MEDPARTNERS MULLIKIN INC, S-4, 1996-08-30

MEDPARTNERS MULLIKIN INC
S-4, 1996-08-30
SPECIALTY OUTPATIENT FACILITIES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1996

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MEDPARTNERS/MULLIKIN, INC.
(Exact Name of Registrant as Specified in its Charter)

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

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<S> <C> <C>
DELAWARE 8099 63-1151076
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>

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3000 GALLERIA TOWER, SUITE 1000, BIRMINGHAM, ALABAMA 35244-2331
(205) 733-8996
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)

LARRY R. HOUSE
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
MEDPARTNERS/MULLIKIN, INC.
3000 GALLERIA TOWER, SUITE 1000
BIRMINGHAM, ALABAMA 35244-2331
(205) 733-8996
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)

COPIES TO:

<TABLE>
<S> <C> <C>
KENNETH R. SCHMEICHEL, ESQ. J. BROOKE JOHNSTON, JR. ESQ. ROBERT E. LEE GARNER, ESQ.
NEIL J. WHITFORD, ESQ. SENIOR VICE PRESIDENT & GENERAL F. HAMPTON MCFADDEN, JR., ESQ.
CALFEE, HALTER & GRISWOLD COUNSEL HASKELL SLAUGHTER & YOUNG, LLC
1400 MCDONALD INVESTMENT CENTER MEDPARTNERS/MULLIKIN, INC. 1200 AMSOUTH/HARBERT PLAZA
800 SUPERIOR AVENUE 3000 GALLERIA TOWER, SUITE 1000 1901 SIXTH AVENUE NORTH
CLEVELAND, OHIO 44114-2688 BIRMINGHAM, ALABAMA 35244-2331 BIRMINGHAM, ALABAMA 35203
(216) 622-8200 (205) 733-8996 (205) 251-1000
</TABLE>

---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Time of the Merger of a wholly-owned subsidiary of the Registrant, EPS
Merger Corporation (the "Subsidiary"), with Emergency Professional Services,
Inc. as described in the Prospectus-Proxy Statement included herein.

If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE

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TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEES
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<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share
(including the Common Stock Purchase
Rights)................................. 2,200,000 shares Inapplicable $44,000,000(1) $112.13(2)
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</TABLE>

(1) Estimated based on the closing price of the MedPartners/Mullikin Common
Stock on the New York Stock Exchange on August 28, 1996.
(2) Computed in accordance with Rule 457(f)(2), solely for the purpose of
calculating the registration fee, based upon the book value of the EPS
Shares ($325,177) (as defined herein) at January 1, 1996, the latest
practicable date prior to the date of filing of this Registration
Statement.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

EMERGENCY PROFESSIONAL SERVICES, INC.
7123 PEARL ROAD, SUITE 200
MIDDLEBURG HEIGHTS, OHIO 44130

To Our Shareholders:

You are cordially invited to attend the Special Meeting of Shareholders of
Emergency Professional Services, Inc. ("EPS") to be held on September 16, 1996,
at 12:30 p.m. local time, at the Holiday Inn, Cleveland -- Independence, 6001
Rockside Road, Independence, Ohio 44131 (the "Special Meeting"). You will be
asked to consider and vote upon a proposal to approve a Plan and Agreement of
Merger, dated as of July 10, 1996 (the "Plan of Merger"), by and among
MedPartners/Mullikin, Inc., a Delaware corporation ("MedPartners/Mullikin"), EPS
Merger Corporation, a Delaware corporation and wholly owned subsidiary of
MedPartners/Mullikin (the "Subsidiary") and EPS and the transactions
contemplated thereby. The Plan of Merger is included in the accompanying
Prospectus-Proxy Statement as Annex A. Pursuant to the Plan of Merger, the
Subsidiary will merge with and into EPS, with EPS as the surviving corporation
(the "Merger"). The result of the Merger will be that EPS will become a wholly
owned subsidiary of MedPartners/Mullikin, a New York Stock Exchange listed
company, and each outstanding common share of EPS, par value $.01 per share (the
"EPS Common Shares"), will be converted into the right to receive approximately
8,244 shares of MedPartners/Mullikin Common Stock, par value $.001 per share
(assuming a Base Period Trading Price of $20.37). Consummation of the Merger is
subject to certain conditions, including (i) the approval and adoption of the
Plan of Merger by holders of at least two-thirds of the outstanding EPS Common
Shares and (ii) the holders of not more than 10% of the outstanding EPS Common
Shares shall have voted against the Merger and demanded to be paid the fair cash
value of such shares in accordance with Section 1701.85 of the Ohio General
Corporation Law. The Merger is intended to be a tax-free reorganization for
federal income tax purposes. The Merger is described in greater detail in the
accompanying Prospectus-Proxy Statement.

THE BOARD OF DIRECTORS OF EPS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND
ADOPTION OF THE PLAN OF MERGER, WHICH APPROVAL AND ADOPTION WILL CONSTITUTE
APPROVAL OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.

Approval of the matters related to the Merger to be voted on at the Special
Meeting requires, among other things, a favorable vote of a majority of the
outstanding EPS Common Shares. Accordingly, failure to vote or abstentions will
have the effect of a vote against the transaction for the purpose of determining
whether approval by a majority of the outstanding EPS Common Shares has been
obtained.

WE URGE YOU TO CONSIDER CAREFULLY THESE IMPORTANT MATTERS, WHICH ARE
DESCRIBED IN THE ACCOMPANYING PROSPECTUS-PROXY STATEMENT. In order to ensure
that your vote is represented at the meeting, please indicate your choice on the
proxy form, date and sign it and return it in the enclosed envelope. A prompt
response will be appreciated.

THE BOARD OF DIRECTORS

G. Malcolm Hope, M.D.

James J. Rybak, M.D.

Philip L. Stout, M.D.

James M. Sudimack, M.D.

Michael C. Thomas, M.D.
<PAGE> 3

EMERGENCY PROFESSIONAL SERVICES, INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 16, 1996

NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of Emergency Professional Services, Inc. ("EPS") will be
convened at 12:30 p.m. local time, on September 16, 1996, at the Holiday Inn,
Cleveland -- Independence, 6001 Rockside Road, Independence, Ohio 44131, for the
following purposes:

1. To consider and act upon a proposal to approve a Plan and Agreement
of Merger, dated as of July 10, 1996 (the "Plan of Merger"), by and among
MedPartners/Mullikin, Inc., a Delaware corporation
("MedPartners/Mullikin"), EPS Merger Corporation, a Delaware corporation
and wholly owned subsidiary of MedPartners/Mullikin (the "Subsidiary"), and
EPS, and the transactions contemplated thereby. The Plan of Merger is
included in the accompanying Prospectus-Proxy Statement as Annex A.

2. In connection with the Plan of Merger and subject to the
consummation of the Merger (see below), to consider and vote upon a
proposal to amend the Emergency Professional Services, Inc. Deferred
Compensation Plan in accordance with Section 7.22 of the Plan of Merger.

3. In connection with the Plan of Merger and subject to the
consummation of the Merger (see below), to consider and vote upon a
proposal to amend the Emergency Professional Services, Inc. Stock Bonus
Plan to eliminate restrictions on shares issued pursuant to the Plan and to
terminate the Plan.

As more fully described in the Prospectus-Proxy Statement of which this
notice forms a part, pursuant to the Plan of Merger, the Subsidiary will merge
with and into EPS, with EPS as the surviving corporation (the "Merger"). The
result of the Merger will be that EPS will become a wholly owned subsidiary of
MedPartners/Mullikin and each issued and outstanding common share of EPS, par
value $.01 per share ("EPS Common Shares"), other than shares held by dissenting
shareholders, will be converted into the right to receive approximately 8,244
shares of MedPartners/Mullikin Common Stock, par value $.001 per share.
Consummation of the Merger is subject to certain conditions, including the
approval and adoption of the Plan of Merger by the holders of at least two
thirds of the outstanding EPS Common Shares.

Shareholders who do not vote to approve the Plan of Merger and who comply
with certain other requirements of law may, as an alternative to receiving the
consideration specified in the Plan of Merger, dissent from the Merger and
obtain the fair cash value of their EPS Common Shares. The full text of Section
1701.85 of the Ohio General Corporation Law, which sets forth the procedures to
be followed by shareholders who choose to dissent under applicable law, is
included as Annex C to the Prospectus-Proxy Statement and should be read
carefully in its entirety. Its is a condition to the Merger that the holders of
not more than 10% of the outstanding EPS Common Shares shall have voted against
the Merger and exercised their dissenters' rights under the Ohio General
Corporation Law.
<PAGE> 4

The Board has fixed August 29, 1996 as the record date for determining
shareholders entitled to notice of and to vote at the Special Meeting.
Accordingly, only shareholders of record at the close of business on such date
will be entitled to notice of and to vote at the Special Meeting or any
adjournments or postponements thereof.

BY ORDER OF THE BOARD OF DIRECTORS

G. Malcolm Hope, M.D.

James J. Rybak, M.D.

Philip L. Stout, M.D.

James M. Sudimack, M.D.

Michael C. Thomas, M.D.

September , 1996

AMONG OTHER THINGS, THE AFFIRMATIVE VOTE OF THE BENEFICIAL HOLDERS OF AT
LEAST A MAJORITY OF THE EPS COMMON SHARES IS REQUIRED TO APPROVE THE MERGER. IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING REGARDLESS
OF THE NUMBER OF SHARES THAT YOU OWN. EVEN IF YOU PLAN TO ATTEND THE SPECIAL
MEETING, YOU ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY
BE REVOKED BY YOU AT ANY TIME PRIOR TO THE EXERCISE THEREOF IN THE MANNER
DESCRIBED IN THE PROSPECTUS-PROXY STATEMENT.

2
<PAGE> 5
PROXY STATEMENT
OF
EMERGENCY PROFESSIONAL SERVICES, INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 16, 1996

PROSPECTUS
OF
MEDPARTNERS/MULLIKIN, INC.

THIS PROSPECTUS RELATES TO UP TO 2,200,000 SHARES OF THE COMMON STOCK, PAR
VALUE $.001 PER SHARE (THE "MEDPARTNERS/ MULLIKIN COMMON STOCK"), OF
MEDPARTNERS/MULLIKIN, INC. (TOGETHER WITH ITS SUBSIDIARIES,
"MEDPARTNERS/MULLIKIN"), ISSUABLE TO THE SHAREHOLDERS OF EMERGENCY PROFESSIONAL
SERVICES, INC., AN OHIO CORPORATION ("EPS"), UPON CONSUMMATION OF THE MERGER (AS
DEFINED BELOW) AS CONSIDERATION FOR THE MERGER (THE "MERGER CONSIDERATION").
SUCH NUMBER OF SHARES REPRESENTS THE MAXIMUM NUMBER OF SHARES THAT MAY BE
ISSUED, ASSUMING THAT THE BASE PERIOD TRADING PRICE (AS HEREIN DEFINED) OF THE
MEDPARTNERS/MULLIKIN COMMON STOCK IS 20.37. THIS PROSPECTUS ALSO SERVES AS THE
PROXY STATEMENT OF EPS FOR ITS SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
SEPTEMBER 16, 1996, AND ANY ADJOURNMENTS AND POSTPONEMENTS THEREOF (THE "SPECIAL
MEETING"). SEE "THE SPECIAL MEETING".

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

This Prospectus-Proxy Statement describes the terms of the acquisition by
MedPartners/Mullikin of EPS by means of the merger (the "Merger") of EPS Merger
Corporation, a Delaware corporation and wholly-owned subsidiary of MedPartners/
Mullikin (the "Subsidiary"), with and into EPS, with EPS being the surviving
corporation (the "Surviving Corporation"). After the Merger, the combined
operations of MedPartners/Mullikin and EPS are expected to be conducted with EPS
as a subsidiary of Team Health Group, Inc., a wholly owned subsidiary of
MedPartners/Mullikin ("Team Health"). At the Special Meeting, the shareholders
of EPS will be asked to approve and adopt the Plan of Merger (as defined below),
which approval and adoption will also constitute approval of the transactions
contemplated thereby, including the Merger. The Merger will be effected pursuant
to the terms and subject to the conditions of the Plan and Agreement of Merger,
dated as of July 10, 1996, among MedPartners/Mullikin, the Subsidiary and EPS
(the "Plan of Merger"). The Plan of Merger is attached to this Prospectus-Proxy
Statement as Annex A and is incorporated herein by reference.

Upon consummation of the Merger, all of the issued and outstanding Common
Shares of EPS, par value $.01 per share (the "EPS Common Shares" and sometimes
collectively hereinafter referred to as the "EPS Shares") (other than dissenting
shares) will be converted into the right to receive the number of shares of
MedPartners/Mullikin Common Stock equal to the Merger Consideration. The number
of shares of MedPartners/Mullikin Common Stock which shall constitute the Merger
Consideration shall be determined by dividing $44 million by the Base Period
Trading Price. EPS shareholders will receive cash (without interest) in lieu of
fractional shares of MedPartners/Mullikin Common Stock. For a more complete
description of the terms of the Merger, see "The Merger".

As used herein, "Base Period Trading Price" means the average of the last
reported sale price per share of MedPartners/ Mullikin Common Stock on each of
the 15 consecutive trading days on which such shares are actually traded on The
New York Stock Exchange, Inc. (the "NYSE") ending at the close of trading on the
second trading day immediately preceding the date of the Special Meeting. For
the 15 consecutive trading days ended August 28, 1996, the average of the last
reported sale prices of the MedPartners/Mullikin Common Stock was $20.37. At
such price, an EPS Share would be exchanged for 8,244 shares of
MedPartners/Mullikin Common Stock. THE BASE PERIOD TRADING PRICE MAY DIFFER FROM
THE ACTUAL MARKET PRICE OF THE MEDPARTNERS/MULLIKIN COMMON STOCK REPORTED ON THE
NYSE FOR THE DATE OF THE SPECIAL MEETING, THE DATE OF CONSUMMATION OF THE MERGER
OR THE DATE THAT EPS SHAREHOLDERS ACTUALLY RECEIVE THEIR SHARES OF
MEDPARTNERS/MULLIKIN COMMON STOCK AFTER THE MERGER IS COMPLETED. SINCE THE
ACTUAL NUMBER OF SHARES OF MEDPARTNERS/MULLIKIN COMMON STOCK ISSUABLE TO EPS
SHAREHOLDERS IN THE MERGER DEPENDS ON THE BASE PERIOD TRADING PRICE, THERE IS NO
GUARANTEE AS TO THE NUMBER OF SHARES OF THE MEDPARTNERS/MULLIKIN COMMON STOCK
THAT EPS SHAREHOLDERS WILL RECEIVE.

The shares of MedPartners/Mullikin Common Stock which would have been issued
with respect to the EPS Shares that are subject to Dissenting Shareholders'
Rights (as defined herein), i.e. EPS Shares held by holders as of the record
date of the Special Meeting who shall not have voted in favor of the Plan of
Merger and who properly demand to be paid the fair cash value for such shares in
accordance with Section 1701.85 of the Ohio General Corporation Law (the
"OGCL"), shall not be issued as part of the Merger Consideration. See "Rights of
Dissenting Shareholders". For a discussion of the right of MedPartners/ Mullikin
to terminate the Plan of Merger at any time prior to the Closing of the Merger
if the holders of more than 10% of the EPS Shares properly give written demand
for appraisal of the value of such shares, see "Summary of Prospectus-Proxy
Statement -- Termination" and "The Merger -- Termination".

This Prospectus-Proxy Statement and the form of Proxy are first being mailed
to shareholders of EPS on or about September , 1996.
---------------------

SEE "RISK FACTORS" AT PAGE 11 FOR A DISCUSSION OF CERTAIN RISK FACTORS RELATED
TO THE MERGER AND
TO MEDPARTNERS/MULLIKIN.

THE SECURITIES TO BE ISSUED HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS-PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------

THE DATE OF THIS PROSPECTUS-PROXY STATEMENT IS SEPTEMBER , 1996.
<PAGE> 6

AVAILABLE INFORMATION

MedPartners/Mullikin has filed a Registration Statement (the "Registration
Statement") on Form S-4 under the Securities Act of 1933, as amended (the
"Securities Act") with the Securities and Exchange Commission (the "SEC")
covering the shares of MedPartners/Mullikin Common Stock to be issued in
connection with the Merger. This Prospectus-Proxy Statement does not contain all
of the information set forth in the Registration Statement covering the
securities offered hereby which MedPartners/Mullikin has filed with the SEC,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC, and to which portions reference is hereby made for
further information with respect to MedPartners/Mullikin, EPS and the securities
offered hereby. Statements contained herein concerning certain documents are not
necessarily complete, and in each instance, reference is made to the copies of
such documents filed as exhibits to the Registration Statement. Each such
statement is qualified in its entirety by such reference.

MedPartners/Mullikin is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (SEC File No.
0-27276), and in accordance therewith files periodic reports, proxy statements
and other information with the SEC relating to its business, financial
statements and other matters. The Registration Statement, as well as such
reports, proxy statements and other information, may be inspected and copied at
prescribed rates at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. and should
be available for inspection and copying at the regional offices of the SEC
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
Citicorp Center, 500 West Madison Street, Chicago, Illinois. Copies of such
material can be obtained at prescribed rates by writing to the SEC, Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The
MedPartners/Mullikin Common Stock is listed on the NYSE. The reports, proxy
statements and certain other information can be inspected at the office of the
NYSE, 20 Broad Street, New York, New York.

PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT. When used
in this Prospectus-Proxy Statement, the words "estimate," "project," "intend,"
"expect" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated in such
forward looking statements. For a discussion of such risks, see "Risk Factors".
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Neither MedPartners/Mullikin
nor EPS undertakes any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
---------------------

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS-PROXY STATEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THE INFORMATION CONTAINED HEREIN WITH RESPECT TO
MEDPARTNERS/MULLIKIN AND ITS SUBSIDIARIES HAS BEEN SUPPLIED BY
MEDPARTNERS/MULLIKIN; THE INFORMATION CONTAINED HEREIN WITH RESPECT TO EPS HAS
BEEN SUPPLIED BY EPS. THIS PROSPECTUS-PROXY STATEMENT DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED
BY THIS PROSPECTUS-PROXY STATEMENT, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION, TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION.

i
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TABLE OF CONTENTS

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AVAILABLE INFORMATION................................................................. i
SUMMARY OF PROSPECTUS-PROXY STATEMENT................................................. 1
The Companies....................................................................... 1
The Caremark Acquisition............................................................ 2
Recent Developments................................................................. 3
Risk Factors........................................................................ 5
The Special Meeting................................................................. 5
Vote Required....................................................................... 5
The Merger.......................................................................... 5
Market and Market Prices............................................................ 8
Comparative Per Share Information................................................... 9
RISK FACTORS.......................................................................... 11
Risks Relating to the Merger; Acquisitions.......................................... 11
Risks Relating to MedPartners/Mullikin's Growth Strategy............................ 11
Risks Relating to Capital Requirements.............................................. 12
Risks Relating to Capitated Nature of Revenues; Control of Health Care Costs........ 12
Potential Reductions in Third-Party Reimbursement................................... 13
Risks Relating to Dependence on Affiliated Physicians............................... 13
Risks Relating to Exposure to Professional Liability; Liability Insurance........... 14
Risks Relating to Concentration of Customers........................................ 14
Competition......................................................................... 14
Government Regulation............................................................... 15
Risks Relating to Regulatory Requirements of Knox-Keene Act......................... 16
Risks Relating to Health Care Reform................................................ 16
Anti-Takeover Considerations........................................................ 16
Control by Certain Stockholders..................................................... 17
Possible Volatility of Stock Price.................................................. 17
Risks Relating to Federal Income Taxes.............................................. 17
Caremark Risk Factors............................................................... 17
SELECTED FINANCIAL INFORMATION -- MEDPARTNERS/MULLIKIN................................ 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--MEDPARTNERS/MULLIKIN.................................................... 22
THE SPECIAL MEETING................................................................... 29
General............................................................................. 29
Date, Place and Time................................................................ 29
Record Date, Quorum and Voting...................................................... 29
Vote Required....................................................................... 29
Voting and Revocation of Proxies.................................................... 29
Solicitation of Proxies............................................................. 30
THE MERGER............................................................................ 31
Terms of the Merger................................................................. 31
Background of the Merger............................................................ 31
Recommendation of the EPS Board of Directors........................................ 33
Opinion of EPS's Financial Advisor.................................................. 34
Engagement of CMH................................................................... 37
Effective Time of the Merger........................................................ 37
Exchange of Certificates............................................................ 37
Conditions to the Merger............................................................ 38
</TABLE>

ii
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<TABLE>
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Representations and Covenants....................................................... 40
Regulatory Approvals................................................................ 40
Business Pending the Merger......................................................... 40
Waiver and Amendment................................................................ 41
Termination......................................................................... 41
New York Stock Exchange Listing..................................................... 42
Resale of MedPartners/Mullikin Common Stock by Affiliates........................... 42
Additional Interests of Certain Persons in the Merger............................... 43
Accounting Treatment................................................................ 43
Federal Income Tax Consequences..................................................... 44
No Solicitation of Transactions..................................................... 44
Expenses............................................................................ 45
Indemnification..................................................................... 45
RIGHTS OF DISSENTING SHAREHOLDERS..................................................... 45
OPERATIONS AND MANAGEMENT OF MEDPARTNERS/MULLIKIN AFTER THE MERGER.................... 47
Operations.......................................................................... 47
Management.......................................................................... 47
BUSINESS OF MEDPARTNERS/MULLIKIN...................................................... 48
General............................................................................. 48
The Caremark Acquisition............................................................ 48
Recent Developments................................................................. 49
Industry............................................................................ 51
Strategy............................................................................ 52
Recent Major Acquisitions........................................................... 53
Development and Operations.......................................................... 53
Information Systems................................................................. 56
Competition......................................................................... 57
Government Regulation............................................................... 57
Legal Proceedings................................................................... 58
Employees........................................................................... 59
Corporate Liability and Insurance................................................... 59
Properties.......................................................................... 59
MANAGEMENT OF MEDPARTNERS/MULLIKIN.................................................... 60
Directors and Executive Officers.................................................... 60
Classified Board of Directors....................................................... 63
Committees of the Board of Directors................................................ 63
Executive Officer Compensation...................................................... 64
Director Compensation............................................................... 66
Compensation Committee Interlocks and Insider Participation......................... 66
Non-Competition and Severance Agreements............................................ 67
Stock Option Plans.................................................................. 67
401(k) Plans........................................................................ 68
CERTAIN TRANSACTIONS--MEDPARTNERS/MULLIKIN............................................ 69
MME Acquisition Agreements.......................................................... 69
Financings.......................................................................... 70
PRINCIPAL STOCKHOLDERS OF MEDPARTNERS/MULLIKIN........................................ 71
SELECTED FINANCIAL DATA -- EMERGENCY PROFESSIONAL SERVICES, INC....................... 73
</TABLE>

iii
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<TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF EMERGENCY PROFESSIONAL SERVICES, INC............................................. 74
Overview............................................................................ 74
Results of Operations............................................................... 74
Liquidity and Capital Resources..................................................... 75
BUSINESS OF EPS....................................................................... 77
Emergency Professional Services, Inc................................................ 77
Healthcare Market Dynamics.......................................................... 77
Governmental Regulation............................................................. 77
Litigation.......................................................................... 78
Risk Management; Malpractice Insurance.............................................. 78
Corporate Governance................................................................ 78
Properties.......................................................................... 78
No Public Market for EPS Stock...................................................... 79
Dividend History.................................................................... 79
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- EPS................................................................... 79
PRO FORMA CONDENSED FINANCIAL INFORMATION (UNAUDITED)................................. 80
DESCRIPTION OF CAPITAL STOCK OF MEDPARTNERS/MULLIKIN.................................. 90
Authorized Capital Stock............................................................ 90
MedPartners/Mullikin Common Stock................................................... 90
MedPartners/Mullikin Preferred Stock................................................ 90
Certain Provisions of the MedPartners/Mullikin Certificate and the DGCL............. 90
MedPartners/Mullikin Stockholder Rights Plan........................................ 92
Limitations on Liability of Officers and Directors.................................. 94
Registration Rights................................................................. 94
Transfer Agent and Registrar........................................................ 95
COMPARISON OF RIGHTS OF EPS AND MEDPARTNERS/MULLIKIN STOCKHOLDERS..................... 96
Classes and Series of Capital Stock................................................. 96
Size and Election of the Board of Directors......................................... 96
Removal of Directors................................................................ 97
Conversion and Dissolution.......................................................... 97
Amendment or Repeal of the Certificate of Incorporation and By-laws................. 97
Special Meetings of Stockholders.................................................... 98
Liability of Directors.............................................................. 98
Stockholder Rights Plan............................................................. 99
Advance Notice Provisions for Stockholder Proposals and Stockholder Nominations of
Directors........................................................................ 99
Action by Written Consent........................................................... 100
Indemnification of Directors and Officers........................................... 100
EXPERTS............................................................................... 101
LEGAL MATTERS......................................................................... 101
ADDITIONAL INFORMATION................................................................ 101
Other Business...................................................................... 101
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
ANNEXES:
A. Plan and Agreement of Merger, dated as of July 10, 1996........................... A-1
B. Opinion of CMH & Co., Incorporated................................................ B-1
C. Dissenters' Rights -- Section 1701.85 of the OGCL................................. C-1
</TABLE>

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SUMMARY OF PROSPECTUS-PROXY STATEMENT

The following is a summary of certain information contained elsewhere in
this Prospectus-Proxy Statement. Certain capitalized terms used in this Summary
are defined elsewhere in this Prospectus-Proxy Statement. Reference is made to,
and this Summary is qualified in its entirety by, the more detailed information
contained in this Prospectus-Proxy Statement and in the Annexes hereto.

THE COMPANIES

MedPartners/Mullikin. MedPartners/Mullikin, Inc. is a leading physician
practice management ("PPM") company that develops, consolidates and manages
integrated health care delivery systems. Through its network of affiliated group
and independent practice association ("IPA") physicians, MedPartners/ Mullikin
provides primary and specialty health care services to prepaid managed care
enrollees and fee-for-service patients. MedPartners/Mullikin enhances clinic
operations by centralizing administrative functions and introducing management
tools, such as clinical guidelines, utilization review and outcomes measurement.
At June 30, 1996, MedPartners/Mullikin operated in 23 states and was affiliated
with 5,777 physicians, including 1,461 in group practices, 3,206 through IPA
relationships and 736 hospital-based physicians. At June 30, 1996
MedPartners/Mullikin physicians provided prepaid health care to over 798,000
enrollees through 45 HMO (as defined herein) relationships.

MedPartners/Mullikin offers medical group practices and independent
physicians a range of affiliation models. These affiliations are carried out by
the acquisition of physician practice management entities or practice assets,
either for cash or through an equity exchange, or by affiliation on a
contractual basis. In all instances, MedPartners/Mullikin enters into long-term
practice management agreements with the affiliated physicians that provide for
the management of the practices by MedPartners/Mullikin while at the same time
allowing the physicians to maintain their clinical independence.

MedPartners/Mullikin's revenue is derived from the provision, through its
affiliated physicians, of fee-for-service medical services and from contracts
with health maintenance organizations and other third-party payors which
compensate MedPartners/Mullikin and its affiliated physicians on a prepaid basis
(collectively, "HMOs"). In the prepaid arrangements, MedPartners/Mullikin,
through its affiliated physicians, typically is paid by the HMO a fixed amount
per member ("enrollee") per month ("professional capitation") or a percentage of
the premium per member per month ("percent of premium") paid by employer groups
and other purchasers of health coverage to the HMOs. In return,
MedPartners/Mullikin, through its affiliated physicians, is responsible for
substantially all of the medical services required by enrollees. In many
instances, MedPartners/Mullikin and its affiliated physicians accept financial
responsibility for hospital and ancillary health care services in return for
payment from HMOs on a capitated or percent of premium basis ("institutional
capitation"). In exchange for these payments (collectively, "global
capitation"), MedPartners/ Mullikin, through its affiliated physicians, provides
the majority of covered health care services to enrollees and contracts with
hospitals and other health care providers for the balance of the covered
services.

MedPartners/Mullikin's strategy is to develop locally prominent, integrated
health care delivery networks that provide high quality, cost-effective health
care in selected geographic markets. MedPartners/Mullikin implements this
strategy through growth in its existing markets, expansion into new markets
through acquisitions and affiliations, creation of strategic alliances with
hospital partners, HMOs and other third-party payors in its market areas, use of
sophisticated information systems and increasing the operational efficiency of,
and reducing costs associated with, operating MedPartners/Mullikin's network.

At June 30, 1996, MedPartners/Mullikin had consolidated assets of
approximately $618 million and consolidated stockholders' equity of
approximately $415 million, and employed 9,433 persons.

