect to
health insurance and other
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benefit plans for similarly situated employees of Employer in which Employee may
elect to participate.

        3.2. During the term of this Agreement, Employee also shall be entitled
to two (2) weeks paid vacation per year and to receive such paid sick leave,
insurance and other fringe benefits as are made available to other personnel of
Employer in comparable positions, with comparable service credit and with
comparable duties and responsibilities. Any benefits in excess of those granted
other salaried employees of Employer shall be subject to the prior approval of
the Board of Directors of Employer.

        3.3. In the discretion of the President of the Employer, and without
implying any obligation on Employer ever to award a bonus to Employee, Employee
may from time to time be awarded a cash bonus or bonuses for services rendered
to the Employer during the term of Employee's employment under this Agreement.
If and to the extent a bonus is ever considered for Employee, it is expected
that any such bonus will be based not only on Employee's individual performance
and Employee's relative position, service tenure and responsibilities with
Employer, but also on the performance and profitability of the entire business
of Employer. During the second full year of this Agreement, Employee and
Employer may agree on a formula to be utilized in determining the amount of any
bonus for Employee. In the event Employer and Employee so agree, both parties
agree to execute an addendum to this Agreement specifying such bonus formula and
the terms and conditions thereof.
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        3.4. Employer shall reimburse all reasonable out-of-pocket travel and
business expenses incurred by Employee in connection with the performance of
Employee's duties pursuant to this Agreement. Employer may also reimburse
reasonable out-of-pocket moving costs incurred by Employee in connection with
Employee's move to Austin, Texas, including two trips to Austin, Texas, by
Employee's spouse, provided such reimbursable moving costs shall be mutually
agreed upon by Employer and Employee. Employee shall provide Employer with a
written accounting of Employee's expenses, on a form acceptable to Employer,
together with supporting documentation, which satisfies applicable federal
income tax reporting and record keeping requirements.

        3.5. The parties acknowledge and agree that Employee's employment duties
hereunder are performable in Austin, Texas, subject to business travel
commensurate with Employee's duties hereunder and as otherwise requested by
Employer.

        4. Employee's Restrictive Covenants. In consideration of this Agreement,
           --------------------------------
the employment of Employee hereunder, the salary paid hereunder, and other good
and valuable consideration the receipt and sufficiency of which Employee hereby
acknowledges, Employee acknowledges and agrees that:

        4.1. (a) In Employee's position of employment, Employee will be exposed
to confidential information and trade secrets ("Proprietary Information")
pertaining to, or arising from, the business of Employer and/or Employer's
Affiliates, that such Proprietary Information is unique and valuable and that
Employer and/or Employer's Affiliates would suffer irreparable injury if this
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information were divulged to those in competition with Employer or Employer's
Affiliates. Therefore, Employee agrees to keep in strict secrecy and confidence,
both during and after the period of Employee's employment, any and all
information which Employee acquires, or to which Employee has access, during
Employee's employment by Employer, that has not been publicly disclosed by
Employer or Employer's Affiliates or that is not a matter of common knowledge by
their respective competitors. The Proprietary Information covered by this
Agreement shall include, but shall not be limited to, information relating to
any inventions, processes, software, formulae, plans, devices, compilations of
information, technical data, mailing lists, management strategies, business
distribution methods, names of suppliers (of both goods and services) and
customers, names of employees and terms of employment, arrangements entered into
with suppliers and customers, including, but not limited to, proposed expansion
plans of Employer, marketing and other business and pricing strategies, and
trade secrets of Employer and/or Employer's Affiliates.

         (b) Except with prior written approval of Employer, either during or
after Employee's employment hereunder, Employee will neither: (i) directly or
indirectly, disclose any Proprietary Information to any person except authorized
personnel of Employer; nor, (ii) use Proprietary Information in any way. Upon
termination of employment, whether voluntary or involuntary, within forty-eight
(48) hours of termination, Employee will deliver to Employer (without retaining
copies thereof) all documents, records or other memorializations including
copies of documents and any notes which Employee has prepared, that contain
Proprietary Information or relate to Employer's or Employer's Affiliates'
business, all other tangible Proprietary Information in Employee's possession or
control, and all of Employer's and the Affiliates' credit
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cards, keys, equipment, vehicles, supplies and other materials that are in
possession or under Employee's control.