MedPartners/Mullikin was incorporated under the laws of Delaware in August
1995 to be the surviving corporation in the combination of the businesses of
MedPartners, Inc., incorporated under the laws of Delaware in 1993
("MedPartners"), and Mullikin Medical Enterprises, L.P. ("MME"), a California
limited partnership which, directly or through its predecessor entities, had
operated since 1957. See "Business of MedPartners/Mullikin -- Recent Major
Acquisitions". As used herein, the term "MedPartners/Mullikin"

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<PAGE> 11

refers to MedPartners/Mullikin, Inc. and its predecessors, MedPartners and MME,
and their respective subsidiaries and affiliates, unless the context otherwise
requires. The executive offices of MedPartners/ Mullikin are located at 3000
Galleria Tower, Suite 1000, Birmingham, Alabama 35244, and its telephone number
is (205) 733-8996. See "Business of MedPartners/Mullikin".

Team Health. Team Health is a PPM company primarily engaged in the
management of physicians and other health care professionals involved in the
delivery of emergency, radiology and teleradiology services and hospital-based
primary care. The operations of Team Health are conducted through its
subsidiaries and affiliates, with Team Health providing corporate control and
centralized management over all operations. Team Health's principal executive
offices are located at 1900 Winston Road, Suite 300, Knoxville, Tennessee.

EPS. EPS is an Ohio corporation that was organized in 1978 under the name
Emergency Professional Services of Ohio, Inc. and subsequently changed its name
in 1990 to Emergency Professional Services, Inc. Its sole business is the
management of a physician practice group. EPS employs 80 full-time employee
physicians and contracts with 122 independent contracting physicians at 16
hospital sites and six urgent care centers in eight counties in northern Ohio
and western Pennsylvania. EPS also employs 20 physician assistants, 41 billing
and operations personnel and 7 administrative and finance personnel. During the
1995 calendar year, EPS physicians treated approximately 400,000 patients. The
geographic spread of the 16 hospitals and six urgent care centers provides EPS
with a primary patient service area population in the eight counties served of
approximately 2,400,000 people. The principal executive offices of EPS are
located at 7123 Pearl Road, Suite 200, Middleburg Heights, Ohio 44130, and the
telephone number of EPS is (216) 842-7990.

EPS Merger Corporation. The Subsidiary is a direct, wholly-owned
subsidiary of MedPartners/ Mullikin and has not engaged in any business activity
unrelated to the Merger. The principal executive offices of the Subsidiary are
located at 3000 Galleria Tower, Suite 1000, Birmingham, Alabama 35244 and its
telephone number is (205) 733-8996.

THE CAREMARK ACQUISITION

On May 13, 1996, MedPartners/Mullikin agreed to acquire Caremark
International Inc. ("Caremark") pursuant to a Plan and Agreement of Merger by
and among MedPartners/Mullikin, PPM Merger Corporation, a wholly-owned
subsidiary of MedPartners/Mullikin and Caremark. Under the Plan of Merger, PPM
Merger Corporation will be merged with and into Caremark, with Caremark to
continue as the surviving corporation as a wholly-owned subsidiary of
MedPartners/Mullikin (the "Caremark Acquisition"). After the consummation of the
Caremark Acquisition, each Caremark stockholder will receive 1.21 shares of
MedPartners/Mullikin Common Stock in exchange for each share of Caremark Common
Stock owned by such stockholder.

Consummation of this acquisition is subject to a number of conditions,
usual in a transaction of this type, including: that the stockholders of
MedPartners/Mullikin and Caremark approve the transaction; that the transaction
qualify for pooling of interests accounting treatment; and that the transaction
qualify as a tax free reorganization. There is no guarantee that such conditions
will be met. If such conditions are not met, the Caremark Acquisition may not be
consummated. After consummation of the Caremark Acquisition,
MedPartners/Mullikin will operate under the name "MedPartners, Inc." The
stockholders' meetings for each of MedPartners/Mullikin and Caremark are
scheduled to occur on September 5, 1996. The merger will close immediately
thereafter subject to the satisfaction of the closing conditions. See
"Businesses of MedPartners/ Mullikin -- Caremark Acquisition"; "Pro Forma
Condensed Financial Information"; and the "Consolidated Financial Statements"
beginning at Page F-1.

Caremark is a leading provider of health care services through its PPM,
pharmaceutical services, disease management and international business. In its
PPM business, Caremark provides PPM services to approximately 1,000 affiliated
physicians delivering comprehensive care to over one million people. Caremark
also operates one of the largest independent prescription drug benefit
management ("PBM") businesses in the United States with four mail service
pharmacies. Caremark's disease management business provides services and
therapies to patients with certain chronic conditions, primarily hemophilia and
growth disorders.

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<PAGE> 12

Caremark's international business provides health care services in a number of
locations outside the United States which have different regulatory environments
and payor systems.

Initiated in 1992, Caremark's PPM business provides comprehensive
management services to large multi-speciality physician practices in major
metropolitan areas. Caremark is a leader in providing capitated health care
arrangements to payors. As of June 30, 1996, Caremark provided management
services to approximately 1,000 affiliated physicians and 210 other licensed
health care professionals who deliver comprehensive health care services to over
one million people. As of June 30, 1996, Caremark had affiliated with large,
established multi-specialty physician practices in six major metropolitan
markets, including Friendly Hills HealthCare Network (that includes CIGNA
Medical Group) in Southern California, Kelsey-Seybold Clinic in Houston, North
Suburban and Glen Ellyn Clinics in Chicago, Diagnostic Clinic in Tampa/ St.
Petersburg, Oklahoma City Clinic and Atlanta Medical Clinic.

Caremark's pharmaceutical services business manages outpatient prescription
drug benefit programs for more than 1,200 clients, including corporations,
insurance companies, unions, government employee groups and managed care
organizations throughout the United States. Caremark's prescription benefit
management business is one of the largest independent PBMs, dispensing 42,000
prescriptions daily from four mail service pharmacies. Caremark also manages
patients' immediate prescription needs through a network of approximately 53,000
pharmacies.

Caremark's disease management business designs and directs comprehensive
programs, including drug therapies, to meet the health care needs of individuals
with chronic diseases or conditions. Caremark currently provides therapies and
services for individuals suffering from hemophilia, growth disorders, immune
deficiencies, genetic emphysema, cystic fibrosis and multiple sclerosis.
Caremark continually develops additional programs to address other chronic
diseases and conditions.

Caremark's international business is developing and implementing new
approaches to health care delivery to provide services in different regulatory
environments and payor systems in six countries.

Caremark was formed as a wholly-owned subsidiary of Baxter International
Inc. ("Baxter") in August 1992, and on November 30, 1992, Baxter distributed to
the holders of Baxter common stock all of the outstanding shares of Caremark
Common Stock. As used herein, the term "Caremark" refers to Caremark and its
predecessors, and their respective subsidiaries and affiliates, unless the
context otherwise requires. The principal executive offices of Caremark are
located at 2215 Sanders Road, Northbrook, Illinois 60062, and its telephone
number is (847) 559-4700.

At June 30, 1996, Caremark had consolidated assets of approximately $1.4
billion and stockholders' equity of approximately $388.0 million, and employed
approximately 11,600 persons.

RECENT DEVELOPMENTS

On March 19, 1996, MedPartners/Mullikin completed a public offering of a
total of 8,250,000 shares of MedPartners/Mullikin Common Stock, 6,632,800 of
which were sold for the account of MedPartners/ Mullikin and 1,617,200 of which
were sold for the account of certain selling stockholders of MedPartners/
Mullikin. The public offering resulted in net proceeds to MedPartners/Mullikin
of approximately $194 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations --
MedPartners/Mullikin -- Liquidity and Capital Resources" and "Business of
MedPartners/Mullikin -- Recent Developments".

On March 11, 1996, MedPartners/Mullikin entered into a Plan and Agreement
of Merger to acquire CHS Management, Inc. ("CHS"), Los Angeles, California, in
exchange for shares of MedPartners/Mullikin Common Stock. The transaction is to
be a tax-free reorganization accounted for as a pooling of interests. CHS
primarily engages in the organization and management of physician practices
which contract with HMOs to provide physician and related healthcare services to
enrollees. CHS currently provides management services to primary care medical
groups and an IPA. Concurrent with, and as a condition to, the consummation of
the CHS merger, MedPartners/Mullikin or their subsidiaries will acquire the
assets of New Management, a California general partnership ("New Management")
owned by the beneficial owners of 50% of CHS. CHS

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<PAGE> 13

provides certain financial services to New Management, which is engaged in the
business of providing certain management and administrative services to West
Hills Hospital. MedPartners/Mullikin has filed a Registration Statement on Form
S-4 with the SEC with respect to the shares of MedPartners/Mullikin Common Stock
to be issued to the stockholders of CHS and the partners of New Management in
connection with such acquisition. Consummation of this acquisition is subject to
a number of conditions, usual in a transaction of this type, including: that the
stockholders of CHS and the partners of New Management approve the transaction;
that the transaction qualify for pooling of interests accounting treatment; and
that the transaction qualify as a tax free reorganization. There is no guarantee
that such conditions will be met. If such conditions are not met, the
acquisition of CHS and New Management may not be consummated. The partners of
New Management approved the acquisition of New Management on August 22, 1996.
The meeting of CHS stockholders is scheduled to occur on August 30, 1996. The
acquisition of New Management and the CHS merger will close immediately
thereafter, subject to the vote of the CHS stockholders. See "Business of
MedPartners/Mullikin -- Recent Developments", "Pro Forma Condensed Financial
Information" and the Financial Statements beginning at page F-1.

On June 28, 1996, MedPartners/Mullikin entered into a Plan and Agreement of
Merger to acquire Summit Medical Group, P.A. ("Summit"), Summit, New Jersey, in
exchange for shares of MedPartners/ Mullikin Common Stock. The transaction is to
be a tax free reorganization accounted for as a pooling of interests. Summit is
a multi-specialty group of approximately 70 physicians which serves the northern
area in New Jersey. Concurrently with, and as a condition to, the consummation
of the acquisition of Summit, MedPartners/Mullikin or its subsidiaries will
acquire the assets of Medical Realty Associates, a New Jersey general
partnership ("MRA"), which owns certain real estate used in the operations of
Summit. MRA is owned by 54 of the 59 shareholders of Summit.
MedPartners/Mullikin intends to file a Registration Statement with the SEC with
respect to the shares of MedPartners/Mullikin Common Stock to be issued to the
shareholders of Summit and the partners of MRA in connection with such
acquisition. Consummation of this acquisition is subject to a number of
conditions, including that the shareholders of Summit and the partners of MRA
approve the transaction, that the transaction qualify as a tax free
reorganization and other conditions usual in transactions of this type. In
addition, the closing of the transaction is conditioned upon the receipt by the
parties of a letter from Ernst & Young LLP, MedPartners/Mullikin's independent
auditors, that the transaction will qualify for pooling of interests accounting
treatment. See "Notes To Pro Forma Condensed Financial Information". There is no
guarantee that such conditions will be met. If such conditions
are not met, the acquisition of Summit and MRA may not be consummated. See
"Business of MedPartners/ Mullikin -- Recent Developments".

On July 3, 1996, MedPartners/Mullikin entered into a Plan and Agreement of
Merger to acquire Cardinal Healthcare, P.A., ("Cardinal") Raleigh, North
Carolina in exchange for shares of MedPartners/ Mullikin Common Stock. The
transaction is to be a tax-free reorganization accounted for as a pooling of
interests. Cardinal is a multi-specialty group of 75 physicians which serves the
Triangle area in Raleigh-Durham and includes Research Triangle Park. In addition
to the main campus, Cardinal provides services at 16 clinical facilities and 15
satellite locations. Cardinal is also affiliated with almost 500 physicians
through three IPAs, including Cardinal IPA, Piedmont Physicians Alliance, Inc.
and Eastern Carolina Primary Care Alliance, Inc. The three IPAs, which are in
the early stages of development, already have contracts with five managed care
companies providing service to almost 6,000 enrollees. MedPartners/Mullikin
intends to file a Registration Statement with the SEC with respect to the shares
of MedPartners/Mullikin Common Stock to be issued to the shareholders of
Cardinal in connection with such acquisition. Consummation of this acquisition
is subject to a number of conditions, including that the shareholders of
Cardinal approve the transaction, that the transaction qualify as a tax free
reorganization and other conditions usual in transactions of this type. In
addition, the closing of the transaction is conditioned upon the receipt by the
parties of a letter from Ernst & Young LLP, MedPartners/Mullikin's independent
auditors, that the transaction will qualify for pooling of interests accounting
treatment. See "Notes To Pro Forma Condensed Financial Information". There is no
guarantee that such conditions will be met. If such conditions are not met, the
acquisition of Cardinal may not be consummated. See "Business of
MedPartners/Mullikin -- Recent Developments".

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<PAGE> 14

RISK FACTORS

Certain factors to be considered in connection with an investment in
MedPartners/Mullikin Common Stock and approval of the Merger are set forth under
"Risk Factors". These risk factors include risks associated with the Merger and
MedPartners/Mullikin's growth strategy in general, and risks associated with the
businesses of MedPartners/Mullikin and EPS, including: capital requirements; the
capitated nature of revenues; control of health care costs; reduction in third
party reimbursement; dependence on affiliated physicians; federal income taxes;
certain Caremark legal matters; professional liability concerns; concentration
of customers; competition; government regulation; pharmacy licensing and
operations; health care reform; and possible volatility of
MedPartners/Mullikin's stock price. For a complete discussion of the risk
factors see "Risk Factors".

THE SPECIAL MEETING

At the Special Meeting and any adjournment or postponement thereof, the
shareholders of EPS will be asked to consider and vote upon the proposal to
approve and adopt the Plan of Merger and the transactions contemplated thereby.
The Special Meeting is to be held on September 16, 1996, at 12:30 p.m. local
time at the Holiday Inn, Cleveland-Independence, 6001 Rockside Road,
Independence, Ohio 44131. Only shareholders of record at the close of business
on the Record Date will be entitled to notice of and to vote at the Special
Meeting. The enclosed proxy card, and the accompanying Notice of Special Meeting
of Shareholders and this Prospectus-Proxy Statement are being first mailed to
shareholders of EPS on or about , 1996.

For additional information relating to the Special Meeting, see "The
Special Meeting".

VOTE REQUIRED

Approval and adoption of the Plan of Merger by the shareholders of EPS
requires the affirmative vote of two-thirds of the issued and outstanding EPS
Common Shares. As a result, abstentions will be the equivalent of votes against
the Plan of Merger. Accordingly, approval and adoption of the Plan of Merger at
the Special Meeting will require the affirmative vote of the holders of the EPS
Common Shares entitled to cast a minimum of 175 votes.

See "The Special Meeting -- Vote Required", "The Merger -- Conditions to
the Merger" and "-- Additional Interests of Certain Persons in the Merger".

THE MERGER

Terms of the Merger. Upon consummation of the Merger, all of the EPS Shares
(other than dissenting shares) will be converted into the right to receive the
number of shares of MedPartners/Mullikin Common Stock equal to the Merger
Consideration. The number of shares of MedPartners/Mullikin Common Stock which
shall constitute the Merger Consideration shall be determined by dividing $44
million (the "Merger Price") by the Base Period Trading Price. For the 15
consecutive trading days ended August 28, 1996, the average of the last reported
sale prices of the MedPartners/Mullikin Common Stock was $20.37. At such price,
an EPS Share would be exchanged for 8,244 shares of MedPartners/Mullikin Common
Stock. THE BASE PERIOD TRADING PRICE MAY DIFFER FROM THE ACTUAL MARKET PRICE OF
THE MEDPARTNERS/MULLIKIN COMMON STOCK REPORTED ON THE NYSE FOR THE DATE OF THE
SPECIAL MEETING, THE DATE OF CONSUMMATION OF THE MERGER OR THE DATE THAT EPS
SHAREHOLDERS ACTUALLY RECEIVE THEIR SHARES OF MEDPARTNERS/MULLIKIN COMMON STOCK
AFTER THE MERGER IS COMPLETED. SINCE THE ACTUAL NUMBER OF SHARES OF
MEDPARTNERS/MULLIKIN COMMON STOCK ISSUABLE TO EPS SHAREHOLDERS IN THE MERGER
DEPENDS ON THE BASE PERIOD TRADING PRICE, THERE IS NO GUARANTEE AS TO THE NUMBER
OF SHARES OF THE MEDPARTNERS/MULLIKIN COMMON STOCK THAT EPS SHAREHOLDERS WILL
RECEIVE.

As used herein, the "Base Period Trading Price" shall mean the average of
the last reported sale price for the shares of MedPartners/Mullikin Common Stock
for the 15 consecutive trading days on which such shares are actually traded on
the NYSE ending at the close of trading on the second trading day immediately
preceding the Special Meeting.

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<PAGE> 15

Mullikin Common Stock, the Base Period Trading Price and the estimated number of
shares of MedPartners/ Mullikin Common Stock that constitute the Merger
Consideration by calling toll free at 1-800-563-7126.

After consummation of the Merger, EPS will operate as a subsidiary of Team
Health under the name "Emergency Professional Services, Inc." No material
disposition or restructuring of either MedPartners/ Mullikin, Team Health or EPS
or any material part thereof is contemplated as a result of the Merger. See
"Operations and Management of MedPartners/Mullikin after the Merger".

Recommendation of the Board of Directors of EPS. The Board of Directors of EPS
has approved the Plan of Merger, and recommends a vote FOR the Plan of Merger.
EPS's Board of Directors believes the Plan of Merger is fair to and in the best
interests of the shareholders of EPS.

The Board of Directors of EPS believes that the Merger is desirable for the
following reasons, among others:

(i) the potential ability of the combined company to leverage EPS's
market leadership in northern Ohio and western Pennsylvania with the
managed care expertise of MedPartners/Mullikin;

(ii) the combined company's potential ability to improve its cost
effectiveness as a result of the complementary strengths of EPS and
MedPartners/Mullikin; and

(iii) other potential synergies that may be obtained from combining
the operations of EPS and MedPartners/Mullikin.

On July 25, 1996, the MedPartners/Mullikin Board of Directors approved the
Merger. The MedPartners/Mullikin Board of Directors believes that the Merger is
desirable because the Merger will allow MedPartners/Mullikin to expand and
strengthen its presence in the Ohio market. See "The Merger -- Recommendation of
the EPS's Board of Directors" and "The Merger -- Opinion of EPS's Financial
Advisor".

Effective Time of the Merger. The Merger will become effective upon the filing
of the Certificate of Merger by the Subsidiary and EPS under the DGCL and the
OGCL, or at such later time as may be specified in such Certificates of Merger.
The Plan of Merger requires that these filings be made, subject to satisfaction
of the separate conditions to the obligations of each party to consummate the
Merger, as soon as practicable on or after the Closing Date, or at such other
time as may be agreed by MedPartners/Mullikin and EPS. It is presently
anticipated that such filings will be made as soon as practicable after the
Special Meeting on September 16, 1996, and that the Effective Time will occur
upon such filing, although there can be no assurance as to whether or when the
Merger will occur. See "The Merger -- Effective Time of the Merger".

Opinion of EPS's Financial Advisor. Carleton, McCreary, Holmes & Co. ("CMH") has
acted as financial advisor to EPS in connection with the Merger. CMH assisted
the EPS Board in its negotiation of the terms of the Plan of Merger and its
examination of the fairness to the shareholders of EPS from a financial point of
view of the consideration the shareholders are to receive in connection with the
Merger. CMH has delivered a written option to EPS stating that, as of the date
thereof, the consideration to be received pursuant to the terms and conditions
of the Plan of Merger was fair, from a financial point of view, to the
shareholders of EPS. CMH's fairness opinion is attached hereto as Annex B and
should be read carefully in its entirety.

In the ordinary course of business, CMH and its affiliates may actively
trade the securities of MedPartners/Mullikin for its own account or for the
accounts of their customers and, accordingly, may at any time hold a long or
short position in such securities. See "The Merger -- Opinion of EPS's Financial
Advisor".

Exchange of Certificates. As soon as reasonably practicable on or after the
Effective Time, transmittal materials will be provided to each holder of record
of EPS Shares for use in exchanging such holder's stock certificates for
certificates evidencing shares of MedPartners/Mullikin Common Stock and for
receiving cash in lieu of fractional shares and any dividends or other
distributions to which such holder is entitled as a result of the Merger.
Notwithstanding the foregoing, to the extent practicable, arrangements will be
made to effect

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<PAGE> 16

the exchange of certificates directly between MedPartners/Mullikin and the
holders of shares of EPS Shares on the Closing Date. See "The Merger -- Exchange
of Certificates".

Conditions to the Merger. The obligation of each of MedPartners/Mullikin, the
Subsidiary and EPS to consummate the Merger is subject to certain conditions
typical in transactions of this type. See "The Merger -- Conditions to the
Merger".

Representations and Covenants. Under the Plan of Merger, MedPartners/Mullikin
and EPS have each made a number of representations regarding the organization
and capital structures of the respective companies and their affiliates, their
operations, financial condition and other matters, including their authority to
enter into the Plan of Merger and to consummate the Merger. Under the Plan of
Merger, MedPartners/ Mullikin and EPS have each agreed not to encourage,
solicit, participate in or initiate discussions or negotiations with or provide
any information to any third party concerning any merger, sale of assets, sale
of or tender offer for its shares or similar transactions, except that each of
the companies may furnish information to and negotiate with an unsolicited third
party consistent with the good faith exercise by the Board of Directors of its
fiduciary obligations. See "The Merger -- Representations and Covenants".

Regulatory Approvals. No federal or state regulatory requirements must be
complied with or approvals obtained in connection with the Merger. See "The
Merger -- Regulatory Approvals".

Business Pending the Merger. The Plan of Merger provides that, until the
Effective Time, except as otherwise provided in the Plan of Merger, EPS will
conduct its business in the ordinary course and will use all reasonable best
efforts to preserve intact its present business organization, maintain its
rights and franchises and preserve its relationships with customers, suppliers
and others having business dealings with EPS. EPS has also agreed to abide by
certain restrictions and limitations with respect to its business (as set forth
in the Plan of Merger) prior to the Effective Time and to cooperate on certain
matters relating to the Merger. See "The Merger -- Business Pending the Merger".

Waiver and Amendment. The Plan of Merger provides that, at any time prior to
the Effective Time, MedPartners/Mullikin and the Subsidiary, on the one hand,
and EPS, on the other hand, may, under certain circumstances, waive compliance
with covenants or conditions for the benefit of that company or amend or
otherwise change the Plan of Merger, except that, after approval by the
shareholders of EPS, no amendment may be made that, under the OGCL, would
require further shareholder approval, without such further approval. See "The
Merger -- Waiver and Amendment".

Termination. The Plan of Merger may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the Plan of
Merger by the shareholders of EPS, under certain circumstances which are set
forth under "The Merger -- Termination".

Additional Interests of Certain Persons in the Merger. In considering the
recommendations of the Board of Directors of EPS with respect to the Plan of
Merger and the transactions contemplated thereby, EPS shareholders should be
aware that certain members of the Board of Directors and management of EPS have
certain interests in the Merger that are in addition to the interests of EPS
shareholders generally. Two members of the Board of Directors will receive lump
sum payments in consideration of their surrender of the right to receive
finders' fees, and one member of the Board of Directors will enter into an
employment agreement with Team Health.

Assuming a Base Period Trading Price of $20.37, all of the EPS Shares would
be converted into an aggregate of 2,160,039 shares of MedPartners/Mullikin
Common Stock in the Merger. If the Merger were consummated, the directors and
executive officers of EPS would receive a total of 19.85% of the
MedPartners/Mullikin Common Stock issued to EPS shareholders in the Mergers
assuming there are no dissenting shareholders. These individuals have
unanimously indicated their intentions to vote the EPS Shares beneficially owned
by them FOR the Plan of Merger. See "Security Ownership of Certain Beneficial
Owners and Management -- EPS".

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<PAGE> 17

Accounting Treatment. It is intended that the Merger will be accounted for as a
pooling of interests under GAAP. See "The Merger -- Accounting Treatment" and
"Pro Forma Condensed Financial Information".

Federal Income Tax Consequences. MedPartners/Mullikin has received an opinion
from Haskell Slaughter & Young, LLC, its counsel, and EPS has received an
opinion from Calfee, Halter & Griswold, its counsel, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code which opinions are based upon the facts that are described herein, and
upon certain customary representations to be provided by MedPartners/Mullikin,
the Subsidiary, EPS and the EPS shareholders. Based on the foregoing, the
opinions of counsel state, among other matters, that: (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and MedPartners/Mullikin, the
Subsidiary and EPS will each be a party to the reorganization within the meaning
of Section 368(b) of the Code; (ii) no gain or loss will be recognized by
MedPartners/ Mullikin, EPS or the Subsidiary as a result of the Merger; (iii) no
gain or loss will be recognized by an EPS shareholder who receives solely shares
of MedPartners/Mullikin Common Stock in exchange for EPS Shares; (iv) the
receipt of cash in lieu of fractional shares of MedPartners/Mullikin Common
Stock will be treated as if the fractional shares were distributed as part of
the exchange and then were redeemed by MedPartners/ Mullikin and these payments
will be treated as having been received as distributions in full payment in
exchange for the stock redeemed as provided in Section 302(a) of the Code; (v)
the tax basis of the shares of MedPartners/Mullikin Common Stock received by an
EPS shareholder will be equal to the tax basis of the EPS Shares exchanged
therefor, excluding any basis allocable to a fractional share of
MedPartners/Mullikin Common Stock for which cash is received; and (vi) the
holding period of the shares of MedPartners/Mullikin Common Stock received by an
EPS shareholder will include the holding period or periods of the EPS Shares
exchanged therefor, provided that the EPS Shares are held as a capital asset
within the meaning of Section 1221 of the Code at the Effective Time. EACH
HOLDER OF EPS SHARES IS URGED TO CONSULT HIS OR HER OWN PERSONAL TAX AND
FINANCIAL ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER,
AS WELL AS ANY APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES, BASED
UPON SUCH HOLDER'S OWN PARTICULAR FACTS AND CIRCUMSTANCES. See "The
Merger -- Federal Income Tax Consequences".

Resale Restrictions. All shares of MedPartners/Mullikin Common Stock received
by EPS shareholders in the Merger will be freely transferable, except that
shares of MedPartners/Mullikin Common Stock received by persons who are deemed
to be "affiliates" (as such term is defined under the Securities Act) of EPS at
the time of the Special Meeting may be resold by them only in certain permitted
circumstances under the Securities Act, other applicable securities laws and
rules related to pooling-of-interests accounting treatment. See "The
Merger -- Resale of MedPartners/Mullikin Common Stock by Affiliates".

Rights of Dissenting Shareholders. Holders of EPS Shares at the time of the
vote of the shareholders of EPS to approve the Plan of Merger who shall not have
voted in favor of the Plan of Merger and who properly demand to be paid the fair
cash value for such EPS Shares in accordance with Section 1701.85 of the OGCL
will be entitled to receive the fair cash value for such EPS Shares in
accordance with such Section 1701.85 of the OGCL. For discussion of the right of
MedPartners/Mullikin to terminate the Plan of Merger at any time prior to the
Closing Date if holders of more than 10% of the EPS Shares properly give written
demand for appraisal of the value of such EPS Shares, see "Rights of Dissenting
Stockholders" and "The Merger -- Termination".

NYSE Listing. A Subsequent Listing Application will be filed with the NYSE to
list the shares of MedPartners/Mullikin to be issued to the EPS shareholders.
Although no assurance can be given that the NYSE will accept such shares of
MedPartners/Mullikin Common Stock for listing, MedPartners/Mullikin anticipates
that these shares will qualify for listing. See "The Merger -- NYSE Listing".

MARKET AND MARKET PRICES

Prior to February 21, 1995, the effective date of the initial public
offering of MedPartners, there was no public market for MedPartners' common
stock. MedPartners' and then MedPartners/Mullikin's Common Stock was traded on
the Nasdaq National Market under the symbol "MPTR" from February 21, 1995 until
February 21, 1996. On February 22, 1996, the MedPartners/Mullikin Common Stock
was listed on the NYSE under the symbol "MDM".

8
<PAGE> 18

The following table sets forth for the quarterly periods indicated the high
and low reported bid prices for the MedPartners/Mullikin Common Stock through
February 21, 1996, as reported on the Nasdaq National Market. After February 21,
1996, the table sets forth the high and low last sale price as reported on the
NYSE Composite Tape.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter (from February 21)............................................. $24.00 $14.75
Second Quarter............................................................... 24.50 17.75
Third Quarter................................................................ 30.00 18.00
Fourth Quarter............................................................... 33.00 26.00
1996
First Quarter................................................................ $34.75 $28.50
Second Quarter............................................................... 30.25 20.13
Third Quarter (through August 28, 1996)...................................... 21.50 16.63
</TABLE>

There were approximately 743 holders of record of the MedPartners/Mullikin
Common Stock as of July 22, 1996.

SHAREHOLDERS OF EPS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
MEDPARTNERS/MULLIKIN COMMON STOCK. No assurance can be given as to the market
price of MedPartners/Mullikin Common Stock at the Effective Time or at any other
time.

COMPARATIVE PER SHARE INFORMATION

The following summary presents selected comparative per share information
for (i) MedPartners/ Mullikin on a historical basis in comparison with pro forma
information giving effect to the Merger on a pooling of interests basis, (ii)
Emergency Professional Services on a historical basis in comparison with pro
forma equivalent information after giving effect to the Merger, assuming that
8,244 shares of MedPartners/Mullikin Common Stock are issued in exchange for
each Emergency Professional Services share in the Merger. The historical and pro
forma financial information should be read in conjunction with the historical
consolidated financial statements of MedPartners/Mullikin, the historical
financial statements of Emergency Professional Services, and the related notes
thereto and with the unaudited pro forma financial information and the related
notes thereto, appearing elsewhere in this Prospectus-Proxy Statement. See
"Consolidated Financial Statements of MedPartners/Mullikin", "Pro Forma
Condensed Financial Information," and "Financial Statements of Emergency
Professional Services".

MedPartners/Mullikin has not paid cash dividends since inception. It is
anticipated that MedPartners/ Mullikin will retain all earnings for use in the
expansion of the business and therefore does not anticipate paying any cash
dividends in the foreseeable future. The payment of future dividends will be at
the discretion of the Board of Directors of MedPartners/Mullikin and will
depend, among other things, upon MedPartners/ Mullikin's earnings, capital
requirements, financial condition and debt covenants.

The following information is not necessarily indicative of the combined
results of operations or combined financial position that would have resulted
had the Merger been consummated at the beginning of the periods indicated, nor
is it necessarily indicative of the combined results of operations in future
periods or future combined financial position.

<TABLE>
<CAPTION>
PER COMMON AND COMMON EQUIVALENT SHARE
------------------------------------------------------------------------------------------
NET INCOME
------------------------------------ STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE (BOOK VALUE)
YEAR ENDED DECEMBER 31, 30, --------------------------
------------------------------------ ---------------------- DECEMBER 31, JUNE 30,
1993 1994 1995 1995 1996 1995 1996
---------- ---------- ---------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income (loss):
MedPartners/Mullikin
Historical(1)........ $ (0.06) $ (0.08) $ 0.01 $ 0.26 $ (0.11) $ 4.75 $ 8.29
Pro forma combined... 0.64 (0.61) (0.83) (0.72) (0.20) 4.16 4.79
</TABLE>

9
<PAGE> 19

<TABLE>
<CAPTION>
PER COMMON AND COMMON EQUIVALENT SHARE
--------------------------------------------------------------------------------------
NET INCOME STOCKHOLDERS' EQUITY
-------------------------------- SIX MONTHS ENDED JUNE (BOOK VALUE)
YEAR ENDED DECEMBER 31, 30, ------------------------
-------------------------------- --------------------- DECEMBER 31, JUNE 30,
1993 1994 1995 1995 1996 1995 1996
------ ------ ------ ------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Emergency Professional
Services
Historical........... $(1,689.52) $(1,927.42) $(1,597.07) $ 104.84 $ 400.76 $ 1,191.12 $ 2,229.01
Pro forma
equivalent(2)...... 5,276.16 (5,028.84) (6,842.52) (5,935.68) (1,648.80) 34,295.04 39,488.76
Income (loss) from
continuing
operations(3):
MedPartners/Mullikin
Historical........... (0.06) (0.08) 0.01 0.26 (0.11)
Pro forma combined... 0.39 0.41 0.13 0.31 0.24
Emergency Professional
Services(4)
Historical........... $(1,689.52) $(1,927.42) $(1,597.07) $ 104.84 $ 400.76
Pro forma
equivalent(2)...... 3,215.16 3,380.04 1,071.72 2,555.64 1,978.56
</TABLE>

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

(1) MedPartners/Mullikin's historical pro forma net (loss) income per common
share is computed, after adjusting historical net income for the estimated
tax provision applicable to the pooled companies, by dividing net income
(loss) by the number of common equivalent shares outstanding during the
period in accordance with the applicable rules of the SEC. All stock
options and warrants issued have been considered as outstanding common
share equivalents, even if anti-dilutive, under the treasury stock method.
Shares of MedPartners Common Stock issued in February 1995 upon conversion
of the then outstanding Convertible Preferred Stock are assumed to be
common share equivalents.
(2) Emergency Professional Services pro forma equivalent per common share data
is calculated by multiplying the pro forma MedPartners/Mullikin amounts by
an assumed Exchange Ratio of 8,244, which is based on an assumed Base
Period Trading Price of $20.37 per share.
(3) Income (loss) from continuing operations per share data is computed, after
adjusting historical net income (loss) to eliminate the effects of
discontinued operations, by dividing adjusted net income (loss) by the
number of common equivalent shares outstanding during the period in
accordance with applicable rules of the SEC. All stock options and warrants
issued have been considered as outstanding common share equivalents, even
if anti-dilutive, under the treasury stock method. Shares of MedPartners
Common Stock issued in February 1995, upon conversion of the then
outstanding Convertible Preferred Stock, are assumed to be common share
equivalents. The pro forma combined per share data for income (loss) from
continuing operations relates to Caremark excluding results from its
Clozaril(R) Patient Management System, Home Infusion business, Oncology
Management Service business, Caremark Orthopedic Services Inc. subsidiary
and Nephrology Services division, all of which have been reflected as
discontinued operations in accordance with APB Opinion No. 30.
(4) EPS's per share information is based on a January 31, 1996 year end.

10
<PAGE> 20

RISK FACTORS

In addition to the other information contained in this Prospectus-Proxy
Statement, EPS shareholders should consider carefully the factors listed below
in evaluating the Merger.

RISKS RELATING TO THE MERGER; ACQUISITIONS

MedPartners/Mullikin believes that the Merger represents another step in
MedPartners/Mullikin's consolidation initiative in the PPM business to develop
integrated health care delivery systems through affiliation with individual
physicians, physician practices, hospitals and third-party payors. In addition,
MedPartners/Mullikin has recently completed major acquisitions and is still in
the process of integrating those acquired businesses. While the business plans
of these acquired companies are similar, their histories, geographical location,
business models and cultures are different in many respects. The
MedPartners/Mullikin Board of Directors and senior management of
MedPartners/Mullikin face a significant challenge in their efforts to integrate
the businesses of MedPartners/Mullikin and the acquired companies so that the
different cultures and the varying emphases on managed care and fee-for-service
can be effectively managed to continue to grow these businesses. The dedication
of management resources to such integration may detract attention from the
day-to-day business of MedPartners/Mullikin. There can be no assurance that
there will not be substantial costs associated with such activities or that
there will not be other material adverse effects of these integration efforts.
Such effects could have a material adverse effect on the financial results of
MedPartners/Mullikin. While management of MedPartners/Mullikin and EPS believe
that the diverse experience of each of the combined companies will serve to
strengthen MedPartners/Mullikin, there can be no assurance that management's
efforts to integrate the operations of MedPartners/Mullikin will be successful
or that the anticipated benefits of the Merger will be fully realized.

The profitability of MedPartners/Mullikin is largely dependent on its
ability to develop and integrate networks of physicians from the affiliated
practices, to manage and control costs and to realize economies of scale.
MedPartners/Mullikin's operating results could be adversely affected in the
event it incurs costs associated with developing networks without generating
sufficient revenues from such networks.

RISKS RELATING TO MEDPARTNERS/MULLIKIN'S GROWTH STRATEGY

MedPartners/Mullikin's growth strategy involves growth through acquisitions
and internal development. MedPartners/Mullikin is subject to various risks
associated with its growth strategy. Because the major acquisitions carried out
by MedPartners/Mullikin in 1995 and the first six months of 1996 have been
structured as poolings of interests, the operating income of
MedPartners/Mullikin has been reduced by the merger expenses incurred in
connection therewith, resulting in a net loss for the six months ended June 30,
1996. The expenses of the mergers completed in 1996 are expected to result in a
net loss for the year ended December 31, 1996. In addition,
MedPartners/Mullikin, and the combined company, is subject to the risk that it
will be unable to identify and recruit suitable acquisition candidates in the
future or to integrate and manage the affiliated physicians.

MedPartners/Mullikin is also largely dependent on the continued increase in
the number of HMO enrollees who use its physician networks. This growth may come
from the development or acquisition of other PPM entities, additional affiliated
physicians, increased enrollment in HMOs currently contracting with
MedPartners/Mullikin through its affiliated physicians, or from agreements with
new HMOs. There can be no assurance that MedPartners/Mullikin will be successful
in identifying, acquiring and integrating additional medical groups or other PPM
companies or in increasing the number of enrollees. A decline in enrollees in
HMOs could also have a material adverse effect on MedPartners/Mullikin's
profitability.

MedPartners/Mullikin's current and anticipated future expansion has placed,
and will continue to place, significant demands on the management, operational
and financial resources of MedPartners/Mullikin. MedPartners/Mullikin will need
to continue to augment its management and operational systems to support growth
both within existing and into new geographic markets. There can be no assurance
that MedPartners/ Mullikin will be able to manage its expanded operations
effectively.

11
<PAGE> 21

RISKS RELATING TO CAPITAL REQUIREMENTS

MedPartners/Mullikin's growth strategy requires substantial capital for the
acquisition of assets of physician practices and for the effective integration,
operation and expansion of the affiliated practices. Affiliated physician
practices may also require capital for renovation, expansion and additional
medical equipment and technology. MedPartners/Mullikin believes that, without
taking into consideration the Caremark Acquisition, its existing cash resources,
the use of MedPartners/Mullikin's Common Stock for selected practice and other
acquisitions, and available borrowings under the Bank Credit Facility dated as
of November 21, 1995 between MedPartners/Mullikin and NationsBank of Georgia,
N.A. (the "Bank Credit Facility") or any successor credit facility, will be
sufficient to meet MedPartners/Mullikin's anticipated acquisition, expansion and
working capital needs for the foreseeable future. It is expected that an
increased bank credit facility will be put into effect in connection with the
consummation of the Caremark Acquisition in order to refinance the indebtedness
under the Bank Credit Facility and the current indebtedness under the Caremark
bank facility, so that the combined company will not have a working capital
deficit. MedPartners/ Mullikin may raise additional capital through the issuance
of long-term or short-term indebtedness or the issuance of additional equity
securities in private or public transactions, at such times as management deems
appropriate and the market allows. Any of such financings could result in
dilution of existing equity positions, increased interest and amortization
expense, or decreased income to fund future expansion. There can be no assurance
that acceptable financing for future acquisitions or for the integration and
expansion of existing networks can be obtained.

RISKS RELATING TO CAPITATED NATURE OF REVENUES; CONTROL OF HEALTH CARE COSTS

A substantial portion of the revenue of MedPartners/Mullikin is derived
from agreements with HMOs that provide for the receipt of capitated fees. Under
these agreements, MedPartners/Mullikin, through its affiliated physicians, is
generally responsible for the provision of all covered outpatient benefits,
regardless of whether the affiliated physicians directly provide the medical
services associated with the covered benefits. MedPartners/Mullikin is
statutorily and contractually prohibited from controlling any medical decisions
made by any health care provider. To the extent that enrollees require more care
than is anticipated or require supplemental medical care which is not otherwise
reimbursed by the HMO, aggregate capitation rates may be insufficient to cover
the costs associated with the treatment of enrollees. If revenue is insufficient
to cover costs, MedPartners/Mullikin's operating results could be adversely
affected. As a result, the success of MedPartners/Mullikin will depend in large
part on the effective management of health care costs through various methods,
including utilization management, competitive pricing for purchased services and
favorable agreements with payors. Recently, many providers, including
MedPartners/Mullikin, have experienced pricing pressures with respect to
negotiations with HMOs. In addition, employer groups are becoming increasingly
successful in negotiating reductions in the growth of premiums paid for their
employees' health insurance, which tends to depress the reimbursement for health
care services. At the same time, employer groups are demanding higher
accountability from payors and providers of health care services with respect to
measurable accessibility, quality and service. If these trends continue, the
cost of providing physician services could increase while the level of
reimbursement could grow at a lower rate or decrease. There can be no assurance
that these pricing pressures will not have a material adverse effect on the
operating results of MedPartners/ Mullikin. Changes in health care practices,
inflation, new technologies, major epidemics, natural disasters and numerous
other factors affecting the delivery and cost of health care are beyond the
control of MedPartners/ Mullikin and may adversely affect its operating results.

Under the HMO agreements, MedPartners/Mullikin is frequently responsible
for the provision of all covered hospital benefits regardless of whether it is
responsible for provision of the hospital services associated with the covered
benefits. MedPartners/Mullikin has contracted with a number of hospitals to
provide covered services to HMO enrollees who have been assigned to the
physician practices affiliated with MedPartners/ Mullikin. MedPartners/Mullikin
expects to seek additional hospital providers to provide covered services to HMO
enrollees assigned to its affiliated physicians. To the extent that enrollees
require more care than is anticipated or require supplemental care that is not
otherwise reimbursed by the HMOs, aggregate capitation

12
<PAGE> 22

rates may be insufficient to cover the costs associated with the treatment of
enrollees. If such revenue is insufficient, MedPartners/Mullikin's operating
results could be adversely affected.

In addition, MedPartners/Mullikin's financial statements include estimates
of costs for covered medical benefits incurred by HMO enrollees, but not yet
reported. While these estimates are based on information available at the time
of calculation, there can be no assurance that actual costs will approximate the
estimates of such amounts. If the actual costs significantly exceed the amounts
estimated and accrued, operating results of MedPartners/Mullikin could be
materially adversely affected.

The HMO agreements often contain shared-risk provisions under which
additional revenue can be earned or economic penalties can be incurred based
upon the utilization of hospital and non-professional services by HMO enrollees.
MedPartners/Mullikin's financial statements contain accruals for estimates of
shared-risk amounts receivable from or payable to the HMOs that contract with
their affiliated physicians. These estimates are based upon inpatient
utilization and associated costs incurred by HMO enrollees compared to budgeted
costs. Differences between actual contract settlements and amounts estimated as
receivable or payable relating to HMO risk-sharing arrangements are generally
reconciled annually, which may cause fluctuations from amounts previously
accrued.

In connection with the HMO agreements, MedPartners/Mullikin negotiates
stop-loss catastrophic reinsurance with third-party insurers. Coverage under
this reinsurance commences at the threshold at which the risk of further
financial exposure for critically ill or injured HMO enrollees is contractually
shifted to the HMOs or another third party. There can be no assurance that
MedPartners/Mullikin will be able to negotiate favorable catastrophic
reinsurance in connection with future HMO agreements.

POTENTIAL REDUCTIONS IN THIRD-PARTY REIMBURSEMENT

Physician groups that render services on a fee-for-service basis (as
opposed to a capitated plan), typically bill various third-party payors, such as
governmental programs (e.g., Medicare and Medicaid), private insurance plans and
managed care plans, for the health care services provided to their patients. A
significant portion of the revenue of MedPartners/Mullikin is derived from
payments made by these third-party payors. These third-party payors increasingly
are negotiating the prices charged for medical services, with the goal of
lowering reimbursement and utilization rates. The success of
MedPartners/Mullikin therefore depends in large part on the effective management
of health care costs, including controlling utilization of specialty care
physicians and other ancillary providers and purchasing services from
third-party providers at competitive prices. There can be no assurance that
payments under governmental programs or from other third-party payors will
remain at present levels. In addition, third-party payors can deny reimbursement
if they determine that treatment was not performed in accordance with the
cost-effective treatment methods established by such payors, was experimental or
for other reasons. Any loss of revenues by the affiliated physicians caused by
this trend in the health care industry toward cost containment and oversight
could have a material adverse effect on MedPartners/Mullikin's operating
results.

RISKS RELATED TO DEPENDENCE ON AFFILIATED PHYSICIANS

MedPartners/Mullikin's revenue depends on revenues generated by the
physicians with whom MedPartners/Mullikin has practice management agreements.
These agreements define the responsibilities of the physicians and
MedPartners/Mullikin and govern all terms and conditions of their relationship.
The practice management agreements have terms generally of 20 to 44 years,
subject to termination for cause, which includes bankruptcy or a material
breach. Practice management agreements with certain of the affiliated practices
contain provisions giving the physician practice the option to terminate the
agreement without cause, subject to significant limitations. Because
MedPartners/Mullikin cannot control the provision of medical services by its
affiliated physicians contractually or otherwise under the laws of California
and most other states in which MedPartners/Mullikin operates, affiliated
physicians may decline to enter into HMO agreements that are negotiated for them
by MedPartners/Mullikin or may enter into contracts for the provision of medical
services or make other financial commitments which are not intended to benefit

13
<PAGE> 23

MedPartners/Mullikin and which could have a material adverse effect on
MedPartners/Mullikin's operating results. See "Business of
MedPartners/Mullikin -- Development and Operations -- Affiliated Physicians".

RISKS RELATING TO EXPOSURE TO PROFESSIONAL LIABILITY; LIABILITY INSURANCE

In recent years, physicians, hospitals and other participants in the health
care industry have become subject to an increasing number of lawsuits alleging
medical malpractice and related legal theories. Many of these lawsuits involve
large claims and substantial defense costs. Although MedPartners/Mullikin does
not engage in the practice of medicine or provide medical services, and does not
control the practice of medicine by its affiliated physicians or the compliance
with regulatory requirements directly applicable to the affiliated physicians
and physician groups, there can be no assurance that MedPartners/Mullikin will
not become involved in such litigation in the future. Through the ownership and
operation of Pioneer Hospital ("Pioneer Hospital") and U.S. Family Care Medical
Center ("USFMC"), acute care hospitals located in Artesia and Montclair,
California, respectively, MedPartners/Mullikin could be subject to allegations
of negligence and wrongful acts arising out of providing nursing care, emergency
room services, credentialing of medical staff members and other activities
incident to the operation of an acute care hospital. In addition, through its
management of clinic locations and provision of non-physician health care
personnel, MedPartners/Mullikin could be named in actions involving care
rendered to patients by physicians employed by or contracting with affiliated
medical organizations and physician groups.

MedPartners/Mullikin maintains professional and general liability
insurance. Nevertheless, certain types of risks and liabilities are not covered
by insurance and there can be no assurance that the limits of coverage will be
adequate to cover losses in all instances. In addition, MedPartners/Mullikin's
practice management agreements require the affiliated physicians to maintain
professional liability insurance coverage on the practice and on each employee
and agent of the practice, and MedPartners/Mullikin generally is indemnified
under each of the practice management agreements by the affiliated physicians
for liabilities resulting from the performance of medical services. However,
there can be no assurance that a future claim or claims will not exceed the
limits of these available insurance coverages or that indemnification will be
available for all such claims. See "Business of
MedPartners/Mullikin -- Corporate Liability and Insurance".

RISKS RELATING TO CONCENTRATION OF CUSTOMERS

Three HMOs, PacifiCare, Health Net and CaliforniaCare, accounted for
approximately 29% of net revenue of MedPartners/Mullikin for the six months
ended June 30, 1996. MedPartners/Mullikin's HMO agreements are generally for
one-year terms and are thus subject to annual negotiation of rates, covered
benefits and other terms and conditions. HMO agreements are often negotiated and
executed in arrears. There can be no assurance that such agreements will be
renewed or, if renewed, that they will contain terms favorable to
MedPartners/Mullikin and its affiliated physicians. The loss of any of the above
HMO customers could have a material adverse effect on MedPartners/Mullikin's
operating results.

COMPETITION

The PPM industry is highly competitive. The industry is also subject to
continuing changes in the provision of services and the selection and
compensation of providers. In addition, certain companies, including hospitals
and insurers, are expanding their presence in the physician management market.
The provision of physician contract management services for hospitals and other
health care providers is also highly competitive, and MedPartners/Mullikin's
hospital-based operations compete with national, regional and local companies in
providing its services. Certain of MedPartners/Mullikin's competitors are larger
and better capitalized, provide a wider variety of services, may have greater
experience in providing health care management services and may have longer
established relationships with buyers of such services.

The demand for physician and health care professional personnel presently
exceeds the supply of qualified personnel. As a result, MedPartners/Mullikin
experiences competitive pressures for the recruitment and retention of qualified
physicians and other health care professionals to deliver their services.
MedPartners/ Mullikin's future success depends on its ability to continue to
recruit and retain qualified physicians and other

14
<PAGE> 24

health care professionals to serve as employees or independent contractors of
MedPartners/Mullikin and its affiliates. There can be no assurance that
MedPartners/Mullikin will be able to recruit or retain a sufficient number of
competent physicians and other health care professionals to continue to expand
its operations.

GOVERNMENT REGULATION

Federal and state laws regulate the relationships among providers of health
care services, physicians and other clinicians. These laws include the fraud and
abuse provisions of the Medicare and Medicaid statutes, which prohibit the
solicitation, payment, receipt or offering of any direct or indirect
remuneration for the referral of Medicare or Medicaid patients or for
recommendation, leasing, arranging, ordering or purchasing of Medicare or
Medicaid covered services, as well as laws that impose significant penalties for
false or improper billings for physician services. These laws also impose
restrictions on physicians' referrals for designated health services to entities
with which they have financial relationships. Violations of these laws may
result in substantial civil or criminal penalties for individuals or entities,
including large civil money penalties and exclusion from participation in the
Medicare and Medicaid programs. Such exclusion and penalties, if applied to
MedPartners/Mullikin's affiliated physicians, could result in significant loss
of reimbursement.

Moreover, the laws of many states, including California, from which a
significant portion of MedPartners/Mullikin's revenues are derived, prohibit
physicians from splitting fees with non-physicians and prohibit non-physician
entities from practicing medicine. These laws and their interpretations vary
from state to state and are enforced by the courts and by regulatory authorities
with broad discretion. As stated in the Notes to its Consolidated Financial
Statements, MedPartners/Mullikin believes that it has perpetual and unilateral
control over the assets and operations of the various affiliated professional
corporations. There can be no assurance that regulatory authorities will not
take the position that such control conflicts with state laws regarding the
practice of medicine or other federal restrictions. Although
MedPartners/Mullikin believes its operations as currently conducted are in
material compliance with existing applicable laws, there can be no assurance
that the existing organization of MedPartners/Mullikin and its contractual
arrangements with affiliated physicians will not be successfully challenged as
constituting the unlicensed practice of medicine or that the enforceability of
the provisions of such arrangements, including non-competition agreements, will
not be limited. There can be no assurance that review of the business of
MedPartners/Mullikin and its affiliates by courts or regulatory authorities will
not result in a determination that could adversely affect their operations or
that the health care regulatory environment will not change so as to restrict
existing operations or expansion of MedPartners/Mullikin and its affiliates. In
the event of action by any regulatory authority limiting or prohibiting
MedPartners/Mullikin or its affiliates from carrying on their business or from
expanding the operations of MedPartners/Mullikin to certain jurisdictions,
structural and organizational modifications of such organization or arrangements
of MedPartners/Mullikin may be required, which could have an adverse effect on
MedPartners/Mullikin.

Approximately 10% of the revenues of MedPartners/Mullikin's affiliated
physician groups is derived from payments made by government-sponsored health
care programs (principally, Medicare and state reimbursed programs). As a
result, any change in reimbursement regulations, policies, practices,
interpretations or statutes could adversely affect the operations of
MedPartners/Mullikin. There are also state and federal civil and criminal
statutes imposing substantial penalties, including civil and criminal fines and
imprisonment, on health care providers that fraudulently or wrongfully bill
governmental or other third-party payors for health care services.
MedPartners/Mullikin believes it is in material compliance with such laws, but
there can be no assurance that MedPartners/Mullikin's activities will not be
challenged or scrutinized by governmental authorities.

Certain provisions of the Social Security Act, commonly referred to as the
"Anti-kickback Statute", prohibit the offer, payment, solicitation or receipt of
any form of remuneration in return for the referral of Medicare or state health
program patients or patient care opportunities, or in return for the
recommendation, arrangement, purchase, lease or order of items or services that
are covered by Medicare or state health programs. Many states have adopted
similar prohibitions against payments intended to induce referrals of Medicaid
and other third-party payor patients. The Anti-kickback Statute contains
provisions prescribing civil and criminal penalties to which individuals or
providers who violate such statute may be subjected. The

15
<PAGE> 25

criminal penalties include fines up to $25,000 per violation and imprisonment
for five years or more. Additionally, the Department of Health and Human
Services ("DHHS") has the authority to exclude anyone, including individuals or
entities, who has committed any of the prohibited acts from participation in the
Medicare and Medicaid programs. If applied to MedPartners/Mullikin or any of its
subsidiaries or affiliated physicians, such exclusion could result in a
significant loss of reimbursement for MedPartners/Mullikin, up to a maximum of
the approximately 10% of revenues derived from such programs. Although
MedPartners/Mullikin believes that it is not in violation of the Anti-kickback
Statute or similar state statutes, its operations do not fit within any of the
existing or proposed federal safe harbors.

Significant prohibitions against physician referrals were enacted by
Congress in the Omnibus Budget Reconciliation Act of 1993. Subject to certain
exemptions, a physician or a member of his immediate family is prohibited from
referring Medicare or Medicaid patients to an entity providing "designated
health services" in which the physician has an ownership or investment interest
or with which the physician has entered into a compensation arrangement. While
MedPartners/Mullikin believes it is in compliance with such legislation, future
regulations could require MedPartners/Mullikin to modify the form of its
relationships with physician groups. Some states have also enacted similar
self-referral laws and MedPartners/Mullikin believes it is likely that more
states will follow. MedPartners/Mullikin believes that its practices fit within
exemptions contained in such statutes. Nevertheless, expansion of the operations
of MedPartners/Mullikin to certain jurisdictions may require structural and
organizational modifications of MedPartners/Mullikin's relationships with
physician groups to comply with new or revised state statutes.

RISKS RELATING TO REGULATORY REQUIREMENTS OF KNOX-KEENE ACT

On March 5, 1996 the California Department of Corporations ("DOC") issued
to Pioneer Provider Network, Inc. ("PPN"), a wholly owned subsidiary of
MedPartners/Mullikin, a license (the "Restricted License") in accordance with
the requirements of the Knox-Keene Health Care Service Plan Act of 1975 (the
"Knox- Keene Act"). The Restricted License authorizes PPN to operate as a health
care service plan in the State of California. MedPartners/Mullikin, through PPN,
intends to utilize the Restricted License for purposes of contracting with HMOs
for a broad range of health care services, including both institutional and
professional medical services, through a consolidated contract with the HMO.

The Knox-Keene Act and the regulations promulgated thereunder subject
entities which are licensed as health care service plans in California to
substantial regulation by the DOC. In addition, licensees under the Knox-Keene
Act are required to file periodic financial data and other information (which
generally become available to the public), maintain substantial tangible net
equity on their balance sheets and maintain adequate levels of medical,
financial and operational personnel dedicated to fulfilling the licensee's
statutory and regulatory requirements. The DOC is empowered by law to take
enforcement actions against licensees which fail to comply with such
requirements. PPN is a newly-created organization without an operating history
and there is no assurance that the DOC will view its operations to be fully in
compliance with applicable laws and regulations. If this were to occur, it could
have an adverse effect on MedPartners/ Mullikin.

RISKS RELATING TO HEALTH CARE REFORM

As a result of the continued escalation of health care costs and the
inability of many individuals to obtain health insurance, numerous proposals
have been or may be introduced in the U.S. Congress and state legislatures
relating to health care reform. There can be no assurance as to the ultimate
content, timing or effect of any health care reform legislation, nor is it
possible at this time to estimate the impact of potential legislation, which may
be material, on MedPartners/Mullikin.

ANTI-TAKEOVER CONSIDERATIONS

Certain provisions of MedPartners/Mullikin's Second Amended and Restated
Certificate of Incorporation (the "MedPartners/Mullikin Certificate"),
MedPartners/Mullikin's Amended and Restated By-laws (the "MedPartners/Mullikin
By-laws") and the DGCL could, together or separately, discourage potential
acquisition proposals, delay or prevent a change in control of
MedPartners/Mullikin and limit the price that

16
<PAGE> 26

certain investors might be willing to pay in the future for shares of
MedPartners/Mullikin's Common Stock. These provisions include a classified Board
of Directors and the issuance, without further stockholder approval, of
preferred stock with rights and privileges which could be senior to
MedPartners/Mullikin's Common Stock. MedPartners/Mullikin also is subject to
Section 203 of the DGCL which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder. In
addition, MedPartners/Mullikin's Stockholders' Rights Plan, which provides for
discount purchase rights to certain stockholders of MedPartners/Mullikin upon
certain acquisitions of 10% or more of the outstanding shares of
MedPartners/Mullikin's Common Stock, may also inhibit a change in control of
MedPartners/Mullikin. See "Management of MedPartners/Mullikin -- Classified
Board of Directors", "Description of Capital Stock of
MedPartners/Mullikin -- Certain Provisions of MedPartners/Mullikin's Certificate
and the DGCL" and "MedPartners/Mullikin Stockholders' Rights Plan".