        4.2. (a) During the Employee's employment hereunder and for a period of
five (5) years after Employee ceases to be employed by the Employer, the
Employee shall not, directly or indirectly, for Employee's own account or
otherwise (i) solicit business from, divert business from, or attempt to convert
to other methods of using the same or similar products or services as provided
by the Employer or Employer's Affiliates, any client, account or location of the
Employer or Employer's Affiliates with which the Employee has had any contact as
a result of its employment hereunder; or (ii) solicit for employment or employ
any employee or former employee of the Employer or Employer's Affiliates.

             (b) For a period of five (5) years after the termination of the
Employee's employment hereunder (except as provided in the last sentence of this
paragraph), the Employee shall not, directly or indirectly, own, engage in,
manage, operate, join, control, or participate in the ownership, management,
operation, or control of, or be connected as a stockholder, director, officer,
employee, agent, partner, joint venturer, member, beneficiary or otherwise with
any corporation, limited liability company, partnership, sole proprietorship,
association, business, trust, or other organization, entity or individual which
in any way provides physician practice management services within one hundred
(100) miles of any physician practice that is managed by Employer, the Operating
Subsidiary or any other of Employer's Affiliates; provided, however, that (i)
                                                  --------  -------
Employee may own, directly or indirectly, securities of any entity traded on any
national securities exchange
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or listed on the National Association of Securities Dealers Automated Quotation
System if Employee does not, directly or indirectly, own 3% or more of any class
of equity securities, or securities convertible into or exercisable or
exchangeable for 3% or more of any class of equity securities, of such entity,
and (ii) the one hundred (100) mile restriction shall only apply so as to
prohibit Employee with respect to physician practice management businesses that
are providing services to physicians of the same medical practice specialty as
those being serviced by Employer, the Operating Subsidiary or any of Employer's
Affiliates within the one hundred (100) mile restriction area at the time of
Employee's termination.

        4.3. Employee understands and acknowledges damages at law alone will be
an insufficient remedy for Employer and Employer will suffer irreparable injury
if Employee violates the terms of this Agreement. Accordingly, Employer, upon
application to a court of competent jurisdiction, shall be entitled to
injunctive relief to enforce the provisions of this Agreement in the event of
any breach, or threatened breach, of its terms. Employee hereby waives any
requirement that Employer post bond or other security prior to obtaining such
injunctive relief. Injunctive relief may be sought in addition to any other
available rights or remedies at law. Employer shall additionally be entitled to
reasonable attorneys' fees incurred in enforcing the provisions of this
Agreement.

        5.   Miscellaneous.
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        5.1. This Agreement is performable in Travis County, Texas and is
governed by the laws of Texas. This Agreement supersedes all prior
understandings and agreements between the parties and contains the entire
understanding of the parties hereto with respect to the subject matter hereof;
and is binding upon the parties hereto, their successors and permitted assigns.
Employer may assign its interest in this Agreement and all covenants, conditions
and provisions hereunder shall inure to the benefit of and be enforceable by its
assignee or successor in interest. The rights and obligations of Employee under
this Agreement are personal to Employee, and no such rights, benefits or
obligations shall be subject to voluntary or involuntary alienation, assignment
or transfer.

        5.2. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that shall, in no way,
affect the validity or enforceability of any other provision of this Agreement
and that provision shall be deemed modified to the minimum extent necessary to
render it valid, legal and enforceable.

        5.3. No waiver by either the Employer or the Employee of a breach of any
provision of this Agreement shall operate as or be construed as a waiver of any
subsequent breach.
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EXECUTED by Employer and Employee to be effective for all purposes as of the
Effective Date provided above.


EMPLOYER:                           PRIME MEDICAL OPERATING, INC.


                                    By: /s/ Cheryl Williams
                                       -------------------------------------
                                    Printed Name: Cheryl Williams
                                                 ---------------------------
                                    Title:  Chief Financial Officer
                                           ---------------------------------
EMPLOYEE:

                                     /s/ William J. Walsh
                                    ----------------------------------------
                                    William J. Walsh