CONTROL BY CERTAIN STOCKHOLDERS

After giving effect to the issuance of shares of MedPartners/Mullikin
Common Stock in the Merger, the executive officers and directors of
MedPartners/Mullikin and entities in which such directors are principals will
own or control approximately 18% of the outstanding shares of
MedPartners/Mullikin's Common Stock. See "Principal Stockholders of
MedPartners/Mullikin". Accordingly, such persons, if they were to act in
concert, would likely control MedPartners/Mullikin's Board of Directors and
therefore the business and policies of MedPartners/Mullikin. Furthermore, such
control could preclude any unsolicited acquisition of MedPartners/Mullikin and,
consequently, adversely affect the market price of the MedPartners/Mullikin
Common Stock.

POSSIBLE VOLATILITY OF STOCK PRICE

There may be significant volatility in the market price for
MedPartners/Mullikin's Common Stock. Quarterly operating results of
MedPartners/Mullikin, changes in general conditions in the economy, the
financial markets or the health care industry, or other developments affecting
MedPartners/Mullikin or its competitors, could cause the market price of
MedPartners/Mullikin's Common Stock to fluctuate substantially. In addition, in
recent years, the stock market, and in particular, the health care industry
segment, has experienced significant price and volume fluctuations. This
volatility has affected the market prices of securities issued by many companies
for reasons unrelated to their operating performance.

RISKS RELATING TO FEDERAL INCOME TAXES

If the Merger were not to constitute a tax-free reorganization under
Section 368(a) of the Code, each holder of EPS Shares would recognize gain or
loss equal to the difference between the fair market value of the
MedPartners/Mullikin Common Stock received and cash received in lieu of
fractional shares and such holder's basis in the shares of EPS Shares exchanged
therefor. See "The Merger -- Federal Income Tax Consequences".

CAREMARK RISK FACTORS

In addition to the information contained in this Prospectus-Proxy Statement
and the risk factors described above, there are additional risk factors relating
solely to Caremark and the Caremark Acquisition. In anticipation of the
consummation of the Caremark Acquisition, on or about September 5, 1996, the EPS
shareholders should also consider the following Caremark Risk Factors.

Certain Caremark Legal Matters

OIG Settlement and Related Claims. Caremark agreed in June 1995 to settle
an approximately four year investigation of Caremark with the Office of the
Inspector General of the United States Department of Health and Human Services
(the "OIG"), DOJ, the Veteran's Administration, the Federal Employee Health
Benefits Program, the Civilian Health and Medical Program of the Uniformed
Services and related state investigative agencies in all 50 states and the
District of Columbia (the "OIG Settlement"). Under the terms of the settlement,
which covered allegations dating back to 1986, a subsidiary of Caremark pled
guilty to two counts of mail fraud -- one each in Minnesota and
Ohio -- resulting in the payment of civil penalties and

17
<PAGE> 27

criminal fines. The basis of these guilty pleas was Caremark's failure to
provide certain information to Civilian Health and Medical Payments for the
Uniformed Services ("CHAMPUS") and Federal Employees Health Benefit Plan
("FEHBP"), federally funded health care benefit programs, concerning financial
relationships between Caremark and a physician in each of Minnesota and Ohio.

In its agreement with the OIG and DOJ, Caremark agreed to continue to
maintain certain compliance-related oversight procedures. Should these oversight
procedures reveal credible evidence of legal or regulatory violations, Caremark
is required to report such violations to the OIG and DOJ. Caremark is therefore
subject to increased regulatory scrutiny and, in the event it commits legal or
regulatory violations, Caremark may be subject to an increased risk of sanctions
or penalties, including disqualification as a provider of Medicare or Medicaid
services.

Caremark is a party to various non-governmental claims in connection with
matters relating to the OIG Settlement. Caremark is a party to, or the subject
of, various private suits and claims (including stockholder derivative actions
and an alleged class action suit) being asserted in connection with matters
relating to the OIG Settlement by Caremark's stockholders, patients who received
health care services from Caremark and such patients' insurers. In March 1996,
Caremark agreed to settle all disputes with a number of private payors and, in
the first quarter of 1996, took an aggregate $65.6 million after-tax charge for
payments required under such settlements. The waivers granted by Caremark's
lenders of the impact of these settlements on the financial covenants under the
credit facility expire on September 15, 1996. It is anticipated that
MedPartners/Mullikin will refinance Caremark's existing credit facility in
connection with the Caremark Acquisition. In the event the Caremark Acquisition
is not consummated, Caremark expects to enter into a revised credit facility,
although there can be no assurances as to the certainty or terms of any such
agreement. See the discussion contained in Note 14 to Caremark's Consolidated
Financial Statements.

As of June 30, 1996, the pre-tax reserve for the costs of settlement of the
OIG Settlement and the settlement with the private payors referred to above and
related matters was approximately $110 million. This reserve represented
Caremark's management's estimate of the ultimate costs relating to the
disposition of these matters. Caremark's management cannot determine at this
time whether there will be additional costs relating to any disposition of
non-governmental litigation. Therefore, there can be no assurance that the
ultimate costs of these matters will not exceed the reserve or that additional
costs, claims and damages will not occur. Such additional costs, if incurred,
could have a material negative impact on Caremark's future results. See Note 14
to Caremark's Consolidated Financial Statements.

Coram Litigation. On September 11, 1995, Coram Healthcare Corp. ("Coram")
filed a complaint in the San Francisco Superior Court against Caremark and its
subsidiary, Caremark Inc., and 50 unnamed individual defendants. The complaint,
which arises from Caremark's sale to Coram of Caremark's home infusion therapy
business in April 1995 for approximately $209 million in cash and $100 million
in securities, alleges breach of the Asset Sale and Note Purchase Agreement,
dated January 29, 1995, as amended April 1, 1995, between Coram and Caremark,
breach of related contracts, fraud, negligent misrepresentation and a right to
contractual indemnity. Requested relief in Coram's amended complaint includes
specific performance, declaratory relief, injunctive relief and damages of $5.2
billion. Caremark filed motions in October 1995 in the Superior Court of
California seeking (i) to strike certain causes of action due to the speculative
nature of the claims and damages asserted and (ii) dismissal of Coram's lawsuit
on grounds of lack of jurisdiction over Illinois-based Caremark. The Superior
Court of California subsequently dismissed the case against Caremark (but not
against Caremark Inc.) on the basis of lack of jurisdiction. Caremark also filed
a lawsuit in the U.S. District Court in Chicago claiming that Coram committed
securities fraud in its sale to Caremark of its securities in connection with
the sale of Caremark's home infusion business to Coram. This case, which has
been dismissed, is on appeal and Caremark has filed counterclaims to the lawsuit
pending in San Francisco against Caremark Inc. Coram's lawsuit is currently in
the discovery phase.

Although Caremark management believes, based on information currently
available, that the ultimate resolution of this matter is not likely to have a
material adverse effect on Caremark's results of operations, cash flows or
financial position, there can be no assurance that the ultimate resolution of
this matter, if

18
<PAGE> 28

adversely determined, would not have a material adverse effect on Caremark's
results of operations, cash flows or financial position.

Recently Filed Litigation. In May 1996, two stockholders, each purporting
to represent a class, filed (but have not yet served) complaints against
Caremark and each of its directors in the Court of Chancery of the State of
Delaware alleging breaches of the directors' fiduciary duty in connection with
Caremark's proposed merger with MedPartners/Mullikin. The complaints seek
unspecified damages, injunctive relief and attorneys' fees and expenses.
Caremark intends, if served, to defend these cases vigorously. Caremark believes
these complaints will not have a material adverse effect on its financial
condition or results of operations.

Pharmaceutical Sales

In addition to the regulations referred to above, significant aspects of
Caremark's businesses are subject to state and federal statutes and regulations
governing the operation of pharmacies, repackaging of drug products, dispensing
of controlled substances, medical waste disposal and workplace health and
safety. Caremark's businesses may also be affected by changes in ethical
guidelines and operating standards of professional and trade associations and
private accreditation commissions such as the American Medical Association and
the Joint Commission on Accreditation of Healthcare Organizations. Accordingly,
changes in existing laws and regulations, adverse judicial or administrative
interpretations of such laws and regulations or enactment of new legislation
could have an adverse effect on the businesses of Caremark.

Pharmacy Licensing and Operation

Caremark is subject to federal and state laws and regulations governing
pharmacies. Federal controlled substance laws require Caremark to register its
pharmacies with the United States Drug Enforcement Administration and comply
with security, record-keeping, inventory control and labeling standards in order
to dispense controlled substances. State controlled substance laws require
registration and compliance with the licensing, registration or permit standards
of the state pharmacy licensing authority. State pharmacy licensing,
registration and permit laws impose standards on the qualifications of the
applicant's personnel, the adequacy of its prescription fulfillment and
inventory control practices and the adequacy of its facilities. In general,
pharmacy licenses are renewed annually. Pharmacists must also satisfy state
licensing requirements.

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<PAGE> 29

SELECTED FINANCIAL INFORMATION
MEDPARTNERS/MULLIKIN

SELECTED FINANCIAL DATA

The following tables set forth selected financial data for
MedPartners/Mullikin derived from its Consolidated Financial Statements. The
selected financial data should be read in conjunction with the Consolidated
Financial Statements of MedPartners/Mullikin and the related notes thereto
included elsewhere in this Prospectus-Proxy Statement.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------ -------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.................................. $266,447 $394,878 $549,695 $815,041 $1,153,557 $547,450 $703,683
Operating Expenses:
Cost of affiliated physician services...... 97,364 167,488 224,770 349,036 506,811 240,225 301,280
Clinic salaries, wages & benefits.......... 66,596 89,439 112,489 159,010 216,119 105,133 116,600
Outside hospitalization expense............ 17,411 27,842 59,861 86,974 109,934 50,364 83,516
Clinic rent & lease expense................ 9,467 11,970 18,832 27,515 41,825 19,744 23,814
Clinic supplies............................ 15,552 17,996 24,529 34,453 47,744 22,519 30,953
Other clinic costs......................... 19,227 22,648 41,248 67,645 88,991 43,776 59,154
General corporate expenses................. 18,060 38,099 42,196 56,653 64,713 32,167 39,540
Depreciation & amortization................ 6,404 9,575 14,057 21,892 29,088 13,962 16,482
Interest, net.............................. 2,098 2,396 3,338 5,958 8,443 3,367 2,811
Merger expenses............................ -- -- -- -- 66,564 1,051 34,448
Loss (gain) from disposal of assets........ (3) -- 122 1,627 -- -- --
-------- -------- -------- -------- ---------- -------- --------
Income (loss) form continuing operations
before pro forma income taxes &
cumulative effect of change in method of
accounting............................... 14,271 7,425 8,253 4,278 (26,675) 15,142 (4,915)
Pro forma income tax expense............... 2,190 7,703 9,723 7,350 (27,233) 4,411 360
-------- -------- -------- -------- ---------- -------- --------
Pro forma income (loss) from continuing
operations before cumulative effect of
change in method of accounting........... 12,081 (278) (1,470) (3,072) 558 10,731 (5,275)
Cumulative effect of change in method of
accounting for income taxes.............. (120) -- 298 -- -- -- --
-------- -------- -------- -------- ---------- -------- --------
Pro forma income (loss) from continuing
operations............................... 12,201 (278) (1,768) (3,072) 558 $ 10,731 (5,275)
Loss from discontinued operation of
clinics.................................. 279 702 -- -- -- -- --
-------- -------- -------- -------- ---------- -------- --------
Pro forma net income (loss)(1)............. $ 11,922 $ (980) $ (1,768) $ (3,072) $ 558 $ 10,731 $ (5,275)
========= ========= ========= ========= ========== ========= =========
Pro forma net income (loss) per share(2)..... $ 0.97 $ (0.06) $ (0.06) $ (0.08) $ 0.01 $ 0.26 $ (0.11)
Number of shares used in pro forma net income
(loss) per share........................... 12,249 15,308 28,403 36,553 42,720 41,867 50,034
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------------- ---------
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 23,677 $ 22,312 $ 43,367 $ 66,623 $ 55,328 $ 56,221
Working capital (deficit).............................. 11,425 (3,358) 13,023 75,605 91,892 101,038
Total assets........................................... 111,478 181,032 243,758 417,974 576,733 618,184
Long-term debt, less current portion................... 29,369 46,678 48,340 146,498 200,814 35,080
Total stockholders' equity............................. 30,708 49,281 71,577 109,232 202,717 414,611
</TABLE>

20
<PAGE> 30

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

(1) Includes pro forma income tax provision giving effect to pooling with
non-taxable entities. See Note 1 to Consolidated Financial Statements of
MedPartners/Mullikin, Inc.
(2) Pro forma net income (loss) per share is computed, after giving effect to
the pro forma tax provision described above, by dividing net income (loss)
by the number of common equivalent shares outstanding during the periods
presented in accordance with the applicable rules of the Commission. All
stock options issued have been considered as outstanding common equivalent
shares for all periods presented, even if anti-dilutive, under the treasury
stock method. Shares of the common stock of MedPartners issued in February
1995 upon conversion of the then outstanding convertible preferred stock are
assumed to be common equivalent shares for all periods presented.

21
<PAGE> 31

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- MEDPARTNERS/MULLIKIN

The following discussion of the results of operations and financial
condition of MedPartners/Mullikin should be read in conjunction with the
Consolidated Financial Statements of MedPartners/Mullikin, Inc. and notes
thereto included elsewhere in this Prospectus-Proxy Statement.

GENERAL

MedPartners was incorporated in January 1993, and affiliated with its
initial physician practice in November 1993. MME was formed by the merger of
several physician partnerships in 1994, and the original business was organized
in 1957.

MedPartners/Mullikin is the result of the business combination between
MedPartners and MME, which was consummated on November 29, 1995. As described in
Note 1 to MedPartners/Mullikin's Consolidated Financial Statements, the
financial information referred to in this discussion reflects the combined
operations of several entities. During 1995, MedPartners/Mullikin combined with
MEDCTR, Inc., Vanguard Healthcare Group, Inc., Texas Back Institute, Inc., MME,
Cerritos Investment Group, Cerritos Investment Group II, and 5000 Airport Plaza,
L.P. and in business combinations that were accounted for as poolings of
interests (collectively, the "1995 Mergers"). In February of 1996,
MedPartners/Mullikin combined with Pacific Physician Services, Inc. ("PPSI") in
a business combination that was accounted for as a pooling of interests. During
1995, PPSI combined with Team Health in a business combination accounted for as
a pooling of interests.

Because of MedPartners' limited operating history and the business
combinations described above, MedPartners/Mullikin does not believe that the
period-to-period comparisons, percentage relationships within periods and
apparent trends set forth below are meaningful.

MedPartners/Mullikin acquires existing medical practices and enters into
long-term contractual relationships pursuant to practice management agreements,
for periods ranging from 20 to 44 years, to provide management and
administrative services. MedPartners/Mullikin believes that the practice
management agreements convey to MedPartners/Mullikin perpetual, unilateral
control over the assets and operations of the various affiliated professional
corporations. Notwithstanding the lack of technical majority ownership of the
stock of such entities, consolidation of the professional corporations is
necessary to present fairly the financial position and results of operations of
MedPartners/Mullikin, because there exists a parent-subsidiary relationship by
means other than record ownership of a majority of voting stock. Control by
MedPartners/Mullikin is perpetual rather than temporary because of (i) the
length of the original term of the agreements, (ii) the continuing investment of
capital by MedPartners/Mullikin, (iii) the employment of the majority of the
non-physician personnel, and (iv) the nature of the services provided to the
professional corporations by MedPartners/Mullikin. MedPartners/Mullikin's
financial relationship with each practice offers the physicians access to
capital, management expertise, sophisticated information systems, and managed
care contracts. MedPartners/Mullikin's revenue is derived from medical services
provided by physicians under the practice management agreements, which revenue
has been assigned to MedPartners/Mullikin. Approximately 50% of this revenue is
derived through contracts for prepaid health care with HMOs.
MedPartners/Mullikin contracts directly with the HMOs to provide medical
services to HMO enrollees who have chosen MedPartners/ Mullikin's affiliated
physicians, or, in some cases, physicians who are members of Mullikin
Independent Physicians Association ("MIPA"). Through its wholly-owned
subsidiaries, MedPartners/Mullikin also contracts with hospitals to provide
medical staff for various hospital departments. MedPartners/Mullikin's
profitability depends on enhancing operating efficiency, expanding health care
services provided, increasing market share and assisting affiliated physicians
in managing the delivery of medical care.

The nature of the affiliated practices affects the cost of affiliated
physician services, clinic salaries, wages and benefits, clinic supplies and
depreciation and amortization. These expenses as a percentage of net revenue
will vary based on the mix of primary care and office-based (i.e., non-surgery)
practices to specialty care practices and the mix of capitated business. Primary
care includes family practice, internal medicine, pediatrics and
obstetrics/gynecology. Generally, primary care and office-based practices are
less capital

22
<PAGE> 32

intensive but require a higher number of employees per physician to operate and
maintain than specialty care practices. Typically, MedPartners/Mullikin
endeavors to achieve an equal number of primary care physicians and specialists
in each network. Institutional capitation increases revenues without a material
impact on many of the clinic expenses.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
of net revenue represented by the following items:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenue(1)............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of affiliated physician
services(2)........................... 40.9 42.8 43.9 43.9 42.8
Clinic salaries, wages and benefits...... 20.5 19.5 18.7 19.2 16.6
Outside hospitalization expense.......... 10.9 10.7 9.5 9.2 11.9
Clinic rent and lease expense............ 3.4 3.4 3.6 3.6 3.4
Clinic supplies.......................... 4.5 4.2 4.1 4.1 4.4
Other clinic costs....................... 7.5 8.3 7.7 8.0 8.4
General corporate expenses............... 7.7 7.0 5.6 5.9 5.6
Depreciation and amortization............ 2.6 2.7 2.6 2.6 2.3
Net interest expense..................... 0.5 0.7 0.7 0.6 0.4
Merger expenses.......................... 0.0 0.0 5.9 0.2 4.9
Loss on disposal of assets............... 0.0 0.2 0.0 0.0 0.0
Pro forma income tax expense (benefit)... 1.8 0.9 (2.3) 0.8 0.1
----- ----- ----- ----- -----
Pro forma net loss............... (0.3)% (0.4)% 0.0% 1.9% (0.8)%
===== ===== ===== ===== =====
</TABLE>

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

(1) "Net revenue" means gross clinic charges less allowances for contractual
adjustments.
(2) "Cost of affiliated physician services" consists solely of the total
payments made to each of the affiliated practices for medical services
rendered under its respective practice management agreement.

The following table sets forth the breakdown of net revenue for the periods
indicated:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Prepaid health care........................ 66.7% 62.5% 53.8% 53.4% 48.5%
Fee-for-service............................ 31.4 36.1 44.7 45.3 50.5
Other...................................... 1.9 1.4 1.5 1.3 1.0
----- ----- ----- ----- -----
Net revenue...................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>

Enrollment

MedPartners/Mullikin's prepaid health care revenue is reflective of the
number of HMO enrollees for whom it receives monthly capitation payments.
Enrollment is categorized as either "commercial enrollment" (enrollees generally
under the age of 65 whose health coverage is sponsored by employers) or "senior
enrollment" (enrollees over the age of 65 who are retired and whose coverage is
sponsored by Medicare). MedPartners/Mullikin receives professional capitation to
provide physician services and institutional capitation to provide hospital care
and other non-professional services. The table below sets forth the changes in

23
<PAGE> 33

enrollment for professional and institutional capitation. Most of the enrollment
growth is related to acquisitions and increased enrollment in the northern
California operations.

<TABLE>
<CAPTION>
COMMERCIAL SENIOR TOTAL
ENROLLEES ENROLLEES OTHER ENROLLEES
---------- --------- ------ ---------
<S> <C> <C> <C> <C>
PROFESSIONAL CAPITATION:
December 31, 1995.................................. 607,772 60,345 14,427 682,544
December 31, 1994.................................. 550,672 50,330 3,374 604,376
December 31, 1993.................................. 500,229 44,563 1,239 546,031
INSTITUTIONAL CAPITATION:
December 31, 1995.................................. 313,630 34,744 7,747 356,121
December 31, 1994.................................. 235,174 20,014 -- 255,188
December 31, 1993.................................. 227,561 11,431 -- 238,992
PROFESSIONAL CAPITATION:
June 30, 1996...................................... 694,093 66,457 37,715 798,265
June 30, 1995...................................... 551,176 56,133 55,194 662,503
INSTITUTIONAL CAPITATION:
June 30, 1996...................................... 318,331 36,345 11,636 366,312
June 30, 1995...................................... 258,305 32,681 7,223 298,209
</TABLE>

Six Months Ended June 30, 1996 and 1995

For the six months ended June 30, 1996, net revenue was $704 million,
compared to $547 million for the same period in 1995. The increase in net
revenue partially resulted from the affiliation with new physician practices and
the increase in prepaid enrollees, which accounted for $73.1 million and $48.7
million of the increase in net revenue, respectively. The remaining increase
primarily related to existing clinic growth.

Excluding non-recurring items related to the PPSI Merger, operating
expenses at the clinic level were $615 million, or 87.4% of net revenue for the
six months ended June 30, 1996 compared to $482 million or 88% of net revenue
for the same period in 1995. Clinic salaries, wages and benefits decreased as a
percentage of net revenue from the six months ended June 30, 1995 to the six
months ended June 30, 1996 as certain operational efficiencies were implemented
and the IPA business, which requires a low support staff ratio, continued to
grow. Outside hospitalization expense increased from $50 million for the six
months ended June 30, 1995 to $84 million for the six months ended June 30,
1996, and also increased as a percentage of net revenue from 9.2% for the six
months ended June 30, 1995 to 11.9% for the six months ended June 30, 1996. This
is directly related to the increase of MedPartners/Mullikin global capitation
and increase in IPA business. General corporate expenses increased from $32
million during the six months ended June 30, 1995 to $40 million during the six
months ended June 30, 1996. As a percent of net revenue, general corporate
expenses decreased from 5.9% in the six months ended June 30, 1995 to 5.6% in
the six months ended June 30, 1996.

Included in pre-tax loss for the six months ended June 30, 1996 were merger
expenses totaling $34.4 million relating to the business combination with PPSI.
The major components of the $34.4 million included: $13.8 million for
restructuring of operations, $6.6 million in brokerage fees, $5.9 million in
severance costs, $2.6 million in professional fees, $2.4 million for the
impairment of assets and $1.9 million in unamortized bond issue costs.

Years Ended December 31, 1995 and 1994

Net revenue for the year ended December 31, 1995 was $1,154 million, an
increase of $339 million, or 41.5%, over the year ended December 31, 1994. The
increase in net revenue primarily resulted from affiliation with physician
groups in nine new markets and the increase in prepaid enrollees, which
accounted for $76 million and $111 million of the increase in net revenue,
respectively. The remaining increase primarily related to existing clinic growth
and a full year of operations in 1995 for affiliations only in effect for a
portion of 1994.

Excluding nonrecurring items related to the 1995 Mergers, operating
expenses at the clinic level were $1,011 million, or 87.6% of net revenue for
the year ended December 31, 1995, compared to $725 million, or

24
<PAGE> 34

88.9% of net revenue for 1994. Clinic salaries, wages and benefits decreased as
a percentage of net revenue during 1995 as certain operational efficiencies were
implemented and the IPA business, which requires a low support staff ratio,
continued to grow. Outside hospitalization expense increased from $87 million
for the year ended December 31, 1994 to $110 million for the year ended December
31, 1995, but decreased as a percentage of net revenue from 10.7% for the year
ended December 31, 1994 to 9.5% for the year ended December 31, 1995. This
percentage decrease related to the decline in the relationship of prepaid health
care to total net revenue. General corporate expenses increased from $57 million
during the year ended December 31, 1994 to $65 million during the year ended
December 31, 1995. As a percentage of net revenue, however, general corporate
expenses decreased from 7.0% in 1994 to 5.6% in 1995. Net income (excluding
merger expenses) for the year ended December 31, 1995 was $25.3 million compared
to a loss of $3.1 million for 1994.

Including merger expenses, net income for the year ended December 31, 1995
was $0.6 million compared to a net loss of $3.1 million for 1994. Included in
operating expenses for 1995 are merger expenses totaling $66.6 million related
to business combinations accounted for as poolings of interests. Approximately
$55.6 million related to the business combination with MME and its real estate
partnerships. The components of the total $66.6 million charge included: $8.8
million in investment banking fees, $7.3 million in professional fees, $5
million in other transaction costs and $45.5 million in restructuring charges.
The major components of the restructuring charge included: $19.6 million in
severance for identified employees, $8.1 million impairment of assets, $6.4
million abandonment of facilities, $2.6 in noncompatible technology, $2.3
million in unamortized loan costs, $2.2 million related to conforming of
accounting policies and $1.9 million in restructuring of benefit packages.

At December 31, 1995, MedPartners/Mullikin had a cumulative net operating
loss carryforward for federal income tax purposes of approximately $57 million
available to reduce future amounts of taxable income. If not utilized to offset
future taxable income, the net operating loss carryforwards will expire on
various dates through 2010. Approximately $1 million of the $57 million net
operating loss carryforward (which was generated in 1993) is available at a
reduced rate due to certain tax limitations.

In 1994, MedPartners/Mullikin established a valuation allowance of $14.6
million because it was more likely than not that the deferred tax asset would
not be utilized in future periods. The valuation allowance was decreased by
$14.2 million in 1995 because the realization of the deferred tax asset is now
more likely than not. The primary factor in the determination of the realization
of the deferred tax asset is the profitability of the ongoing business of
MedPartners/Mullikin ($25.3 million net income for 1995 excluding merger
expenses).

Years Ended December 31, 1994 and 1993

For the year ended December 31, 1994, net revenue was $815 million compared
to $550 million for the year ended December 31, 1993. The increase in net
revenue resulted from the affiliation with 46 physician groups (representing 283
physicians) since December 31, 1993 and the enrollment growth of 58,000 lives
under professional capitation and 16,000 lives under institutional capitation.

The percentage increase in cost of affiliated physician services from 40.9%
of net revenues in 1993 to 42.8% in 1994 was a result of the commencement of
operations of MedPartners/Mullikin's clinics. MedPartners/Mullikin (exclusive of
the 1995 Mergers) had a comparable percentage of 62.2%. The decrease in clinic
salaries, wages and benefits from 20.5% of net revenues in 1993 to 19.5% in 1994
was also a result of the commencement of operations of MedPartners' clinics.
MedPartners (exclusive of the 1995 Mergers) had a comparable percentage of
16.5%.

Clinic rent and lease expense was 3.4% of net revenue for the years ended
December 31, 1994 and December 31, 1993. Other clinic costs were 7.5% of net
revenue for 1993 and 8.3% for 1994.

Net interest expense (income) as a percentage of net revenue will vary
based on the purchase price for the assets of additional practices, the interest
rates for additional borrowings and the amount of excess cash

25
<PAGE> 35

available for investment. The increase in net interest expense in 1994 was the
result of increased borrowings to fund acquisitions.

Due to MedPartners/Mullikin's limited operating history and cumulative
operating losses, a valuation allowance was established to eliminate deferred
tax benefits generated through December 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1996, MedPartners/Mullikin had working capital of $101
million, including cash and cash equivalents of $56 million. For the first six
months of 1996, cash flow from operations, excluding $25.9 million cash paid
during the six months for merger expenses, was $6.0 million. For the year ended
December 31, 1995, cash flow used in operations was ($13.5) million. This
included $28 million in cash paid for merger expenses. Net of these expenses,
MedPartners/Mullikin experienced cash flow from operations of $14.5 million. For
the years ending December 31, 1993 and 1994, cash flow provided by operations
was $30.6 million and $13.7 million, respectively. MedPartners/Mullikin has
reduced the medical claims outstanding to levels below that required in its
agreements with HMOs, and it does not expect this to have a negative impact on
future cash flows from operations. On a monthly basis, MedPartners/Mullikin's
most significant expenditure is for affiliated physician services. Payment is
made on the fifteenth day of the month following the month in which the services
were provided.

For the six months ended June 30, 1996, MedPartners/Mullikin invested $29.7
million in acquisitions of the assets of physician practices, $21.8 million in
equipment for the physician practices and the corporate office and $4.5 million
in intangible assets related to corporate name/trademarks and other intangible
assets. For the year ended December 31, 1995, MedPartners/Mullikin invested
$61.5 million in acquisitions of the assets of physician practices, $39.4
million in equipment for the physician practices and the corporate office and
$7.2 million in intangible assets related to debt issue costs, corporate
name/trademarks and other intangible assets. For the year ended December 31,
1994, MedPartners/Mullikin's investing activities totaled $108.5 million, which
primarily was composed of $57.6 million related to practice acquisitions and
$32.1 million related to the purchase of property and equipment. These
expenditures were funded from approximately $116.3 million from equity proceeds
and $7.8 million in net incremental borrowings. For the year ended December 31,
1993, MedPartners/Mullikin's investing activities totaled $37.6 million of which
$14.3 million related to practice acquisitions and $15.6 million related to the
purchase of property and equipment. These expenditures were funded by $42.7
million derived from equity proceeds.

On February 21, 1995, MedPartners sold 4.4 million shares of Common Stock
at $13.00 per share. Subsequent to that date, the underwriters exercised their
overallotment option for an additional 660,000 shares. MedPartners raised net
proceeds of $60.4 million from the offering, $30.4 million of which was applied
to reduce the indebtedness under MedPartners' then existing credit facility.

On March 13, 1996, MedPartners/Mullikin sold 6.6 million shares of Common
Stock at $30.25 per share. MedPartners/Mullikin raised net proceeds of $194
million, $70 million of which was applied to reduce the indebtedness under the
Bank Credit Facility. In April 1996, $69 million of the proceeds were used to
pay-off MedPartners/Mullikin's convertible subordinated debentures.

Effective November 29, 1995, MedPartners/Mullikin entered into the $150.0
million Bank Credit Facility replacing its then existing revolving credit
facility. Interest is paid quarterly based on LIBOR plus a two percent margin.
No principal is due on the facility until its maturity date of May 10, 1998.
MedPartners/ Mullikin provided a negative pledge on substantially all assets and
granted the banks a first priority security interest in all shares of stock of
its subsidiaries. As of June 30, 1996, there was no balance outstanding under
the facility.

The Bank Credit Facility contains affirmative and negative covenants which,
among other things, require MedPartners/Mullikin to maintain certain financial
ratios (including minimum net worth, minimum fixed charge coverage ratio,
maximum indebtedness to cash flow), limit the amount of additional indebtedness,
and set certain restrictions on investments, mergers and sales of assets. As of
December 31, 1995, MedPartners/ Mullikin was in compliance with the covenants in
the Bank Credit Facility. Additionally, MedPartners/

26
<PAGE> 36

Mullikin is required to obtain bank consent for acquisitions with an aggregate
purchase price of $15.0 million or more.

MedPartners/Mullikin intends to acquire the assets of additional physician
practices and to fund this growth with existing cash and cash equivalents and
borrowings under the Bank Credit Facility. MedPartners/ Mullikin believes that
its existing cash resources, the use of MedPartners/Mullikin's Common Stock for
selected practice and other acquisitions, and available borrowings under the
Bank Credit Facility and the increased bank credit facility anticipated to be
entered into in connection with the consummation of the Caremark Acquisition
will be sufficient to meet MedPartners/Mullikin's anticipated acquisition,
expansion and working capital needs for the next twelve months.
MedPartners/Mullikin will raise additional capital through the issuance of
long-term or short-term indebtedness or the issuance of additional equity
securities in private or public transactions, at such times and terms as
management deems appropriate and the market allows, in order to meet the capital
needs of MedPartners/Mullikin on a long term basis (i.e. for a period in excess
of 12 months).

QUARTERLY RESULTS (UNAUDITED)

The following table sets forth certain unaudited quarterly financial data
for 1994, 1995 and 1996. In the opinion of MedPartners/Mullikin's management,
this unaudited information has been prepared on the same basis as the audited
information and includes all adjustments (consisting of normal recurring items)
necessary to present fairly the information set forth therein. The operating
results for any quarter are not necessarily indicative of results for any future
period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1994 1994 1995 1995 1995 1995 1996 1996
------------- ------------ --------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue........... $ 210,189 $234,422 $259,750 $287,700 $ 299,272 $306,835 $343,285 $360,398
Operating expenses:
Cost of affiliated
physician
services........... 91,791 97,001 114,272 125,953 132,631 133,955 148,662 152,618
Clinic salaries,
wages and
benefits........... 38,862 43,889 50,570 54,563 53,760 57,226 56,762 59,838
Outside
hospitalization
expense............ 20,436 26,435 22,193 28,171 30,796 28,774 35,668 47,849
Clinic rent and lease
expense............ 7,094 8,370 9,717 10,027 10,518 11,563 11,693 12,121
Clinic supplies...... 8,002 10,568 10,983 11,536 11,704 13,521 15,014 15,938
Other clinic costs... 15,953 21,005 20,711 23,065 23,661 21,554 31,285 27,868
General corporate
expenses........... 15,808 13,809 15,703 16,464 15,697 16,849 19,414 20,126
Depreciation and
amortization....... 5,631 6,448 6,605 7,357 7,384 7,742 8,174 8,308
Net interest
expense............ 1,654 1,903 1,885 1,482 2,042 3,034 3,232 (421)
Merger expenses...... -- -- -- 1,051 3,473 62,040 34,448 --
Loss on disposal of
assets............. 412 413 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
taxes................ 4,546 4,581 7,111 8,031 7,606 (49,423) (21,067 ) 16,153
Pro forma income tax
expense (benefit).... 2,363 2,764 2,176 2,235 2,427 (34,071) (5,769 ) 6,129
-------- -------- -------- -------- -------- -------- -------- --------
Pro forma net income
(loss)............... $ 2,183 $ 1,817 $ 4,935 $ 5,796 $ 5,179 $(15,352) $(15,298 ) $ 10,024
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

27
<PAGE> 37

MedPartners/Mullikin's historical unaudited quarterly financial data for
all periods prior to the effective dates of the 1995 Mergers have been restated
to include the results of the merged companies. MedPartners' Quarterly Reports
on Form 10-Q were filed prior to the 1995 Mergers, the merger with PPSI and the
insignificant 1996 Mergers and thus differ from the amounts for the quarters
included herein. The differences caused solely by the operation of the merged
companies are summarized as follows:

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, 1995 JUNE 30, 1995 SEPTEMBER 30, 1995 MARCH 31, 1996
-------------------- -------------------- -------------------- --------------------
AS AS AS AS
FORM 10-Q RESTATED FORM 10-Q RESTATED FORM 10-Q RESTATED FORM 10-Q RESTATED
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue... $45,667 $259,750 $57,272 $287,700 $76,019 $299,272 $332,549 $343,285
Income before
income
taxes....... 765 7,111 820 8,031 2,265 7,606 (21,435 ) (21,067)
Income tax
expense..... 291 2,176 260 2,235 770 2,427 (5,935 ) (5,769)
Net income.... 474 4,935 560 5,796 1,495 5,179 (15,500 ) (15,298)
</TABLE>

28
<PAGE> 38

THE SPECIAL MEETING

GENERAL

This Prospectus-Proxy Statement is being furnished to holders of EPS Shares
in connection with the solicitation of proxies by the Board of Directors of EPS
for use at the Special Meeting to consider and vote upon the approval of the
Plan of Merger and to transact such other business as may properly come before
the Special Meeting or any adjournments or postponements thereof. Each copy of
this Prospectus-Proxy Statement mailed or delivered to holders of EPS Shares is
accompanied by a form of Proxy for use at the Special Meeting.

This Prospectus-Proxy Statement is also furnished to EPS shareholders as a
Prospectus in connection with the issuance to them of the shares of
MedPartners/Mullikin Common Stock upon consummation of the Merger.

DATE, PLACE AND TIME

The Special Meeting is to be held at the Holiday Inn,
Cleveland-Independence, 6001 Rockside Road, Independence, Ohio 44131 on
September 16, 1996, at 12:30 p.m. local time.

RECORD DATE, QUORUM AND VOTING

The Board of Directors of EPS has fixed the close of business on August 29,
1996, as the Record Date for the determination of the holders of EPS Shares
entitled to receive notice of and to vote at the Special Meeting. The presence,
in person or by Proxy, of the holders of EPS Shares entitled to cast a majority
of the votes entitled to be cast at the Special Meeting will constitute a quorum
at the Special Meeting. As of the Record Date, the outstanding voting securities
of EPS consisted of 262 Common Shares which were held by 57 shareholders of
record. Each shareholder of record as of that date is entitled to one vote for
each share then held. EPS will seek the approval of its shareholders to vote the
EPS Shares in favor of the Plan of Merger at the Special Meeting.

VOTE REQUIRED

Approval and adoption of the Plan of Merger by the shareholders of EPS
requires the affirmative vote of two-thirds of the votes cast by the holders of
EPS Shares entitled to vote thereon; as a result, abstentions will be the
equivalents of votes against the Plan of Merger. Accordingly, approval and
adoption of the Plan of Merger at the Special Meeting will require the
affirmative vote of the holders of EPS Shares entitled to cast a minimum of 175
votes.

The members of the Board of Directors and executive officers of EPS own
approximately 19.85% of the issued and outstanding shares of EPS and have
indicated their intent to vote such shares FOR the Plan of Merger.

See "The Special Meeting -- Vote Required", "The Merger -- Conditions to
the Merger" and "-- Additional Interests of Certain Persons in the Merger".

VOTING AND REVOCATION OF PROXIES

EPS Shares represented by a Proxy properly signed and received at or prior
to the Special Meeting, unless subsequently revoked, will be voted in accordance
with the instructions thereon. IF A PROXY IS PROPERLY EXECUTED AND RETURNED
WITHOUT INDICATING ANY VOTING INSTRUCTIONS, EPS SHARES REPRESENTED BY THE PROXY
WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE PLAN OF MERGER. Any Proxy given
pursuant to the solicitation may be revoked by the person giving it at any time
before the Proxy is voted by the filing of an instrument revoking it or of a
duly executed Proxy bearing a later date with the Secretary of EPS prior to or
at the Special Meeting, or by voting in person at the Special Meeting.
Attendance at the Special Meeting will not in and of itself constitute a
revocation of a Proxy. The persons named as proxies with respect to the Special
Meeting may propose and vote for one or more adjournments or postponements of
the Special Meeting to permit further

29
<PAGE> 39

solicitation of proxies in favor of the proposals to be considered at the
Special Meeting; provided, however, that no proxy which is voted against any of
such proposals will be voted in favor of such proposal at any such adjournment
or postponement. Only votes cast FOR approval of the Plan of Merger or other
matters constitute affirmative votes. Abstentions and votes that are withheld
will, therefore, have the same effect as votes AGAINST approval of the Plan of
Merger.

The Board of Directors of EPS is not aware of any business to be acted upon
at the Special Meeting other than as described in the Notice of the Special
Meeting or in this Prospectus-Proxy Statement. If, however, other matters are
properly brought before the Special Meeting, or any adjournments or
postponements thereof, the persons appointed as proxies will have discretion to
vote or act thereon according to their best judgment and subject to applicable
rules of the SEC.

SOLICITATION OF PROXIES

In addition to solicitation by mail, directors, officers and employees of
EPS, who will not be specifically compensated for such services, may solicit
proxies from the shareholders of EPS personally or by telephone or telegram or
other forms of communication. Except as otherwise provided in the Plan of
Merger, EPS will bear its own expenses in connection with the solicitation of
proxies for the Special Meeting. See "The Merger -- Expenses".

EPS SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE PROCEDURE FOR THE EXCHANGE OF SHARES AFTER THE MERGER IS CONSUMMATED IS SET
FORTH IN THIS PROSPECTUS-PROXY STATEMENT. SEE "THE MERGER -- EXCHANGE OF
CERTIFICATES".

30
<PAGE> 40

THE MERGER

The description of the Merger contained in this Prospectus-Proxy Statement
summarizes the principal provisions of the Plan of Merger; it is not complete
and is qualified in its entirety by reference to the Plan of Merger, the full
text of which is attached hereto as Annex A. All EPS shareholders are urged to
read Annex A carefully in its entirety.

TERMS OF THE MERGER

The acquisition of EPS by MedPartners/Mullikin will be effected by means of
the merger of the Subsidiary with and into EPS, with EPS being the surviving
corporation. The Articles of Incorporation and the Code of Regulations of EPS in
effect at the Effective Time will govern the Surviving Corporation until amended
or repealed in accordance with applicable law. At the Effective Time, EPS shall
continue as the surviving corporation under the name "Emergency Professional
Services, Inc."

Upon consummation of the Merger, all of the EPS Shares (other than
dissenting shares) will be converted into the right to receive the number of
shares of MedPartners/Mullikin Common Stock equal to the Merger Consideration.
The number of shares of MedPartners/Mullikin Common Stock which shall constitute
the Merger Consideration shall be determined by dividing $44 million by the Base
Period Trading Price. For the 15 consecutive trading days ended August 28, 1996,
the average of the last reported sale price per share of MedPartners/Mullikin
Common Stock was $20.37. At such price, each EPS Share would be converted into
8,244 shares of MedPartners/Mullikin Common Stock. THE BASE PERIOD TRADING PRICE
MAY DIFFER FROM THE ACTUAL MARKET PRICE OF THE MEDPARTNERS/MULLIKIN COMMON STOCK
REPORTED ON THE NYSE FOR THE DATE OF THE SPECIAL MEETING, THE DATE OF
CONSUMMATION OF THE MERGER, OR THE DATE THAT EPS SHAREHOLDERS ACTUALLY RECEIVE
THEIR SHARES OF MEDPARTNERS/MULLIKIN COMMON STOCK AFTER THE MERGER IS COMPLETED.
SINCE THE ACTUAL NUMBER OF SHARES OF MEDPARTNERS/MULLIKIN COMMON STOCK ISSUABLE
TO EPS SHAREHOLDERS IN THE MERGER DEPENDS ON THE BASE PERIOD TRADING PRICE,
THERE IS NO GUARANTEE AS TO THE NUMBER OF SHARES OF MEDPARTNERS/ MULLIKIN COMMON
STOCK THAT EPS SHAREHOLDERS WILL RECEIVE.

During the period between the date of this Prospectus-Proxy Statement and
the time of the Special Meeting, EPS shareholders may obtain updated information
regarding the market prices for the MedPartners/Mullikin Common Stock, the Base
Period Trading Price and the estimated exchange ratio by calling a
representative of MedPartners/Mullikin toll free at 1-800-563-7126.

Assuming a Base Period Trading Price of $20.37, the shareholders of EPS
would own less than 1.5% of the MedPartners/Mullikin Common Stock that would be
outstanding after the Merger. See "-- Additional Interests of Certain Persons in
the Merger".

Notwithstanding the foregoing, EPS Shares outstanding immediately prior to
the Effective Time held by an EPS shareholder who is entitled to demand, and who
properly demands, appraisal for such shares in accordance with Section 1701.85
of the OGCL shall not be converted into the right to receive MedPartners/
Mullikin Common Stock, as set forth hereinabove, unless such shareholder fails
to perfect or otherwise loses his right to appraisal, if any. If, after the
Effective Time, such shareholder fails to perfect or loses any such right to
appraisal, such shares shall be treated as if they had been converted as of the
Effective Time into the right to receive MedPartners/Mullikin Common Stock, cash
in lieu of fractional shares of MedPartners/ Mullikin Common Stock and any
dividends or distributions to which such holder is entitled as a result of the
Merger, as set forth hereinabove. See "Rights of Dissenting Shareholders".

BACKGROUND OF THE MERGER

The terms of the Plan of Merger resulted from arm's length negotiations
between representatives of EPS and representatives of MedPartners/Mullikin.

EPS was organized in 1978 as a professional corporation to manage physician
services for hospital emergency departments. Since then, EPS has pursued a
policy of recruiting and integrating physicians into its group physician
practice and increasing the number of its medical facility service contracts. In
1994, EPS was approached by a national physician practice management company
which was interested in a potential

31
<PAGE> 41

business combination with EPS. Although confidentiality agreements were executed
and the company and EPS exchanged information with respect to their operations,
the related discussions were eventually terminated. In 1995, in response to the
increasingly competitive managed care environment which had generated
substantial cost containment pressures on all health care providers, the Board
of Directors of EPS decided to explore the company's strategic options. In order
to explore such strategic options, EPS retained CMH in June of 1995 to serve as
its financial advisor. CMH prepared confidential offering materials that were
used for soliciting interest in EPS and a number of parties proposed further
discussions with EPS. Certain of these parties expressed an interest in a
business combination with EPS or in making an equity investment in EPS. Due to
the interest of such parties and the general consolidation trend in the health
care industry, the Board of Directors of EPS began to consider a sale of EPS as
a viable strategic option.

The Board of Directors of EPS authorized CMH to conduct preliminary
discussions with each of the parties who had expressed an interest in EPS. The
Board established October 22, 1995 as the deadline for receiving proposals for
an investment in, or acquisition of, EPS. Generally, the valuation of EPS in the
proposals presented by potential strategic acquirers was greater than the
valuation of EPS in the proposals presented by potential equity investors. The
Board determined, after reviewing the proposals with its legal and financial
advisors, to clarify the preliminary bids and to pursue further discussions with
the bidders. CMH and the management of EPS then conducted preliminary
discussions and due diligence sessions with each of the bidders. At that time,
CMH was conducting negotiations on behalf of EPS with Team Health, which was a
subsidiary of Pacific Physician Services, Inc. ("PPSI") at that time. In
December of 1995, PPSI announced that it would merge with MedPartners/Mullikin.
This transaction was consummated in February of 1996. On January 22, 1996, EPS
requested revised proposals from the bidders, which were then considered upon
their receipt by the Board.

After careful consideration, on January 24, 1996, the Board of Directors of
EPS authorized the EPS management and CMH to proceed with discussions with two
prospective bidders. The management and advisors of EPS then engaged in further
discussions and due diligence sessions with these bidders. At a special meeting
of the Board of Directors of EPS held on February 18, 1996, CMH gave the
Directors of EPS an update on the progress of such discussions.

A proposal to acquire EPS was presented by Team Health to the
MedPartners/Mullikin Board of Directors on March 15, 1996, at its regularly
scheduled Board meeting. The MedPartners/Mullikin Board of Directors unanimously
approved the communication of a binding offer to acquire EPS and approved
entering into a merger on substantially similar terms.

At a special meeting of the Board of Directors of EPS held on May 6, 1996,
CMH reviewed with the Directors the revised proposals that had been received
from the remaining bidders. Representatives of CMH then summarized their
analysis of such proposals, and described the perceived advantages and
disadvantages of a potential strategic alliance with each of such bidders. Legal
counsel for EPS then reviewed with the Directors their fiduciary duties in the
context of a proposed change of control transaction. The Board then approved a
resolution to permit the bidders to continue their respective due diligence
reviews of EPS. The Board preliminarily determined, however, based upon the
proposals that had been received and analyzed to date, as well as subsequent
discussions with the proposed bidders, that MedPartners/Mullikin had proposed
the best offer. EPS then provided additional legal and financial documentation
to representatives of Team Health and MedPartners/Mullikin. Representatives of
EPS, Team Health and MedPartners/Mullikin, and their respective legal and
financial advisors, continued to hold discussions on the terms of the proposed
business combination, including discussions on the structure of the transaction
and the form of consideration to be received by the shareholders of EPS. Special
meetings of the Board of Directors of EPS were held on June 17, 1996 and June
24, 1996 to update the Board on the progress of ongoing discussions with the
prospective bidders and, in particular, ongoing discussions with
MedPartners/Mullikin.

On June 28, 1996, the Board of Directors of EPS held a special meeting to
discuss a draft of the Plan of Merger proposed by MedPartners/Mullikin. EPS's
legal advisors were present at this meeting. The Board discussed the actions
taken by EPS's executive officers in connection with MedPartners/Mullikin's
proposed acquisition of EPS; the terms of the Plan of Merger, including the
amount and form of consideration to be

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received by the shareholders of EPS; and the potential benefits of combining the
operations of EPS and MedPartners/Mullikin, including operational efficiencies
and the ability to diversity risk by practice specialty and geography. The Board
noted that the value placed on EPS by MedPartners/Mullikin substantially
exceeded the value placed on EPS by other interested bidders. The Board then
reviewed and discussed the terms of the proposed Plan of Merger, agreed in
principle to EPS's acquisition by MedPartners/Mullikin, and authorized the
management of EPS to continue negotiating a definitive agreement with
MedPartners/ Mullikin.

A special meeting of the Board of Directors of EPS was held on July 3,
1996, at which EPS's legal advisors were present. The Board received a progress
report on the negotiations with MedPartners/Mullikin and determined to continue
to negotiate a definitive agreement with MedPartners/Mullikin.

On July 8, 1996, a special meeting of the Board of Directors of EPS was
held to discuss the proposed definitive Plan of Merger which had been delivered
by MedPartners/Mullikin. Members of EPS's management and EPS' legal and
financial advisors were present at such meeting. The Board discussed the form of
the Plan of Merger with EPS's legal counsel. The Board then approved the
proposed Plan of Merger, in the form submitted to the Board, together with such
changes as the Chairman of the Board might authorize in his sole discretion.

On July 10, 1996, MedPartners/Mullikin, EPS and the Subsidiary executed the
Plan of Merger. The terms of the Plan of Merger resulted from arms length
negotiations between representatives of EPS and representatives of Team Health
and MedPartners/Mullikin. On July 24, 1996, MedPartners/Mullikin issued a press
release announcing the Merger.

RECOMMENDATION OF THE EPS BOARD OF DIRECTORS

By majority vote of the members of the Board of Directors of EPS, at a
special meeting held on July 8, 1996, the Board of Directors determined that the
proposed Merger, and the terms and conditions of the Plan of Merger, were fair
to and in the best interests of EPS and its shareholders and resolved to
recommend that the shareholders of EPS vote FOR approval and adoption of the
Plan of Merger. (See "Background of the Merger.") In reaching its conclusion to
enter into the Plan of Merger and to recommend that the shareholders of EPS vote
FOR the approval and adoption of the Plan of Merger, the Board of Directors of
EPS considered a number of factors, including, without limitation and without
assigning relative weights thereto, the following:

(i) the terms and conditions of the Plan of Merger;

(ii) the value of the Common Stock of MedPartners/Mullikin to be
exchanged for Common Shares of EPS;

(iii) the financial condition, business, prospects and opportunities
of EPS;

(iv) the potential ability of the combined company to leverage EPS's
market leadership in northern Ohio and western Pennsylvania with the
managed care expertise of MedPartners/Mullikin;

(v) the combined company's potential ability to improve its cost
effectiveness as a result of the complementary strengths of EPS and
MedPartners/Mullikin; and

(vi) other potential synergies that may be obtained from combining the
operations of EPS and MedPartners/Mullikin.

If the Merger is consummated, the Board of Directors of EPS believes that
EPS will have access to additional capital, management resources and clinical
information systems which could enhance the competitiveness and profitability of
EPS. The Board also believes that the Merger will enhance EPS' ability to expand
its market share through acquisitions of other physician practice groups.
Finally, the Board believes that the Merger will provide EPS shareholders,
through their ownership of MedPartners/Mullikin stock, with enhanced liquidity
due to the market capitalization of MedPartners/Mullikin, as well as the
opportunity to realize additional appreciation in the value of their investment
to the extent the foregoing potential benefits of the Merger are realized.

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<PAGE> 43

The EPS Board also considered several negative outcomes that could result
from the Merger, including the risk that the benefits sought in the Merger would
not be fully achieved, the risk that the Merger would not be consummated, the
effect of the public announcement of the Merger on EPS's hospital contracts and
operating results and other risks described above under "Risk Factors". The EPS
Board believed that the risks relating to the combined company were outweighed
by the potential benefits to be achieved through the Merger.

In view of the wide variety of factors, both positive and negative,
considered by the Board of Directors of EPS, the Board did not find it practical
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered by it.

On July 29, 1996, a letter agreement was executed between EPS and CMH
confirming the further engagement of CMH to render a fairness opinion to the
Board of Directors of EPS in connection with any acquisition of EPS.

OPINION OF EPS'S FINANCIAL ADVISOR

CMH was retained by EPS to evaluate the fairness, from a financial point of
view, to EPS of the value of the consideration to be paid by
MedPartners/Mullikin in the Merger. On August 2, 1996, CMH delivered to the EPS
Board a financial opinion (the "Opinion") to the effect that, as of the date of
such Opinion and based upon and subject to certain matters stated therein, the
MedPartners/Mullikin consideration was fair, from a financial point of view, to
the shareholders of EPS.

In arriving at its Opinion, CMH reviewed the financial terms of the Plan of
Merger and met with certain senior officers, directors and other representatives
and advisors of EPS and certain senior officers and other representatives of
Team Health and MedPartners/Mullikin to discuss the business, operations and
prospects of EPS and MedPartners/Mullikin. CMH examined certain publicly
available business and financial information relating to MedPartners/Mullikin as
well as certain financial forecasts and other data for EPS and
MedPartners/Mullikin which were provided to CMH by EPS and MedPartners/Mullikin.
CMH reviewed the financial terms of the Merger as set forth in the Plan of
Merger in relation to, among other things, current and historical market prices
and trading volumes of the MedPartners/Mullikin Common Stock; the earnings and
book value per share of EPS and MedPartners/Mullikin and the capitalization and
financial condition of EPS and MedPartners/Mullikin. CMH also considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which CMH considered comparable to the Merger and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations CMH
considered comparable to the operations of EPS and MedPartners/ Mullikin. In
addition to the foregoing, CMH conducted such other analyses and examinations
and considered such other financial, economic and market criteria as CMH deemed
necessary to arrive at its Opinion. CMH noted that its Opinion was necessarily
based upon financial, stock market and other conditions and circumstances
existing and disclosed to CMH as of the date of its Opinion.

In rendering its Opinion, CMH assumed and relied, without independent
verification, upon the accuracy and completeness of the financial and other
information publicly available or furnished to or otherwise discussed with CMH.
With respect to financial forecasts and other information provided to or
otherwise discussed with CMH, CMH assumed that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgments of EPS as to the expected future financial
performance of EPS. CMH also assumed that the Merger would qualify as a "pooling
of interests" for accounting and financial reporting purposes and as a tax-free
reorganization for federal income tax purposes. CMH's Opinion relates to the
total consideration offered to EPS shareholders by MedPartners/Mullikin. CMH did
not express any opinion as to what the value of the MedPartners/Mullikin Common
Stock will be when issued to EPS shareholders pursuant to the Merger or the
price at which the MedPartners/Mullikin Common Stock will trade or otherwise be
transferable subsequent to the Merger. In addition, CMH did not make or obtain
an independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of EPS or MedPartners/Mullikin nor did CMH make any physical
inspection of the properties or assets of EPS or MedPartners/Mullikin. CMH was
not asked to consider and its Opinion does not address the relative

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<PAGE> 44

merits of the Merger as compared to any alternative business strategies that
might exist for EPS or the effect of any other transaction in which EPS might
engage. In addition, although CMH evaluated the financial terms of the Merger,
CMH was not asked to and did not recommend the specific consideration to be paid
by MedPartners/Mullikin in the Merger. No other limitations were imposed by EPS
on CMH with respect to the investigations made or procedures followed by CMH in
rendering its Opinion.

The Opinion of CMH is attached as Annex B to this Prospectus-Proxy
Statement. EPS shareholders are urged to read this Opinion carefully in its
entirety. CMH's Opinion is directed only to the fairness of the
MedPartners/Mullikin consideration from a financial point of view, does not
address any other aspect of the Merger and does not constitute a recommendation
to any EPS shareholder as to how such shareholder should vote at the Special
Meeting. The summary of the Opinion of CMH set forth in this Prospectus-Proxy
Statement is qualified in its entirety by reference to the full text of such
Opinion.

In preparing its Opinion to the Board of Directors of EPS, CMH performed a
variety of financial and comparative analyses, including those described below.
The summary of such analyses does not purport to be a complete description of
the analyses underlying CMH's Opinion. The preparation of a fairness opinion is
a complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. In arriving at its Opinion, CMH
did not attribute any particular weight to any analysis or factor considered by
it, but rather made qualitative judgments as to the significance and relevance
of each analysis and factor. Accordingly, CMH believes that its analyses must be
considered as a whole and selecting portions of its analyses and factors without
considering all analyses and factors could create a misleading or incomplete
view of the processes underlying such analyses and its Opinion. In its analyses,
CMH made numerous assumptions with respect to EPS and MedPartners/Mullikin,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of EPS and
MedPartners/Mullikin. The estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty.

Selected Companies Analysis. CMH reviewed and compared selected actual and
estimated financial, operating and stock market information for the following
comparable public companies in comparison with EPS: Coastal Physicians Group,
Inc., EmCare Holdings, Inc., FPA Medical Management, Inc., InPhyNet Medical
Management, Inc., MedPartners/Mullikin, Inc., Sheridan Healthcare, Inc.,
American Oncology Resources, Inc., Physician Reliance Network, Inc., PhyCor,
Inc., MedCath Incorporated and Equimed, Inc. (collectively, the "EPS Selected
Companies"). Such analysis indicated that (a) leveraged market capitalization as
a multiple of latest twelve months ("LTM") revenues, earnings before interest,
taxes, depreciation and amortization ("EBITDA") and total assets as of each
company's most recent 10-K or 10-Q, as the case may be, ranged from 0.3x to
6.1x, 7.8x to 32.2x and 0.7x to 3.8x, respectively, with medians of 1.8x, 13.8x
and 1.8x, for the EPS Selected Companies, as compared to corresponding multiples
of the adjusted LTM revenues, adjusted LTM EBITDA and total assets for EPS of
1.3x, 10.3x and 5.0x; (b) market price as a multiple of LTM earnings, estimates
of 1996 earnings and estimates of 1997 earnings ranged from 17.7x to 65.6x,
13.2x to 51.5x and 11.5x to 37.7x, respectively, with medians of 29.8x, 21.3x
and 16.1, for the EPS Selected Companies (based on consensus analysts earnings
estimates) as compared to corresponding multiples of adjusted LTM earnings,
adjusted 1997 earnings and adjusted 1998 earnings for EPS of 17.2x, 15.7x and
14.7x (based on management's estimates of fully-taxed 1996 and 1997 earnings);
and (c) market capitalization as a multiple of book value as of the latest
available balance sheet data ranged from 1.0x to 5.5x with a median of 2.6x for
the EPS Selected Companies, as compared to the corresponding multiple of 44.3
for EPS.

No company, transaction or business used in the selected company and
selected transactions analyses as a comparison is identical to EPS, or the
Merger. Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather, it involves complex considerations and judgments
concerning differences in

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financial and operating characteristics and other factors that could affect the
acquisition or public trading value of the comparable companies or the business
segment or company to which they are being compared.

Selected Transactions Analysis. CMH reviewed and analyzed selected
financial and operating information relating to seven sale, merger or
consolidation transactions involving physician practice management companies
since April 1, 1995. Such analyses indicated that based on EPS's adjusted LM
financial results, (a) aggregate levered consideration of these transactions as
a multiple of LM sales, EBITDA and total assets ranged from 0.8x to 2.1x, 12.2x
to 21.0x and 1.5x to 7.8x, respectively, with averages of 1.2x, 15.7x and 3.6x,
respectively, as compared to corresponding multiples of 1.3x, 8.7x and 5.0x,
respectively, based on a purchase price consideration of $44 million; and (b)
equity consideration as a multiple of book value ranged from 3.4x to 21.9x with
an average of 9.9x as compared to a corresponding multiple of 44.3x; based on a
MedPartners/ Mullikin purchase price consideration of $44 million.

Pro Forma Merger Analysis. CMH reviewed certain financial information
(including estimates of potential synergies and cost savings) for the pro forma
combined entity resulting from the Merger based on internal financial analyses
and forecasts for EPS prepared by the management of EPS. Such analysis indicated
that, based on the exchange ratios and based on analyst's earnings estimates,
the Merger would be accretive to MedPartners/Mullikin.

Contribution Analysis. CMH reviewed certain historical and operating and
financial information (including, among other things, sales, EBITDA, EBIT and
book value) for EPS, MedPartners/Mullikin and the pro forma combined entity
resulting from the Merger. Such analysis indicated that EPS's contribution to
sales and book value of the pro forma combined entity would have been 2.8% and
0.5%, respectively, based on 1995 financial results for each of EPS and
MedPartners/Mullikin. EPS's contribution to EBIT and EBITDA are not meaningful
since MedPartners/Mullikin has reported EBIT and EBITDA to be negative for the
period.

Historical Stock Trading Analysis. CMH reviewed and compared the
historical stock price performance of MedPartners/Mullikin. This analysis showed
that during the period from February 22, 1995 through July 26, 1995,
MedPartners/Mullikin Common Stock traded at a low price of $16.375 and a high
price of $36.00. The Common Stock of MedPartners/Mullikin underperformed the
Russell 1000 Health Care Index for that period.

Discounted Cash Flow Analyses. CMH performed discounted cash flow analyses
of the projected after-tax cash flows of EPS for the fiscal years ending January
31, 1997 through 2001. Discounted cash flow analyses are undertaken to derive
the total implied equity value of an entity by discounting projected future cash
flows (over a specific period) and the entity's implied terminal value at the
end of that same period (based on capitalizing year 2001 operating cash flow
into perpetuity), then taking into account current debt and cash balances to
calculate an implied equity value. CMH noted that the purchase price
consideration for EPS Common Shares (based upon a $44 million consideration for
the EPS Common Shares) was greater than the range of values derived by its
discounted cash flow analyses. In arriving at the valuation range, CMH took into
account the results of the discounted cash flow analyses it performed as
described below to arrive at the above overall range of values. In performing
its discounted cash flow analyses, CMH discounted the stream of projected EPS
cash flows using discount rates of between 12.5% and 14.5%. CMH calculated
terminal values (i.e., the implied value of EPS at the end of 2001) utilizing
the earnings into perpetuity method and discounted such values at the same
discount rates. CMH based its range of discount rates upon a calculation of
EPS's weighted average cost of capital.

CMH performed its discounted cash flow analysis for EPS relying on internal
projections of future earnings developed by EPS's management for the fiscal year
ending January 31, 1997; working capital assumptions and capital requirements
based upon historical ratios, business growth rates and EPS's management input;
and extrapolations of those projections for the fiscal years ending January 31,
1998, 1999, 2000 and 2001. This analysis is not necessarily indicative of actual
values or of actual future results.

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ENGAGEMENT OF CMH

EPS hired CMH on June 20, 1995 (the "Original Engagement") to assist in the
formulation and execution of a plan for the future of EPS given the changing
conditions in their market, and the industry in general. It was anticipated that
the plan could include several strategic opportunities such as an outright sale,
joint ventures, strategic partnerships and/or capital investments.

Pursuant to an addendum to the original engagement (the "Addendum") dated
July 29, 1996, EPS retained CMH to act as its financial advisor to issue a
fairness opinion to the EPS Board of Directors in connection with the Merger.
The engagement letter agreement pursuant to which the Company hired CMH to issue
a fairness opinion specifically provides that any opinion to be issued by CMH
would be issued only to the Board of Directors of EPS. Further, the Opinion and
the description of the Opinion, are not on behalf of and are not intended to
confer rights and remedies upon the EPS shareholders. Consequently, the EPS
shareholders do not have any legal rights under the engagement letter with
respect to the Opinion. Pursuant to the terms of CMH's engagement letter dated
July 29, 1996, EPS has agreed to pay CMH a fee of $125,000 payable at and
contingent upon the closing of the Merger. EPS also has agreed to indemnify CMH
and related persons against certain liabilities, including liabilities under the
federal securities laws, arising out of CMH's engagement.

The Original Engagement letter agreement dated June 20, 1995 provided that
if a sale of EPS was consummated, EPS would pay CMH a transaction fee in cash
equal to 1.25% of the aggregate consideration up to $40 million; plus 5% of
aggregate consideration in excess of $40 million, up to $42 million; plus 7% of
aggregate consideration in excess of $42 million. The Addendum provides that if
a sale of EPS is accomplished, CMH will be paid a flat fee of $825,000 of which
$125,000 shall be for the fairness opinion and the balance shall be a financial
advisory fee for acting as EPS's advisor and representative in connection with
the Merger. It is anticipated that the fees under the engagement letter will be
paid to CMH upon consummation of the Merger. EPS has also agreed to reimburse
CMH for its reasonable out-of-pocket expenses and to indemnify CMH against
certain liabilities.

CMH is an investment banking firm and was selected by EPS based on CMH's
experience and expertise. CMH regularly engages in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.

EFFECTIVE TIME OF THE MERGER

The Merger will become effective upon the filing of the Certificates of
Merger, executed in accordance with the relevant provisions of the OGCL and the
DGCL, with the Secretary of State of the State of Ohio and Secretary of State of
the State of Delaware, or at such other time as MedPartners/Mullikin, the
Subsidiary and EPS agree should be specified in the Certificates of Merger. The
Plan of Merger requires that all filings required under the OGCL and the DGCL be
made, subject to satisfaction of the separate conditions to the obligations of
each party to consummate the Merger, as soon as practicable on or after the date
of the Special Meeting, or at such other time as may be agreed upon by
MedPartners/Mullikin and EPS.

EXCHANGE OF CERTIFICATES

Exchange Agent. Prior to the Effective Time, MedPartners/Mullikin will
enter into an agreement with Chase Mellon Shareholder Services, L.L.C., New
York, New York (the "Exchange Agent"), which will provide that
MedPartners/Mullikin shall deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of the EPS Shares, certificates
representing the shares of MedPartners/Mullikin Common Stock issuable pursuant
to the Plan of Merger (together with any dividends or distributions with respect
thereto with a record date after the Effective Time) in exchange for the
outstanding EPS Shares. MedPartners/Mullikin and EPS will make an effort to
exchange certificates of MedPartners/Mullikin Common Stock for outstanding EPS
Shares at the Closing. If that exchange does not occur, the following Exchange
Procedures will be used.

Exchange Procedures. As soon as reasonably practicable after the Effective
Time, the Exchange Agent will mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time

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represented outstanding EPS Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as MedPartners/ Mullikin may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of MedPartners/Mullikin Common Stock. Upon
surrender of a Certificate to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of MedPartners/Mullikin Common Stock which such holder has the right to
receive pursuant to the provisions of the Plan of Merger. In the event of a
transfer of ownership of EPS Shares which is not registered in the transfer
records of EPS, a certificate representing the proper number of shares of
MedPartners/Mullikin Common Stock may be issued to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of MedPartners/Mullikin
Common Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of MedPartners/Mullikin that such tax has been
paid or is not applicable. Until surrendered as contemplated by the Plan of
Merger, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of MedPartners/Mullikin Common Stock and cash in lieu of any
fractional shares of MedPartners/Mullikin Common Stock as contemplated by the
Plan of Merger. No interest will be paid or will accrue on any cash payable in
lieu of any fractional shares of MedPartners/Mullikin Common Stock. To the
extent permitted by law, former holders of record of EPS Shares shall be
entitled to vote after the Effective Time at any meeting of MedPartners/Mullikin
stockholders the number of shares of MedPartners/Mullikin Common Stock into
which their respective shares of EPS Shares are converted, regardless of whether
such holders have received their certificates representing MedPartners/Mullikin
Common Stock in accordance with the Plan of Merger.

No certificates or scrip representing fractional shares of
MedPartners/Mullikin Common Stock shall be issued upon conversion of EPS Shares,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of MedPartners/Mullikin. Notwithstanding any
other provision of the Plan of Merger, each holder of EPS Shares exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of MedPartners/Mullikin Common Stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of MedPartners/Mullikin Common Stock multiplied by the Base Period Trading
Price.

At the Effective Time, holders of EPS Shares immediately prior to the
Effective Time will cease to be, and shall have no rights as, holders of EPS
Shares, other than the right to receive shares of MedPartners/ Mullikin Common
Stock into which such shares have been converted and any fractional share
payment and any dividends or other distributions to which they may be entitled
under the Plan of Merger.

Neither MedPartners/Mullikin nor EPS will be liable to any holder of EPS
Shares for any shares of MedPartners/Mullikin Common Stock (or dividends or
other distributions with respect thereto) or cash in lieu of fractional shares
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.

CONDITIONS TO THE MERGER

The obligations of MedPartners/Mullikin and the Subsidiary to consummate
the Merger are subject to, among others, the following conditions: (i) EPS shall
have performed in all material respects all of its obligations required to be
performed by the Plan of Merger at or prior to the Closing Date; (ii) the
representations and warranties of EPS set forth in the Plan of Merger shall be
true and correct in all material respects, as of both the date of the Plan of
Merger and the Closing Date except to the extent an earlier date is specified,
in which case such representations and warranties shall be true and correct in
all material respects, as of such earlier date; (iii) MedPartners/Mullikin shall
have received the opinion of Haskell Slaughter & Young, L.L.C. that the Merger
constitutes a tax-free reorganization under the Code and the opinion of Calfee,

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Halter & Griswold with respect to certain other matters; (iv) receipt of all
consents, authorizations, orders and approvals of (or filings or registrations
with) any governmental commission, board or other regulatory body required in
connection with the execution, delivery and performance of the Plan of Merger
shall have been obtained or made, except for filings in connection with the
Merger and any documents required to be filed after the Effective Time; (v) EPS
and each holder of EPS Shares (other than any dissenting shareholder) shall have
executed and delivered a release of rights under the existing Stock Redemption
Agreement between EPS and the shareholders; (vi) MedPartners/Mullikin shall have
received "Affiliate Letters" from each of the affiliates of EPS; (vii) the
Required Lenders (as defined in the Bank Credit Facility shall, in their sole
discretion, have approved the Merger and the transactions contemplated by the
Merger; (viii) a sufficient number of Independent Contractor Agreements between
New EPS and EPS's physicians, shall have been executed prior to the Closing
Date, such that, in the reasonable judgment of MedPartners/Mullikin, the
operation of the Surviving Corporation's business after the Closing Date will
not be materially impaired; (ix) each EPS Shareholder (other than dissenting
shareholders) shall have executed and delivered an indemnification agreement;
(x) EPS and each person who performed medical services in connection with EPS's
business prior to the Effective Time and who signs an Independent Contractor
Agreement with MedPartners/Mullikin or a MedPartners/Mullikin Subsidiary shall
have executed and delivered a release of rights under the existing Employment
Agreement between EPS and such person; (xi) each holder of EPS Shares (other
than any dissenting shareholder) shall have executed and delivered a release of
any claims such person may have relating to ownership or other rights in respect
of EPS Shares; and (xii) EPS shall have obtained the written consent of Lakewood
Hospital Association to the transactions contemplated by the Plan of Merger.

The obligation of EPS to consummate the Merger is subject to, among others,
the following conditions: (i) MedPartners/Mullikin and the Subsidiary shall have
performed in all material respects all of their obligations as required by the
Plan of Merger at or prior to the Closing Date; (ii) the representations and
warranties of MedPartners/Mullikin and the Subsidiary set forth in the Plan of
Merger shall be true and correct in all material respects as of both the date of
the Plan of Merger and the Closing Date, except to the extent an earlier date is
specified, in which case such representations and warranties shall be true and
correct, in all material respects, as of such earlier date; (iii) EPS shall have
received the opinion of Calfee, Halter & Griswold that the Merger constitutes a
tax-free reorganization under the Code and the opinion of Haskell Slaughter &
Young, L.L.C. with respect to certain other matters; (iv) MedPartners/Mullikin
shall certify compliance with the State of Ohio corporate practice of medicine
doctrine; (v) receipt of all consents, authorizations, orders and approvals of
(or filings of registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of the Plan of Merger shall have been obtained or made, except for
filings in connection with the Merger and any documents required to be filed
after the Effective Time; and (vi) EPS shall have received an opinion from CMH
that the consideration to be received by the EPS shareholders in the Merger is
fair from a financial point of view.

The obligation of each of MedPartners/Mullikin, the Subsidiary and EPS to
consummate the Merger is subject to certain additional conditions, including the
following: (i) no order, decree or injunction by a court of competent
jurisdiction preventing the consummation of the Merger or imposing any material
limitation on the ability of MedPartners/Mullikin effectively to exercise full
rights of ownership of the common stock of EPS following the Effective Time or
any material portion of the assets or business of EPS, shall be in effect; (ii)
no statute, rule or regulation shall have been enacted by the government of the
United States or any state, municipality or other political subdivision thereof
that makes the consummation of the Merger or any other transaction contemplated
by the Plan of Merger illegal; (iii) the Merger shall have been approved by the
requisite votes of the holders of the outstanding EPS Shares; (iv) the shares of
MedPartners/Mullikin Common Stock to be issued in connection with the Merger
shall have been listed on the NYSE, upon official notice of issuance, and
MedPartners/Mullikin shall be registered or qualified in transactions qualified
or exempt from registration under applicable securities laws of such states of
the United States as may be required; (v) MedPartners/Mullikin and EPS shall
each have received at closing a letter from Ernst & Young LLP with regard to
pooling of interests accounting for the Merger under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with the Plan of Merger;
(vi) the Registration Statement, of which this Prospectus-Proxy Statement forms
a part, shall have been declared effective under the Securities

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Act and shall not be subject to any stop order; and (vii) MedPartners/Mullikin,
the Subsidiary and EPS shall have received all consents, approvals and
authorizations of third parties with respect to all material leases and
management agreements to which they are parties, which consents, approvals and
authorizations are required of such third parties by such documents, in form and
substance acceptable to MedPartners/Mullikin or EPS, as the case may be, except
where the failure to obtain such consent, approval or authorization would not
have a material effect on the business of the Surviving Corporation.

REPRESENTATIONS AND COVENANTS

Under the Plan of Merger, MedPartners/Mullikin and EPS have each made a
number of representations regarding the organization and capital structures of
the respective companies and their affiliates, their operations, financial
condition and other matters, including their authority to enter into the Plan of
Merger and to consummate the Merger. Under the Plan of Merger,
MedPartners/Mullikin and EPS have each agreed not to encourage, solicit,
participate in or initiate discussions or negotiations with or provide any
information to any third party concerning any merger, sale of assets, sale of or
tender offer for its shares or similar transactions, except that each of the
companies may furnish information to and negotiate with an unsolicited third
party consistent with the good faith exercise by the Board of Directors of its
fiduciary obligations.

REGULATORY APPROVALS

No federal or state regulatory requirements must be complied with or
approval must be obtained in connection with the Merger.

As conditions precedent to the consummation of the Merger, the Plan of
Merger requires, among other things, that no statute, rule or regulation shall
have been enacted by the government (or any governmental agency) of the United
States or any state, county, municipality or other political subdivision thereof
that makes the consummation of the Merger and any other transaction contemplated
thereby illegal.

Certain persons, such as states' attorneys general and private parties,
could challenge the Merger as violative of the antitrust laws and seek to enjoin
the consummation of the Merger and, in the case of private persons, also seek to
obtain treble damages. There can be no assurance that a challenge to the Merger
on antitrust grounds will not be made or, if such a challenge is made, that it
will not be successful. Neither MedPartners/Mullikin nor EPS intends to seek any
further stockholder approval or authorization of the Plan of Merger as a result
of any action that it may take to resist or resolve any objections by the
Federal Trade Commission or other objections, unless required to do so by
applicable law.

BUSINESS PENDING THE MERGER

The Plan of Merger provides that, during the period from the date of the
Plan of Merger to the Effective Time, except as provided in the Plan of Merger,
EPS will use its reasonable best efforts to preserve intact its present business
organization, to keep available to MedPartners/Mullikin and the surviving
corporation the services of the present employees of EPS, and maintain the
goodwill of customers, suppliers and others having business dealings with EPS.

Under the Plan of Merger, EPS has agreed that it will not (other than as
required pursuant to or contemplated by the terms of the Plan of Merger and
related documents and other than with respect to transactions for which binding
commitments have been entered into prior to the date of the Plan of Merger and
certain other transactions disclosed to MedPartners/Mullikin), without first
obtaining the written consent of MedPartners/Mullikin, (i) encumber any asset or
enter into any transaction or make any contract or commitment relating to its
properties, assets and business, other than in the ordinary course of business
or as otherwise disclosed in the Plan of Merger; (ii) enter into any employment
contract which is not terminable upon notice of 30 days or less, at will and
without penalty to it, except as provided in the Plan of Merger; (iii) enter
into any contract or agreement which cannot be performed within three months or
which involves the expenditure of over $25,000; (iv) issue or sell, or agree to
issue or sell, any shares of capital stock or other securities of EPS; (v)
except as provided in the Plan of Merger, make any payment or distribution to
the trustee under any bonus, pension, profit sharing or retirement plan or incur
any obligation to make any such

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payment or contribution which is not in accordance with its usual past practice,
or make any payment or contributions or incur any obligation pursuant to or with
respect to any other plan or contract or arrangement providing for bonuses,
executive incentive compensation, pensions, deferred compensation, retirement
payments, profit sharing or the like, establish or enter into any such plan,
contract or arrangement, or terminate any plan; (vi) extend credit to anyone
except in the ordinary course of business consistent with prior practices; (vii)
guarantee the obligation of any person, firm or corporation, except in the
ordinary course of business consistent with prior practices; (viii) incur any
material adverse change; (ix) discharge or satisfy any material lien or
encumbrance, or pay or satisfy any material obligation or liability (absolute,
accrued, contingent or otherwise) other than liabilities shown or reflected on
the balance sheet of EPS as of January 31, 1996 (the "EPS Balance Sheet") or
liabilities incurred since the date of the EPS Balance Sheet in the ordinary
course of business, which discharge or satisfaction would have a material
adverse effect on EPS; (x) increase or establish any reserve for taxes or any
other liability on its books or otherwise provided therefor which would have a
material adverse effect on EPS, except as may have been required due to income
or operations of EPS since the date of the EPS Balance Sheet; (xi) mortgage,
pledge or subject to any lien, charge or other encumbrance any of the assets,
tangible or intangible, which assets are material to the business or financial
condition of EPS; (xii) sell or transfer any of the assets material to the
business of EPS, cancel any material debts or claims or waive any material
rights, except in the ordinary course of business; (xiii) grant any general or
uniform increase in the rates of pay of employees or any material increase in
salary payable or to become payable by EPS to any officer or employee,
consultant or agent (other than normal merit increases), or by means of any
bonus or pension plan, contract or other commitment, increase in a material
respect the compensation of any officer, employee, consultant or agent; (xiv)
except for the Plan of Merger and any other agreement executed and delivered
pursuant to the Plan of Merger, enter into any material transaction other than
in the ordinary course of business or permitted under the Plan of Merger; (xv)
issue any stock, bonds or other securities or any options or rights to purchase
any of its securities; or (xvi) amend its Articles of Incorporation or Code of
Regulations.

WAIVER AND AMENDMENT

The Plan of Merger provides that, at any time prior to the Effective Time,
MedPartners/Mullikin and the Subsidiary, on the one hand, and EPS, on the other
hand, may (i) extend the time for the performance of any of the obligations or
other acts of the other party contained in the Plan of Merger; (ii) waive any
inaccuracies in the representations and warranties of the other party contained
in the Plan of Merger or in any document delivered pursuant to the Plan of
Merger; and (iii) subject to the following sentence, waive compliance with the
agreements or conditions under the Plan of Merger. In addition, the Plan of
Merger may be amended at any time upon the written agreement of the parties to
the Plan of Merger provided that, after the Special Meeting, no amendment may be
made which requires further approval of the EPS shareholders under the OGCL or
the DGCL without such further approval being obtained.

TERMINATION

The Plan of Merger may be terminated at any time prior to the Effective
Time, whether before or after the requisite approval of the Plan of Merger by
the shareholders of EPS: (i) by mutual written consent of MedPartners/Mullikin,
the Subsidiary and EPS; (ii) by either MedPartners/Mullikin or EPS if (A) the
holders of more than 10% of the issued and outstanding EPS Shares vote against
the approval of the Merger at the Special Meeting if such meeting occurs less
than 10 days prior to the Closing Date or (B) prior to the Closing Date, there
are dissenting EPS Shares constituting more than 10% of the issued and
outstanding EPS Shares; (iii) by either MedPartners/Mullikin or EPS, if the
Merger has not been consummated on or before September 30, 1996, unless the
failure to consummate the Merger by such time is due to the willful and material
breach of the Plan of Merger by the party seeking to terminate the Plan of
Merger; provided, however, that the passage of such period shall be tolled for
any part thereof (not to exceed 60 days in the aggregate) during which any party
shall be subject to a non-final order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or the calling
or holding of a meeting of stockholders; (iv) by either MedPartners/Mullikin or
EPS, if any required approval of the Plan of Merger by holders of EPS Shares has
not been obtained at the Special Meeting; (v) by either MedPartners/Mullikin or

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EPS if any court of competent jurisdiction or other governmental entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; (vi)
by either MedPartners/Mullikin or EPS in the event of a breach by the other
party of any representation, warranty, covenant or other agreement contained in
the Plan of Merger which (A) would give rise to the failure of a condition set
forth in Section 9.2(a) or (b) or Section 9.3(a) or (b) of the Plan of Merger,
as applicable, and (B) cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach (a "Material
Breach") (provided that the terminating party is not then in Material Breach of
any representation, warranty, covenant or other agreement contained in the Plan
of Merger); (vii) by either MedPartners/Mullikin or EPS if such party gives
notice of termination pursuant to Section 7.9 of the Plan of Merger (which
section relates to the occurrence of a material adverse effect); (viii) by
either MedPartners/ Mullikin or EPS in the event that (A) all of the conditions
to the obligation of such party to effect the Merger set forth in Section 9.1 of
the Plan of Merger shall have been satisfied and (B) any condition to the
obligation of such party to effect the Merger set forth in Section 9.2 (in the
case of MedPartners/Mullikin) or Section 9.3 (in the case of EPS) is not capable
of being satisfied prior to September 30, 1996; (ix) by EPS if the Board of
Directors of EPS shall have (A) determined, in the exercise of its fiduciary
duties under applicable law, to withdraw its recommendation to the shareholders
of EPS that they approve the Merger or (B) approved, recommended or endorsed any
proposal to acquire EPS through a merger, purchase of assets, purchase of or
tender offer for shares of its capital stock or similar transaction other than
the Merger or (C) resolved to do any of the foregoing; or (x) by either
MedPartners/Mullikin or EPS if either party shall not have received a letter
prior to September 30, 1996 from Ernst & Young, LLP as to the qualification of
the Merger for "pooling of interests" accounting treatment.

NEW YORK STOCK EXCHANGE LISTING

A Subsequent Listing Application will be filed with the NYSE to list the
shares of MedPartners/ Mullikin Common Stock to be issued to EPS shareholders in
connection with the Merger. Although no assurance can be given that the shares
of MedPartners/Mullikin Common Stock so issued will be accepted for listing,
MedPartners/Mullikin anticipates that these shares will qualify for listing on
the NYSE, upon official notice of issuance thereof.

RESALE OF MEDPARTNERS/MULLIKIN COMMON STOCK BY AFFILIATES

MedPartners/Mullikin Common Stock to be issued to EPS shareholders in
connection with the Merger has been registered under the Securities Act.
MedPartners/Mullikin Common Stock received by the EPS shareholders upon
consummation of the Merger will be freely transferable under the Securities Act,
except for shares issued to any person who may be deemed an "Affiliate" (as
defined below) of EPS or MedPartners/ Mullikin within the meaning of Rule 145
under the Securities Act. "Affiliates" are generally defined as persons who
control, are controlled by, or are under common control with EPS or
MedPartners/Mullikin at the time of the Special Meeting (generally, directors
and certain executive officers of EPS or MedPartners/ Mullikin and major
stockholders of MedPartners/Mullikin or EPS). Generally, all shares of
MedPartners/ Mullikin Common Stock received by such Affiliates may not be sold
until MedPartners/Mullikin publishes at least one full month of the combined
results of operations of MedPartners/Mullikin and EPS. MedPartners/ Mullikin has
agreed to publish (as defined in SEC Authority Series Release No. 135) such
results within 30 days after the end of the first calendar month following the
Effective Time. In addition, Affiliates of EPS or MedPartners/Mullikin may not
sell their shares of MedPartners/Mullikin Common Stock acquired in connection
with the Merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 or another
applicable exemption from the registration requirements of the Securities Act.
In general, under Rule 145, for two years following the Effective Time, an
Affiliate (together with certain related persons) would be entitled to sell
shares of MedPartners/Mullikin Common Stock acquired in connection with the
Merger only through unsolicited "broker transactions" or in transactions
directly with a "market maker", as such terms are defined in Rule 144 under the
Securities Act. Additionally, the number of shares to be sold by an Affiliate
(together with certain related persons and certain persons acting in concert)
during such two-year period within any three-month period for purposes of

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Rule 145 may not exceed the greater of 1% of the outstanding shares of
MedPartners/Mullikin Common Stock or the average weekly trading volume of such
stock during the four calendar weeks preceding such sale. Rule 145 would remain
available to Affiliates only if MedPartners/Mullikin remained current with its
information filings with the SEC under the Exchange Act. Two years after the
Effective Time, an Affiliate would be able to sell such MedPartners/Mullikin
Common Stock without such manner of sale or volume limitations, provided that
MedPartners/Mullikin was current with its Exchange Act information filings and
such Affiliate was not then an Affiliate of MedPartners/Mullikin. Three years
after the Effective Time, an Affiliate would be able to sell such shares of
MedPartners/Mullikin Common Stock without any restrictions so long as such
Affiliate was not, and had not been for at least three months prior thereto, an
Affiliate of MedPartners/Mullikin.

ADDITIONAL INTERESTS OF CERTAIN PERSONS IN THE MERGER

Assuming a Base Period of $20.37, all of the shares of EPS Common Stock
would be converted into an aggregate of 2,160,039 shares of MedPartners/Mullikin
Common Stock in the Merger. If the Merger were consummated, the directors and
executive officers of EPS would receive a total of approximately 19.85% of the
MedPartners/Mullikin Common Stock issued to EPS shareholders in the Merger
(assuming there are no dissenting shareholders). These individuals have
unanimously indicated their intentions to vote the EPS Shares beneficially owned
by them FOR the Plan of Merger. See "Security Ownership of Certain Beneficial
Owners and Management -- EPS".

The Plan of Merger provides that EPS will maintain in effect following the
Merger the rights to indemnification of EPS's officers and directors provided
for in EPS's Articles of Incorporation and Code of Regulations. See
"-- Indemnification of Officers and Directors". Upon consummation of the Merger,
four shareholders of EPS, including two Directors, will receive lump sum
payments in consideration of surrendering rights to receive future payments of
finders' fees relating to the acquisition and maintenance of EPS's existing
business relationships. In addition, James J. Rybak, M.D. will enter into a new
employment agreement with Team Health for a term of five years at an annual
compensation which will not exceed the annual compensation received by Dr. Rybak
from EPS prior to the Merger.

ACCOUNTING TREATMENT

MedPartners/Mullikin and EPS expect to receive a letter from Ernst & Young
LLP to the effect that they concur with the conclusion of the managements of
MedPartners/Mullikin and EPS that the Merger will qualify for
pooling-of-interests accounting treatment if consummated in accordance with the
Plan of Merger. If the Merger does not qualify for pooling of interests
treatment for accounting purposes, the Merger would be treated as a purchase for
accounting purposes. The Merger is expected to qualify for pooling-of-interests
accounting treatment if consummated in accordance with the Plan of Merger.
MedPartners/Mullikin, the Subsidiary and EPS have agreed not to intentionally
take any action that would disqualify treatment of the Merger as a pooling of
interests for accounting purposes.

Under the pooling-of-interests method of accounting, the historical basis
of the assets and liabilities of MedPartners/Mullikin and EPS will be combined
at the Effective Time and carried forward at their previously recorded amounts,
the stockholders' equity accounts of MedPartners/Mullikin and EPS will be
combined on the consolidated balance sheet of MedPartners/Mullikin and no
goodwill or other intangible assets will be created. Consolidated financial
statements of MedPartners/Mullikin issued after the Merger will be restated
retroactively to reflect the consolidated operations of MedPartners/Mullikin and
EPS as if the Merger had taken place prior to the periods covered by such
consolidated financial statements.

The unaudited pro forma financial information contained in this
Prospectus-Proxy Statement has been prepared using the pooling of interests
accounting method to account for the Merger. Consistent with pooling-
of-interests accounting treatment, the direct costs related to the Merger will
be taken as a non-recurring charge to earnings in the quarter in which the
Merger is consummated. See "Pro Forma Condensed Financial Information".

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FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of the material federal income tax
consequences of the Merger and the exchange by the holders of EPS Shares of such
shares for shares of MedPartners/Mullikin Common Stock. This summary is not a
complete description of all the consequences of the Merger. Each stockholder's
individual circumstances may affect the tax consequences of the Merger to him or
her. In addition, no information is provided herein with respect to the tax
consequences of the Merger under applicable foreign, state or local laws.
Accordingly, each EPS shareholder is urged to consult his or her own tax advisor
as to the specific tax consequences of the Merger to him or her.

Neither MedPartners/Mullikin nor EPS has requested or will receive an
advance ruling from the Internal Revenue Service (the "Service") as to the
federal income tax consequences of the Merger. The respective obligations of
MedPartners/Mullikin and EPS to consummate the Merger are conditioned upon
receipt of certain legal opinions relating to the federal income tax
consequences of the Merger. The opinions are based upon the facts that are
described herein, and upon certain customary representations to be provided by
MedPartners/Mullikin, the Subsidiary, EPS and the EPS shareholders. Such
opinions are also based upon the Code, regulations currently in effect
thereunder, current administrative rulings and practice by the Service, and
judicial authority, all of which are subject to change. Any such change could
affect the continuing validity of such opinions and this discussion. In
addition, an opinion of counsel is not binding upon the Service, and there can
be no assurance, and none is hereby given, that the Service will not take a
position which is contrary to one or more positions reflected in the opinions of
such counsel, or that such opinions will be upheld by the courts if challenged
by the Service. Furthermore, MedPartners/Mullikin and EPS have agreed in the
Plan of Merger not to take any action which would disqualify the Merger as a
reorganization which is tax-free to the shareholders of EPS pursuant to Section
368(a) of the Code. Based on the foregoing, the opinions of counsel state, among
other matters, that: (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and MedPartners/ Mullikin, the Subsidiary and EPS will each be a party
to the reorganization within the meaning of Section 368(b) of the Code; (ii) no
gain or loss will be recognized by MedPartners/Mullikin, EPS or the Subsidiary
as a result of the Merger; (iii) no gain or loss will be recognized by a EPS
shareholder who receives solely shares of MedPartners/Mullikin Common Stock in
exchange for EPS Shares; (iv) the receipt of cash in lieu of fractional shares
of MedPartners/Mullikin Common Stock will be treated as if the fractional shares
were distributed as part of the exchange and then were redeemed by
MedPartners/Mullikin and these payments will be treated as having been received
as distributions in full payment in exchange for the stock redeemed as provided
in Section 302(a) of the Code; (v) the tax basis of the shares of
MedPartners/Mullikin Common Stock received by a EPS shareholder will be equal to
the tax basis of the EPS Shares exchanged therefor, excluding any basis
allocable to a fractional share of MedPartners/Mullikin Common Stock for which
cash is received; and (vi) the holding period of the shares of
MedPartners/Mullikin Common Stock received by a EPS shareholder will include the
holding period or periods of the EPS Shares exchanged therefor, provided that
the EPS Shares are held as a capital asset within the meaning of Section 1221 of
the Code at the Effective Time. EACH HOLDER OF EPS SHARES IS URGED TO CONSULT
SUCH HOLDER'S PERSONAL TAX AND FINANCIAL ADVISORS AS TO THE SPECIFIC FEDERAL
INCOME TAX CONSEQUENCES TO SUCH HOLDER, BASED ON SUCH HOLDER'S OWN PARTICULAR
STATUS AND CIRCUMSTANCES, AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES ARISING OUT OF THE MERGER.

The foregoing discussion is intended only as a summary of the material
federal income tax consequences of the Merger and does not purport to be a
complete analysis or listing of all potential tax effects relevant to a decision
whether to vote in favor of approval and adoption of the Plan of Merger and the
Merger. The discussion does not address the tax consequences arising under the
laws of any state, locality or foreign jurisdiction. Holders of EPS Shares are
urged to consult their own tax advisors concerning the federal, state, local and
foreign tax consequences of the Merger to them.

NO SOLICITATION OF TRANSACTIONS

Under the Plan of Merger, EPS may furnish information and access, in
response to unsolicited requests therefor, concerning EPS to other corporations,
partnerships, persons or other entities or groups, and may

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participate in discussions and negotiate with such entities concerning any
proposal to acquire EPS upon a merger, purchase of assets, purchase of or tender
offer for EPS Shares or similar transaction (an "Acquisition Transaction"), in
response to unsolicited requests therefor, if the Board of Directors of EPS
determines in its good faith judgment in the exercise of its fiduciary duties or
the exercise of its duties under Rule 14e-2 under the Exchange Act that such
action is appropriate in furtherance of the best interest of its shareholders.
Except as described in the preceding sentence, EPS has agreed that it will not,
and will direct each officer, director, employee, representative and agent of
EPS not to, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with or provide any information to any
corporation, partnership, person or other entity or group (other than
MedPartners/Mullikin or an affiliate or associate or agent of MedPartners/
Mullikin) concerning any merger, sale of assets, sale of or tender offer for EPS
Shares or similar transactions involving EPS. EPS has further agreed that it
will notify MedPartners/Mullikin if it enters into a confidentiality agreement
with any third party in response to any unsolicited request for information and
access in connection with a possible Acquisition Transaction, including
providing MedPartners/Mullikin with the identity of the third party and the
proposed terms of such Acquisition Transaction.

EXPENSES

The Plan of Merger provides that all costs and expenses incurred in
connection with the Plan of Merger and the transactions contemplated thereby
shall be paid by the party incurring such expense.

INDEMNIFICATION

MedPartners/Mullikin's Certificate and MedPartners/Mullikin's By-laws
provide for the elimination of directors' liability for monetary damages arising
from a breach of certain fiduciary obligations and for the indemnification of
directors, officers and agents to the full extent permitted by the DGCL. These
provisions generally provide for indemnification in the absence of gross
negligence or willful misconduct and cannot be amended without the affirmative
vote of a majority of the outstanding shares of MedPartners/Mullikin Common
Stock entitled to vote thereon.

The Plan of Merger provides that all rights to indemnification for acts or
omissions occurring prior to the Effective Time now existing in favor of the
current or former directors or officers of EPS as provided in its Articles of
Incorporation or Code of Regulations shall survive the Merger and shall continue
in effect in accordance with their terms.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling
MedPartners/Mullikin pursuant to the foregoing provisions, MedPartners/ Mullikin
has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.

RIGHTS OF DISSENTING SHAREHOLDERS

Holders of EPS Shares are entitled to relief as dissenting shareholders
under Section 1701.85 of the OGCL. However, a shareholder of EPS will be
entitled to such relief only if he complies with the requirements set forth in
Section 1701.85 of the OGCL. The following summary does not purport to be a
complete statement of the method of compliance with Section 1701.85 of the OGCL
and is qualified in its entirety by reference to the full text of such section,
which is attached hereto as Annex C.

An EPS shareholder who wishes to perfect his rights as a dissenting
shareholder in the event the Plan of Merger is adopted (i) must have been a
record holder of the EPS Shares as to which he seeks relief as of the date fixed
for the determination of shareholders entitled to notice of the Special Meeting;
(ii) must not have voted his EPS Shares in favor of adoption of the Plan of
Merger; and (iii) must deliver to EPS, not later than 10 days after the Special
Meeting, a written demand for payment of the fair cash value of the EPS Shares
as to which he seeks relief. This written demand must state the name of the
shareholder, his address, the number of shares as to which he seeks relief and
the amount claimed as the fair cash value thereof.

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A vote against adoption of the Plan of Merger will not satisfy the
requirements of a written demand for payment as described in clause (iii) of the
first sentence of the immediately preceding paragraph. Any written demand for
payment should be mailed or delivered to Emergency Professional Services, Inc.,
7123 Pearl Road, Suite 200, Middleburg Heights, Ohio 44130, Attention:
Secretary. As the written demand must be delivered within the 10-day period
following the Special Meeting, it is recommended, although not required, that a
shareholder using the mails should use certified or registered mail, return
receipt requested, to confirm that he has made a timely delivery.

If EPS sends to the dissenting shareholder, at the address specified in his
demand, a request for the certificates representing the EPS Shares as to which
he seeks relief, the dissenting shareholder, within 15 days from the date of the
sending of such request, must deliver to EPS such certificates so that EPS may
endorse on them a legend to the effect that demand for the fair cash value of
such shares has been made. EPS promptly shall return such endorsed certificates
to the dissenting shareholder. The failure of the dissenting shareholder to
deliver such certificates to EPS shall terminate his rights as a dissenting
shareholder, at the option of EPS, exercised by written notice to the dissenting
shareholder within 20 days after the lapse of the 15-day period, unless a court
for good cause shown otherwise directs.

Unless the dissenting shareholder and EPS shall agree on the fair cash
value per EPS Share as to which relief is sought, either may, within three
months after the service of the written demand by the shareholder, file a
petition in the Court of Common Pleas of Cuyahoga County, Ohio. If the court
finds that the dissenting shareholder is entitled to be paid the fair cash value
of any EPS Shares, the court may appoint one or more appraisers to receive
evidence and to recommend a decision on the amount of the fair cash value.

Fair cash value will be determined as of the day prior to the Special
Meeting, will be the amount a willing seller and willing buyer would accept or
pay with neither being under compulsion to sell or buy, will not exceed the
amount specified in the dissenting shareholder's written demand and will exclude
any appreciation or depreciation in market value resulting from the Merger. The
court shall make a finding as to the fair cash value of an EPS Share and render
judgment against EPS for its payment with interest at such rate and from such
date as the court considers equitable. The costs of proceedings shall be
assessed or apportioned as the court considers equitable.

The rights of any dissenting shareholder will terminate if (i) he has not
complied with Section 1701.85 of the OGCL, unless EPS by its Board of Directors
waives such failure, (ii) EPS abandons or is finally enjoined or prevented from
carrying out, or the shareholders of EPS rescind their adoption of, the Merger,
(iii) the dissenting shareholder withdraws his written demand, with the consent
of EPS by its Board of Directors, or (iv) EPS and the dissenting shareholder
shall not have agreed upon the fair cash value per EPS Share, and neither shall
have timely filed or joined in a petition in an appropriate court for a
determination of the fair cash value of the EPS Shares.

BECAUSE A PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL, UNLESS
REVOKED, BE VOTED FOR ADOPTION OF THE PLAN OF MERGER, AN EPS SHAREHOLDER WHO
WISHES TO EXERCISE HIS DISSENTERS' RIGHTS MUST EITHER NOT SIGN AND RETURN HIS
PROXY OR, IF HE SIGNS AND RETURNS HIS PROXY, VOTE AGAINST OR ABSTAIN FROM VOTING
ON THE ADOPTION OF THE PLAN OF MERGER.

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OPERATIONS AND MANAGEMENT
OF MEDPARTNERS/MULLIKIN AFTER THE MERGER

OPERATIONS

After consummation of the Merger, EPS will continue to operate under the
name Emergency Professional Services, Inc. and will continue to engage in the
business of physician practice management. It is expected that the operations of
EPS will be integrated where appropriate with the operations of Team Health. No
material disposition or restructuring of either MedPartners/Mullikin, Team
Health or EPS or any material part thereof is contemplated as a result of the
Merger.

MANAGEMENT

After the consummation of the Merger, MedPartners/Mullikin and Team Health
will be managed by the same Board of Directors and executive officers as existed
prior to the Merger.

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BUSINESS OF MEDPARTNERS/MULLIKIN

GENERAL

MedPartners/Mullikin is a leading physician practice management company
that develops, consolidates and manages integrated health care delivery systems.
Through its network of affiliated group and IPA physicians, MedPartners/Mullikin
provides primary and specialty health care services to prepaid managed care
enrollees and fee-for-service patients. MedPartners/Mullikin enhances clinic
operations by centralizing administrative functions and introducing management
tools, such as clinical guidelines, utilization review and outcomes measurement.
At June 30, 1996, MedPartners/Mullikin operated in 23 states and was affiliated
with more than 5,777 physicians, including 1,461 in group practices, 3,580
through IPA relationships and 736 hospital-based physicians.
MedPartners/Mullikin physicians provided prepaid health care to over 687,000
enrollees through 45 HMO relationships.

MedPartners/Mullikin's revenue is derived from the provision of
fee-for-service medical services and from contracts with HMOs which compensate
MedPartners/Mullikin and its affiliated physicians on a prepaid basis. In the
prepaid arrangements, MedPartners/Mullikin, through its affiliated physicians,
typically is paid by the HMO a fixed amount per member ("enrollee") per month
("professional capitation") or a percentage of the premium per member per month
("percent of premium") paid by employer groups and other purchasers of health
coverage to the HMOs. In return, MedPartners/Mullikin, through its affiliated
physicians, is responsible for substantially all of the medical services
required by enrollees. In many instances, MedPartners/Mullikin and its
affiliated physicians accept financial responsibility for hospital and ancillary
health care services in return for payment from HMOs on a capitated or percent
of premium basis ("institutional capitation"). In exchange for these payments
(collectively, "global capitation"), MedPartners/ Mullikin, through its
affiliated physicians, provides the majority of covered health care services to
enrollees and contracts with hospitals and other health care providers for the
balance of the covered services.

THE CAREMARK ACQUISITION

On May 13, 1996, MedPartners/Mullikin agreed to acquire Caremark pursuant
to a Plan and Agreement of Merger by and among MedPartners/Mullikin, PPM Merger
Corporation and Caremark. Under the Plan of Merger, PPM Merger Corporation will
be merged with and into Caremark, with Caremark to continue as the surviving
corporation as a wholly owned subsidiary of MedPartners/Mullikin. After the
consummation of the Caremark Acquisition, MedPartners/Mullikin will operate
under the name of "MedPartners, Inc." Upon the consummation of the Caremark
Acquisition, each Caremark stockholder will receive 1.21 shares of
MedPartners/Mullikin Common Stock in exchange for each share of Caremark Common
Stock owned by such stockholder. Consummation of this acquisition is subject to
a number of conditions, usual in a transaction of this type, including: that the
stockholders of MedPartners/Mullikin and Caremark approve the transaction; that
the transaction qualify for pooling of interests accounting treatment; and that
the transaction qualify as a tax free reorganization. There is no guarantee that
such conditions will be met. If such conditions are not met, the acquisition of
Caremark may not be consummated. The stockholders' meetings for each of
MedPartners/

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Mullikin and Caremark are scheduled to occur on September 5, 1996. The merger
will close immediately thereafter subject to the satisfaction of the closing
conditions. See "Pro Forma Condensed Financial Information" and the Financial
Statements beginning at Page F-1.

Caremark is a leading provider of health care services through its PPM,
pharmaceutical services, disease management and international businesses. In its
PPM business, Caremark provides PPM services to approximately 1,000 affiliated
physicians delivering comprehensive care to over one million people. Caremark
also operates one of the largest independent prescription drug benefit
management ("PBM") businesses in the United States with four mail service
pharmacies. Caremark's disease management business provides services and
therapies to patients with certain chronic conditions, primarily hemophilia and
growth disorders. Caremark's international business provides health care
services in a number of locations outside the United States which have different
regulatory environments and payor systems.

Initiated in 1992, Caremark's PPM business provides comprehensive
management services to large multi-speciality physician practices in major
metropolitan areas. Caremark is a leader in providing capitated health care
arrangements to payors. As of March 31, 1996, Caremark provided management
services to approximately 1,000 affiliated physicians and 210 other licensed
health care professionals who deliver comprehensive health care services to over
one million people. As of March 31, 1996, Caremark had affiliated with large,
established multi-specialty physician practices in six major metropolitan
markets, including Friendly Hills HealthCare Network (that includes CIGNA
Medical Group) in Southern California, Kelsey-Seybold Clinic in Houston, North
Suburban and Glen Ellyn Clinics in Chicago, Diagnostic Clinic in Tampa/ St.
Petersburg, Oklahoma City Clinic and Atlanta Medical Clinic.

Caremark's pharmaceutical services business manages outpatient prescription
drug benefit programs for more than 1,200 clients, including corporations,
insurance companies, unions, government employee groups and managed care
organizations throughout the United States. Caremark's prescription benefit
management business is one of the largest independent PBMs dispensing 42,000
prescriptions daily from four mail services pharmacies. Caremark also manages
patients' immediate prescription needs through a network of approximately 53,000
pharmacies.

Caremark's international business is developing and implementing new
approaches to health care delivery to provide services in different regulatory
environments and payor systems in six countries.

Caremark was formed as a wholly-owned subsidiary of Baxter in August 1992,
and on November 30, 1992, Baxter distributed to the holders of Baxter common
stock all of the outstanding shares of Caremark Common Stock. As used herein,
the term "Caremark" refers to Caremark and its predecessors, and their
respective subsidiaries and affiliates, unless the context otherwise requires.
The principal executive offices of Caremark are located at 2215 Sanders Road,
Northbrook, Illinois 60062, and its telephone number is (847) 559-4700.

At June 30, 1996, Caremark had consolidated assets of approximately $1.40
billion and stockholders' equity of approximately $388.0 million, and employed
approximately 11,600 persons.

RECENT DEVELOPMENTS

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On March 11, 1996, MedPartners/Mullikin entered into a Plan and Agreement
of Merger to acquire CHS, in exchange for shares of MedPartners/Mullikin Common
Stock. The transaction is to be a tax-free reorganization accounted for as a
pooling of interests. CHS primarily engages in the organization and management
of physician practices which contract with HMOs to provide physician and related
healthcare services to enrollees. CHS currently provides management services to
primary care medical groups and an IPA. Concurrent with, and as a condition to,
the consummation of the CHS merger, MedPartners/Mullikin will acquire the assets
of New Management, which is owned by the beneficial owners of 50% of CHS. CHS
provides certain financial services to New Management, which is engaged in the
business of providing certain management and administrative services to West
Hills Hospital. MedPartners/Mullikin has filed a Registration Statement on Form
S-4 with the SEC with respect to the shares of MedPartners/Mullikin Common Stock
to be issued to the stockholders of CHS and the partners of New Management in
connection with such acquisition. Consummation of this acquisition is subject to
a number of conditions, usual in a transaction of this type, including: that the
stockholders of CHS and the partners of New Management approve the transaction;
that the transaction qualify for pooling of interests accounting treatment; and
that the transaction qualify as a tax free reorganization. There is no guarantee
that such conditions will be met. If such conditions are not met, the
acquisition of CHS and New Management may not be consummated. The partners of
New Management approved the acquisition of New Management on August 22, 1996.
The meeting of CHS stockholders is scheduled to occur on August 30, 1996. The
acquisition of New Management and the CHS merger will close immediately
thereafter subject to the vote of the CHS stockholders. See "Pro Forma Condensed
Financial Information" and the Financial Statements beginning at page F-1.

On June 28, 1996, MedPartners/Mullikin entered into a Plan and Agreement of
Merger to acquire Summit, in exchange for shares of MedPartners/Mullikin Common
Stock. The transaction is to be a tax free reorganization accounted for as a
pooling of interests. Summit is a multi-specialty group of approximately 70
physicians which serves northern New Jersey. Concurrently with, and as a
condition to, the consummation of the acquisition of Summit,
MedPartners/Mullikin or its subsidiaries will acquire the assets of MRA, which
owns certain real estate and equipment used in the operations of Summit. MRA is
owned by 54 of the 59 shareholders of Summit. MedPartners/Mullikin intends to
file a Registration Statement with the SEC with respect to the shares of
MedPartners/Mullikin Common Stock to be issued to the shareholders of Summit and
the partners of MRA in connection with such acquisition. Consummation of this
acquisition is subject to a number of conditions, including that the
shareholders of Summit and the partners of New Management approve the
transaction, that the transaction qualify as a tax free reorganization and other
conditions usual in transactions of this type. In addition, the closing of the
transaction is conditioned upon the receipt by the parties of a letter from
Ernst & Young LLP, MedPartners/Mullikin's independent auditors, that the
transaction will qualify for pooling of interests accounting treatment. See
"Notes to Pro Forma Condensed Financial Information". There is no guarantee that
such conditions will be met. If such conditions are not met, the acquisition of
Summit and MRA may not be consummated.

On July 3, 1996, MedPartners/Mullikin entered into a Plan and Agreement of
Merger to acquire Cardinal in exchange for shares of MedPartners/Mullikin Common
Stock. The transaction is to be a tax-free reorganization accounted for as a
pooling of interests. Cardinal is a multi-specialty group of 75 physicians which
serves the Triangle area in Raleigh-Durham and includes Research Triangle Park.
In addition to the main campus, Cardinal provides services at 16 clinical
facilities and 15 satellite locations. Cardinal is also affiliated with almost
500 physicians through three IPAs, including Cardinal IPA, Piedmont Physicians
Alliance, Inc. and Eastern Carolina Primary Care Alliance, Inc. The three IPAs,
which are in the early stages of development, already have contracts with five
managed care companies providing service to almost 6,000 enrollees.
MedPartners/Mullikin intends to file a Registration Statement with the SEC with
respect to the shares of MedPartners/Mullikin Common Stock to be issued to the
shareholders of Cardinal in connection with such merger. Consummation of this
merger is subject to a number of conditions, including that the shareholders of
Cardinal approve the transaction, that the transaction qualify as a tax-free
reorganization and other conditions usual in transactions of this type. In
addition, the closing of the transaction is conditioned upon the receipt by the
parties of a letter from Ernst & Young LLP, MedPartners/Mullikin's independent
auditors, that the transaction will qualify for pooling of interests accounting
treatment. See "Notes to Pro

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Forma Condensed Financial Information". There is no guarantee that such
conditions will be met. If such conditions are not met, the acquisition of
Cardinal may not be consummated.

INDUSTRY

The Health Care Financing Administration ("HCFA") estimates that national
health spending in 1994 was approximately $1 trillion, with physicians
controlling more than 80% of the overall expenditures. The American Medical
Association reports that approximately 565,000 physicians are actively involved
in patient care in the United States, with a growing number participating in
multi-specialty or single-specialty groups. The physician practice management
market is estimated at $200 billion.

Concerns over the accelerating cost of health care have resulted in the
increasing prominence of managed care. As markets evolve from traditional
fee-for-service medicine to managed care, HMOs and health care providers
confront market pressures to provide high quality health care in a
cost-effective manner. Employer groups have begun to bargain collectively in an
effort to reduce the cost of premiums and to bring about greater accountability
of HMOs and providers with respect to accessibility, choice of provider, quality
of care and other indicators of consumer satisfaction. The focus on
cost-containment has placed small to mid-sized physician groups and solo
practices at a disadvantage because they typically have higher operating costs
and little purchasing power with suppliers, they often lack the capital to
purchase new technologies that can improve quality and reduce costs and they do
not have the cost accounting and quality management systems necessary to allow
these physicians to enter into sophisticated risk-sharing contracts with payors.

Industry experts expect the medical delivery system to evolve into a system
where the primary care physician, often part of a multi-specialty group, manages
and directs health care expenditures. As a result of these developments, primary
care physicians have increasingly become the conduit for the delivery of medical
care by acting as "case managers" and directing referrals to certain
specialists, hospitals, alternate-site facilities and diagnostic facilities. By
contracting directly with payors, organizations that control primary care
physicians are able to reduce the administrative overhead expenses incurred by
HMOs and insurers and thereby reduce the cost of delivering medical services.

As a result of the trends toward increased HMO enrollment and physician
membership in group medical practices, health care providers have sought to
reorganize themselves into health care delivery systems that are better suited
to the managed care environment. Physician groups and IPAs are joining with
hospitals and other institutional providers in various ways to create vertically
integrated delivery systems which provide medical and hospital services ranging
from community-based primary medical care to specialized inpatient services.
These health care delivery systems contract with HMOs to provide hospital and
medical services to enrollees under full risk contracts, under which providers
assume the obligation of providing both the professional and institutional
components of covered health care services to the HMO enrollees.

In order to compete effectively in such an emerging environment, physicians
are concluding that they must have control over the delivery and financial
impact of a broader range of health care services through the acceptance of
global capitation. To this end, groups of independent physicians and medium to
large medical groups are taking steps to assume responsibility and risk for
health care services which they do not provide, such as hospitalization.
Physicians are increasingly abandoning traditional private practice in favor of
affiliations with larger organizations, such as MedPartners/Mullikin, which
offer skilled and innovative management, sophisticated information systems and
capital resources. Many payors and their intermediaries, including governmental
entities and HMOs, are increasingly looking to outside providers of physician
services to develop and maintain quality outcomes, management programs and
patient care data. In addition, such payors and intermediaries look to share the
risk of providing health care services through capitation arrangements which
provide for fixed payments for patient care over a specified period of time.
While the acceptance of greater responsibility and risk provides the opportunity
to retain and enhance market share and operate at a higher level of
profitability, medical groups and independent physicians are concluding that the
acceptance of global capitation carries with it significant requirements for
infrastructure, information systems, capital, network resources and financial
and medical management. Physicians are increasingly turning to

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organizations such as MedPartners/Mullikin to provide the resources necessary to
function effectively in a managed care environment.

STRATEGY

Expansion of Existing Markets. MedPartners/Mullikin's principal
strategy for expanding its existing markets is through the acquisition of
(through purchase, merger or otherwise) or affiliation with physicians and
medical groups within those markets. MedPartners/Mullikin seeks to acquire
or otherwise affiliate with physician groups, IPAs and other providers with
significant market shares in their local markets and established
reputations for providing quality medical care in order to increase market
share in targeted regions. MedPartners/Mullikin also develops
multi-specialty physician networks that are designed to meet the specific
medical needs of a targeted geographic market. MedPartners/Mullikin seeks
to further enhance its existing market share by increasing enrollment and
fee-for-service business in its existing clinics and IPAs.
MedPartners/Mullikin anticipates further internal growth by expanding more
of its payor contracts to global capitation through PPN. Additionally,
MedPartners/Mullikin believes that increasing marketing activities,
enhancing patient service and improving the accessibility of care will
increase MedPartners/Mullikin's market share.

Expansion into New Markets. MedPartners/Mullikin expands into new
markets through the acquisition of or affiliation with other physician
practice management entities and medical groups. MedPartners/Mullikin
believes it is a leading consolidator in the physician practice management
industry and that the MME acquisition was the first major consolidation in
the industry. As a result of the consolidation of physician practices and
the entry of other physician practice management companies into the market,
MedPartners/Mullikin's management has determined that it is important for
MedPartners/ Mullikin to accelerate its rate of expansion through
acquisitions and mergers with entities which already have significant
market penetration. MedPartners/Mullikin believes that by concentrating on
larger acquisitions and continuing to expand its core of physician groups
and IPAs, as well as its network of hospital affiliations, it will be able
to create vertically integrated health care delivery systems and enhance
its competitive position. MedPartners/Mullikin continually reviews
potential acquisitions and physician affiliations and is currently in
preliminary negotiations with various candidates.

Strategic Alliances. MedPartners/Mullikin believes that strategic
alliances with hospitals and health plans improve the delivery of managed
health care. MedPartners/Mullikin has entered into arrangements with
various hospitals under which a portion of the capitation revenue received
from HMOs for institutional care of enrollees assigned to designated
clinics and IPA physicians is deposited into "subcapitated risk pools"
managed by MedPartners/Mullikin. MedPartners/Mullikin believes that such
arrangements can be enhanced through the implementation of the Restricted
License held by PPN. Under these arrangements, the hospital is at risk in
the event that the costs of institutional care exceed the available funds
and MedPartners/Mullikin shares in cost savings and revenue enhancements.
MedPartners/Mullikin believes that through these and other similar
alliances, the providers will devote greater resources to ensuring the
wellness of HMO enrollees, provide high-quality and cost-effective care and
seek to retain and expand their respective market shares. As a result, it
is anticipated that the overall cost of providing care will be contained,
rendering both MedPartners/Mullikin and the participating providers more
appealing to both HMOs and medical care consumers. MedPartners/Mullikin and
its affiliated physicians have also established relationships with HMOs
pursuant to which MedPartners/ Mullikin and the HMOs share proportionately
in the risks and rewards of market trends.

Sophisticated Information Systems. MedPartners/Mullikin believes that
information technology is critical to the growth of integrated health care
delivery systems and that the availability of detailed clinical data is
fundamental to quality control and cost containment. MedPartners/Mullikin
develops and maintains sophisticated management information systems which
collect and analyze clinical and

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administrative data to allow MedPartners/Mullikin to effectively control
overhead expenses, maximize reimbursement and provide effective utilization
management. MedPartners/Mullikin evaluates the administrative and clinical
operations of affiliated practices and re-engineers these functions as
appropriate in conjunction with the implementation of
MedPartners/Mullikin's management information systems to maximize the
benefits of the systems.

Increased Operational Efficiencies and Cost
Reductions. MedPartners/Mullikin is seeking to increase its operating
efficiency through expansion of its market area and number of HMO
enrollees, refinement of its utilization management programs that deliver
information used by its physicians to monitor and improve their practice
patterns, increased specialization, the development of additional in-house
services and through increased emphasis on outpatient care.
MedPartners/Mullikin's networks take advantage of economies of scale
through centralized billing, scheduling, information management and other
functions.

RECENT MAJOR ACQUISITIONS

On November 29, 1995, a business combination between MedPartners and MME
was consummated, pursuant to which MedPartners acquired MME by exchanging a
total of 13,476,855 shares of MedPartners/ Mullikin's Common Stock for all of
the outstanding partnership interests of MME. In connection with the MME
acquisition, MedPartners/Mullikin also issued a total of 547,010 shares of its
Common Stock to acquire a controlling interest in three real estate partnerships
that own properties leased to and utilized in connection with the business of
MedPartners/Mullikin. The transaction, which was consummated as a tax-free
reorganization and pooling of interests for accounting purposes, was valued at
approximately $413 million. See the Consolidated Financial Statements of
MedPartners/Mullikin, Inc. included elsewhere in this Prospectus-Proxy
Statement.

On February 22, 1996, MedPartners/Mullikin acquired PPSI, a publicly traded
physician management company based in Redlands, California, in exchange for
approximately 10,968,458 shares of MedPartners/ Mullikin Common Stock having a
total value of approximately $343 million (the "PPSI Merger"). The PPSI Merger
was a tax-free exchange accounted for as a pooling of interests. See the
Consolidated Financial Statements of MedPartners/Mullikin, Inc., included
elsewhere in this Prospectus-Proxy Statement.

In addition to growth through the acquisition of physician groups, the MME
acquisition and the PPSI Merger, MedPartners/Mullikin has consummated business
combinations with MEDCTR, Inc., a family medicine provider located in Ohio,
Vanguard Healthcare Group, Inc., an obstetrics/gynecology practice management
entity operating in the Philadelphia and New Jersey areas, Texas Back Institute,
Inc. and its affiliated medical practice, a spine care center operating in Texas
and Retina and Vitreous Associates of Alabama, P.C., an ophthalmology practice
in Alabama. MedPartners/Mullikin issued a total of 2,788,263 shares of Common
Stock in connection with these additional acquisitions. See the Consolidated
Financial Statements of MedPartners/Mullikin, Inc. included elsewhere in this
Prospectus-Proxy Statement.

Prior to the 1995 Mergers, MedPartners had affiliated with 190 physicians
through December 31, 1994. At June 30, 1996, MedPartners/Mullikin had affiliated
with over 5,777 physicians.

DEVELOPMENT AND OPERATIONS

Prior to affiliation with MME, MedPartners concentrated its development
efforts in the southeastern United States, affiliating primarily with physician
groups who practice on a fee-for-service basis. With the MME and PPSI
organizations, MedPartners/Mullikin acquired additional business models,
specifically designed to operate efficiently in the capitated managed care
environment. These business models, which are replicable and flexible, allow
MedPartners/Mullikin to capitalize on the full range of market opportunities in
the physician practice management industry and enable MedPartners/Mullikin to
build integrated physician networks attractive to payors of all types.
MedPartners/Mullikin has networks currently under development in 23 states.

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To meet payor demand for price competitive, quality services,
MedPartners/Mullikin utilizes a market-based approach that incorporates primary
care and specialty physicians into a network of providers serving a targeted
geographic area. MedPartners/Mullikin engages in research activities and market
analysis to determine the network configuration for a particular market.
Typically, MedPartners/Mullikin aims to achieve an equal number of primary care
physicians and specialists in each network. Primary care includes family
practice, internal medicine, pediatrics and obstetrics/gynecology. Key
specialties include orthopedics, cardiology, neurosciences, urology, surgery,
ear, nose and throat and ophthalmology. At certain locations, affiliated
physicians and support personnel operate centers for diagnostic imaging, urgent
care, cancer management, mental health treatment and health education. Network
physicians also treat fee-for-service patients on a per-occurrence basis.
After-hours care is available in several of MedPartners/Mullikin's clinics. Each
network is configured to contain, when complete, the physician services
necessary to capture at least 20% of market share and to provide at least 90% of
the physician services required by payors. MedPartners/Mullikin markets its
networks to managed care and third-party payors, referring physicians and
hospitals.

Affiliated Physicians. The relationship between MedPartners/Mullikin and
its affiliated physicians is set forth in asset purchase and practice management
agreements. Through the asset purchase agreement, MedPartners/Mullikin acquires
the assets utilized in the practice and may also assume certain leases and other
contracts of the physician group. The practice management agreements generally
have terms ranging from 20 to 44 years, although certain of the agreements
acquired in the PPSI Merger have terms as short as ten years, and provide the
physicians with access to capital, management expertise, sophisticated
information systems and managed care contracts, while enabling affiliated
physicians to retain their autonomy through their professional corporations,
thereby maintaining governance of physician-specific issues and clinical
control.

Under a practice management agreement, a physician group delegates to
MedPartners/Mullikin administrative, management and support functions required
in connection with its medical practice. MedPartners/Mullikin provides the
physician group with the equipment and facilities used in its medical practice,
manages practice operations and employs substantially all of the practice's
non-physician personnel, except certain allied health professionals, such as
nurses and physical therapists. The physicians are responsible for all decisions
regarding patient health care, including diagnosis, treatment, surgery and
therapy. The agreement also provides that the affiliated professional
corporation will not compete with MedPartners/ Mullikin. See also Notes 1 and 10
to Consolidated Financial Statements of MedPartners/Mullikin, Inc. included
elsewhere in this Prospectus-Proxy Statement.

Pursuant to the practice management agreement, the affiliated professional
corporation assigns to MedPartners/Mullikin all or substantially all its rights
and interest in the revenue it receives. For providing services pursuant to such
agreement, the physicians receive compensation, as negotiated, either as a fixed
percentage of net revenues, a pre-determined salary and incentive arrangement or
an arrangement based directly on the profitability of the practice.

Physicians in practice groups acquired by MedPartners/Mullikin typically
sign three-year employment agreements with the affiliated medical group
containing noncompetition covenants. The employment agreements provide for a
physician to be paid either a fixed salary or pursuant to a negotiated formula.
The medical group provides the physician with health, death and disability and
professional liability insurance and other benefits. Physicians are also paid
for any management responsibilities they assume.

MedPartners/Mullikin enhances growth in its practices by expanding managed
care arrangements, assisting in the recruitment of new physicians and expanding
and adding services that have historically been performed outside of the
practices. MedPartners/Mullikin works closely with affiliated physicians in
targeting and recruiting physicians and in merging sole practice or single
specialty groups into the affiliated physician groups. MedPartners/Mullikin
assists in the development of new and expanded ancillary services by providing
the needed capital resources and management services. MedPartners/Mullikin
recognizes and develops opportunities to provide services throughout a market by
positioning its practices so that an entire market is covered geographically.
This approach provides patients with convenient medical facilities and services
and responds to coverage criteria essential to payors.

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IPAs. MedPartners/Mullikin's networks include MIPA, which operates in 16
separate geographic regions in southern and northern California, as well as four
IPAs acquired in the PPSI Merger. Formed in 1989, MIPA currently has
approximately 3,450 primary care and specialist physicians and approximately
139,000 HMO enrollees in its network. The PPSI IPAs, operating in the Inland
Empire region of California, have approximately 75 physicians and approximately
35,000 HMO enrollees. An IPA allows individual practitioners to access patients
in their area through contracts with HMOs without having to join a group
practice or sign exclusive contracts, and also coordinates utilization review
and quality assurance programs for its affiliated physicians. In addition to
providing access to HMO contracts, an IPA offers other benefits to physicians
seeking to remain independent, including economies of scale in the marketplace,
enhanced risk-sharing arrangements and access to other strategic alliances
within MedPartners/Mullikin's network. MedPartners/Mullikin believes that the
expansion of its IPA operations is important to the future growth of
MedPartners/Mullikin, because many of the physicians who contract with
MedPartners/Mullikin's IPAs have a significant number of patients who do not
currently participate in a prepaid health plan and because such physicians may
facilitate the formation of physician group practices which may become
affiliated with, or acquired by, MedPartners/Mullikin. MedPartners/Mullikin
identifies IPAs that need access to capitated HMO contracts, and such IPA
organizations typically agree to assign their existing HMO contracts to
MedPartners/Mullikin. Individual physicians then enter into contracts directly
with the IPA. MedPartners/ Mullikin believes that the expansion of its IPAs will
enable it to increase its market share with relatively low risk because of the
low incremental investment required to recruit additional physicians.

MedPartners/Mullikin has practice management agreements with its affiliated
IPAs pursuant to which it provides management and administrative services
including physician credentialing, contracting, accounting and marketing.
However, since IPA physicians are independent physicians with their own medical
practices, unlike the agreements with affiliated practice groups, the scope of
services provided to an IPA is limited to administrative, accounting,
contractual and marketing services. Pursuant to these agreements, substantially
all of the IPA's revenues are assigned to MedPartners/Mullikin and the
physicians receive payments similar to those provided in the practice management
agreements.

HMOs. MedPartners/Mullikin, through its affiliated physicians, began
contracting with HMOs to provide health care on a capitated reimbursement basis
in 1975. Under these contracts, which typically are automatically renewed on an
annual basis, MedPartners/Mullikin provides virtually all covered medical
services and receives a fixed monthly capitation payment from HMOs for each
member who chooses an affiliated physician as his or her primary care physician.
The capitation amount may be fixed, based upon a percentage of premium, or
adjusted based on the age and/or sex of the HMO enrollee. Contracts for prepaid
health care with HMOs accounted for approximately 50% of MedPartners/Mullikin's
pro forma combined net revenue for the second quarter of 1996.
MedPartners/Mullikin currently has 45 relationships with HMOs of which the
relationships with PacifiCare, Health Net and CaliforniaCare accounted for
approximately 29% of net revenue of MedPartners/Mullikin for the six months
ended June 30, 1996.

To the extent that enrollees require more care than is anticipated or
require supplemental medical care which is not otherwise reimbursed by the HMOs
or other payors, aggregate capitation payments may be insufficient to cover the
costs associated with the treatment of enrollees. Stop-loss coverage is
maintained, which mitigates the effect of occasional high utilization of health
care services. At June 30, 1996, over 798,000 HMO enrollees were covered
beneficiaries for professional services in MedPartners/Mullikin's network, of
which approximately 622,000 were served by affiliated professionals and
approximately 176,000 were served by IPA professionals. These patients are
covered under either commercial (typically employer-sponsored) or senior
(Medicare-funded) HMOs. Higher capitation rates are typically received for
senior patients, because their medical needs are generally greater and
consequently the cost of covered care is higher. As of June 30, 1996,
MedPartners/Mullikin's HMO enrollees comprised approximately 694,093 commercial
enrollees and approximately 66,457 senior (over age 65) enrollees.

MedPartners/Mullikin seeks to contract with the same HMOs on a capitated or
similar prepaid basis to provide institutional care to substantially all the
enrollees who have selected an affiliated physician as their primary health care
provider. Under its institutional capitation agreements with HMOs, MedPartners/
Mullikin is obligated to pay for, in addition to inpatient hospitalization
costs, costs for ambulance service,

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<PAGE> 65

emergency room facilities, outpatient surgeries, home nursing care, skilled
nursing care and, in some cases, pharmacy and out-of-area services. At June 30,
1996, MedPartners/Mullikin was receiving institutional capitation payments for
approximately 366,000 enrollees.

Hospitals. MedPartners/Mullikin operates Pioneer Hospital, a 99-bed acute
care hospital located in Artesia, California and USFMC, an 102-bed acute care
hospital in Montclair, California. Many of the physicians on professional staff
rosters of these hospitals are either employed by an affiliated professional
corporation or under contract with MedPartners/Mullikin's IPAs. The traditional
hospital-based physicians, such as emergency room physicians, anesthesiologists,
pathologists, radiologists and cardiologists, are all supplied through
contractual arrangements with an affiliated corporation. Several of
MedPartners/Mullikin's medical clinics are located sufficiently close to Pioneer
Hospital to allow the enrollees who utilize these clinics to also utilize
Pioneer Hospital. Under the HMO contracts, MedPartners/Mullikin is obligated to
pay for inpatient hospitalization and related services. Over 85% of Pioneer
Hospital's and approximately 50% of USFMC's daily census is made up of
MedPartners/Mullikin HMO enrollees. MedPartners/Mullikin has entered into
agreements with other hospitals in California for the delivery of hospital
services to the remainder of its enrollees. In each instance, the institutional
capitation payments received from HMOs are placed at risk for the benefit of the
applicable hospital, MedPartners/Mullikin and its affiliated physicians.
MedPartners/ Mullikin and these providers split any savings realized if hospital
utilization declines due to the success of MedPartners/Mullikin's programs for
early intervention, wellness and outpatient treatment.

Hospital-Based Physician Operations. MedPartners/Mullikin's Hospital-Based
Physician ("HBP") operations acquired in the PPSI Merger organize and manage
physicians and other health care professionals engaged in the delivery of
emergency, radiology and teleradiology services, hospital-based primary care and
temporary staffing and support services to hospitals, clinics, managed care
organizations and physician groups. NorthWest Emergency Physicians ("NEP"), an
affiliate of PPSI, is the largest provider of emergency physician contract
management services to hospital-based emergency departments in the Pacific
Northwest (Washington, Oregon and Alaska). NEP's emergency department contracts
provide physician coverage for 15 hospital emergency departments, 24 hours a day
throughout the year. Team Health, also an affiliate of PPSI, principally
operates in the Southeastern United States and currently serves 57 hospital
emergency departments in Tennessee, Kentucky, Alabama, Arkansas and Virginia,
and 15 hospital radiology departments. Under contracts with hospitals and other
clients, MedPartners/Mullikin's HBP operations identify and recruit physicians
and other health care professionals for admission to a client's medical staff,
monitor the quality of care and proper utilization of services and coordinate
the ongoing scheduling of staff physicians who provide clinical coverage in
designated areas of care. Hospitals have found it increasingly difficult to
recruit, schedule, retain and appropriately compensate hospital-based physician
specialists required to operate hospital emergency, radiology and other
departments. As a consequence, a large number of hospitals have turned to
contract management firms as a more cost-effective and reliable alternative to
the development of in-house physician staffing.

INFORMATION SYSTEMS

MedPartners/Mullikin develops and maintains integrated information systems
to support its growth and acquisition plans. MedPartners/Mullikin's overall
information systems design is open, modular and flexible. MedPartners/Mullikin
is implementing an individual patient electronic medical record ("EMR") to
complement primary practice management and billing functions.
MedPartners/Mullikin has configured its systems to give affiliated physicians
and their staff efficient and rapid access to complex clinical data.
MedPartners/ Mullikin's use of the EMR enhances operational efficiencies through
automation of many routine clinical functions, as well as the capacity to link
"physician-specific" treatment protocols by diagnosis, thus allowing physicians
to have treatments checked against pre-defined protocols at the time of service.

Effective and efficient access to key clinical patient data is critical in
improving costs and quality outcomes as MedPartners/Mullikin enters into more
capitation contracts. MedPartners/Mullikin utilizes its existing information
systems to improve productivity, manage complex reimbursement procedures,
measure patient care satisfaction and outcomes of care, and integrate
information from multiple facilities throughout

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<PAGE> 66

the care spectrum. These systems allow MedPartners/Mullikin to analyze clinical
and cost data so that it is able to determine effectively thresholds of
profitability under various capitation arrangements.

COMPETITION

GOVERNMENT REGULATION

As a participant in the health care industry, MedPartners/Mullikin's
operations and relationships are subject to extensive and increasing regulation
by a number of governmental entities at the federal, state, and local levels.
MedPartners/Mullikin believes its operations are in material compliance with
applicable laws. Nevertheless, because of the uniqueness of the structure of the
relationship with the physician groups, many aspects of MedPartners/Mullikin's
business operations have not been the subject of state or federal regulatory
interpretation and there can be no assurance that a review of
MedPartners/Mullikin's or the affiliated physicians' business by courts or
regulatory authorities will not result in a determination that could adversely
affect the operations of MedPartners/Mullikin or the affiliated physicians or
that the health care regulatory environment will not change so as to restrict
MedPartners/Mullikin's or the affiliated physicians' existing operations or
their expansion.

The laws of many states prohibit business corporations such as
MedPartners/Mullikin from practicing medicine and employing physicians to
practice medicine. MedPartners/Mullikin performs only non-medical administrative
services, does not represent to the public or its clients that it offers medical
services and does not exercise influence or control over the practice of
medicine by the physicians with whom it contracts. Accordingly,
MedPartners/Mullikin believes that it is not in violation of applicable state
laws relating to the practice of medicine. In addition to prohibiting the
practice of medicine, numerous states prohibit entities like
MedPartners/Mullikin from engaging in certain health care-related activities,
such as fee-splitting with physicians.

Certain provisions of the Social Security Act, commonly referred to as the
"Anti-kickback Statute", prohibit the offer, payment, solicitation, or receipt
of any form of remuneration in return for the referral of Medicare or state
health program patients or patient care opportunities, or in return for the
recommendation, arrangement, purchase, lease or order of items or services that
are covered by Medicare or state health programs. Many states have adopted
similar prohibitions against payments intended to induce referrals of Medicaid
and other third-party payor patients. Although MedPartners/Mullikin believes
that it is not in violation of the Anti-kickback Statute or similar state
statutes, its operations do not fit within any of the existing or proposed
federal safe harbors.

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<PAGE> 67

On March 5, 1996, the DOC issued the Restricted License to PPN in
accordance with the requirements of the Knox-Keene Act. The Restricted License
authorizes PPN to operate as a health care service plan in the State of
California. MedPartners/Mullikin, through PPN, intends to utilize the Restricted
License for purposes of contracting with HMOs for a broad range of health care
services, including both institutional and professional medical services,
through a consolidated contract with the HMO. The Knox-Keene Act and the
regulations promulgated thereunder subject entities which are licensed as health
care service plans in California to substantial regulation by the DOC. In
addition, licensees under the Knox-Keene Act are required to file periodic
financial data and other information (which generally become available to the
public), maintain substantial tangible net equity on their balance sheets and
maintain adequate levels of medical, financial and operational personnel
dedicated to fulfilling the licensee's statutory and regulatory requirements.
The DOC is empowered by law to take enforcement actions against licensees which
fail to comply with such requirements. PPN is a newly created organization
without an operating history and there is no assurance that the DOC will view
its operations to be fully in compliance with applicable laws and regulations.

The operation of Pioneer Hospital and USFMC is highly regulated. Pioneer
Hospital and USFMC are accredited by the Joint Commission on Accreditation of
Healthcare Organizations. Accreditation from this Joint Commission allows
Pioneer Hospital to serve Medicare patients and provides authorization from the
California Department of Health Services and the Los Angeles County Department
of Health to operate as a licensed hospital facility. Each of Pioneer Hospital
and USFMC is licensed and regulated as a general acute care hospital by the
State of California Department of Health Services. Additionally, each of Pioneer
Hospital and USFMC has a clinical laboratory license from the State of
California Department of Health Services, a clinical laboratory license for its
cardio-pulmonary laboratory and a pharmacy license for its inpatient pharmacy.

Because the affiliated practice groups remain separate legal entities, they
may be deemed competitors subject to a range of antitrust laws which prohibit
anti-competitive conduct, including price fixing, concerted refusals to deal and
division of market. MedPartners/Mullikin intends to comply with such state and
federal laws as may affect its development of integrated health care delivery
networks, but there can be no assurance that a review of MedPartners/Mullikin's
business by courts or regulatory authorities will not result in a determination
that could adversely affect the operation of MedPartners/Mullikin and its
affiliated physician groups.

LEGAL PROCEEDINGS

MedPartners/Mullikin is named as a defendant in various legal actions
arising primarily out of services rendered by physicians employed by its
affiliated physician entities and Pioneer Hospital and USFMC, personal injury
and employment disputes. In addition, certain of its affiliated medical groups
are named as defendants in numerous actions alleging medical negligence on the
part of their physicians. In certain of these

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actions, MedPartners/Mullikin's and the medical group's insurance carrier has
either declined to provide coverage or has provided a defense subject to a
reservation of rights. MedPartners/Mullikin's management does not view any of
these actions as likely to result in an uninsured award which would have a
material adverse effect on MedPartners/Mullikin's financial condition, results
of operations or liquidity.

EMPLOYEES

As of June 30, 1996, MedPartners/Mullikin, including its affiliated
professional entities, employed 9,433 people on a full-time equivalent basis.

CORPORATE LIABILITY AND INSURANCE

MedPartners/Mullikin's business entails an inherent risk of claims of
physician professional liability. To protect its overall operations from such
potential liabilities, MedPartners/Mullikin has a multi-tiered corporate
structure and preserves the operational integrity of each of its operating
subsidiaries. In addition, MedPartners/Mullikin maintains professional liability
insurance, general liability and other customary insurance on a claims-made and
modified occurrence basis, in amounts deemed appropriate by management based
upon historical claims and the nature and risks of the business, for all of the
affiliated physicians, practices and operations. This insurance includes "tail"
coverage for claims against MedPartners/Mullikin's affiliated medical
organizations to cover incidents which were or are incurred but not reported
during the periods for which the related risk was covered by "claims made"
insurance. There can be no assurance that a future claim will not exceed the
limits of available insurance coverage or that such coverage will continue to be
available.

Moreover, MedPartners/Mullikin requires each physician group with which it
affiliates to obtain and maintain professional liability insurance coverage.
Such insurance would provide coverage, subject to policy limits, in the event
MedPartners/Mullikin were held liable as a co-defendant in a lawsuit for
professional malpractice against a physician. In addition, generally,
MedPartners/Mullikin is indemnified under the practice management agreements by
the affiliated physician groups for liabilities resulting from the performance
of medical services.

PROPERTIES

MedPartners/Mullikin leases approximately 48,000 square feet at 3000
Galleria Tower in Birmingham, Alabama, for its corporate headquarters.

In its western operations, MedPartners/Mullikin and its affiliated entities
own certain real estate assets in California, and lease their other facilities
from third parties. MedPartners/Mullikin leases, directly or through affiliated
real estate partnerships, real estate for its clinics in 79 locations in
southern California, 52 in northern California and six in the Portland, Oregon
area. MedPartners/Mullikin leases an approximately 60,000 square foot building
in Artesia which is occupied by Pioneer Hospital and owns the USFMC hospital
building. In addition, MedPartners/Mullikin leases approximately 22 properties
used for general administrative offices and storage.

MedPartners/Mullikin also leases, subleases or occupies, pursuant to the
asset purchase agreements, the clinic facilities for the affiliated physician
groups. The leases have varying terms ranging from one to 22 years and monthly
rents ranging from $250 to $97,170. MedPartners/Mullikin anticipates that, as
the affiliated practices continue to grow and add new services, expanded
facilities will be required.

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<PAGE> 69

MANAGEMENT OF MEDPARTNERS/MULLIKIN

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information about the executive
officers and directors of MedPartners/Mullikin as of the date of this
Prospectus-Proxy Statement:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH MEDPARTNERS/MULLIKIN
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
Larry R. House(1)...................... 53 Chairman of Board, President and Chief
Executive Officer
Mark L. Wagar.......................... 45 President -- Western Operations
John J. Gannon......................... 58 President -- Eastern Operations
H. Lynn Massingale, M.D. .............. 43 President -- Team Health
Harold O. Knight, Jr................... 38 Executive Vice President and Chief
Financial Officer
Tracy P. Thrasher...................... 33 Executive Vice President of
Administration and Secretary
William R. Dexheimer................... 39 Executive Vice President and Chief
Operating Officer -- East
J. Rodney Seay......................... 49 Executive Vice President of Mergers and
Acquisitions
J. Brooke Johnston, Jr................. 56 Senior Vice President and General
Counsel
Peter J. Clemens, IV................... 31 Vice President of Finance and Treasurer
Richard M. Scrushy..................... 43 Director
Larry D. Striplin, Jr.(2).............. 66 Director
Charles W. Newhall III(1).............. 51 Director
Scott F. Meadow(2)..................... 42 Director
Ted H. McCourtney, Jr.(1).............. 57 Director
Walter T. Mullikin, M.D................ 78 Director
John S. McDonald, J.D.(1).............. 63 Director
Rosalio J. Lopez, M.D.(2).............. 43 Director
Richard J. Kramer...................... 53 Director
</TABLE>

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

(1) Member of the Compensation Committee
(2) Member of the Audit Committee

Larry R. House has been President and Chief Executive Officer of
MedPartners/Mullikin since August 27, 1993, and has been Chairman of the Board
since January 8, 1993. From 1985 to 1992, he was Chief Operating Officer of
HEALTHSOUTH Rehabilitation Corporation, now HEALTHSOUTH Corporation, a publicly
traded provider of rehabilitative health care services ("HEALTHSOUTH"). From
1992 to 1993, Mr. House was President of HEALTHSOUTH International, Inc. Mr.
House is a member of the Board of Directors of each of HEALTHSOUTH, Capstone
Capital Corporation, a publicly traded real estate investment trust, and the
American Sports Medicine Institute.

Mark L. Wagar has been President -- Western Operations of
MedPartners/Mullikin since January 1995. From March 1994 to December 1994, he
was the President of CIGNA HealthCare of California, a health care plan serving
enrollees in California, Oregon and Washington and, from January 1993 through
February 1994, was a Vice President of CIGNA HealthCare of California, an HMO.
From November 1989 to December 1992, he was the President of Managed Care
Partners, Inc., a private consulting management

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<PAGE> 70

company specializing in managed care services. He has been involved in health
care management for over 20 years, including 10 years in managed care companies.

John J. Gannon has been President -- Eastern Operations of
MedPartners/Mullikin since July 27, 1996. For 23 years, Mr. Gannon was a Partner
with KPMG Peat Marwick. His most recent position with KPMG was that of National
Partner-in-Charge of Strategy and Marketing, Healthcare and Life Sciences. He
served as one of the firm's designated industry review specialists for health
care financial feasibility studies.

H. Lynn Massingale, M.D. has been President and Chief Executive Officer of
Team Health since its formation in March 1994. Dr. Massingale has served as
President of Southeastern Emergency Physicians, Inc., a subsidiary of Team
Health, since 1981. A graduate of the University of Tennessee Center for Health
Sciences in Memphis, Dr. Massingale is certified by the National Board of
Medical Examiners, Tennessee Board of Medical Examiners and American Board of
Emergency Medicine. Dr. Massingale's professional memberships include the
Knoxville Academy of Medicine, Tennessee Medical Association, American Medical
Association and American College of Emergency Physicians.

Harold O. Knight, Jr. has been Executive Vice President and Chief Financial
Officer of MedPartners/ Mullikin since November 10, 1994. Mr. Knight was Senior
Vice President of Finance and Treasurer of MedPartners/Mullikin from August 27,
1993 to November 10, 1994 and, from March 1, 1993 to August 27, 1993, Mr. Knight
served as Vice President of Finance of MedPartners/Mullikin. From 1980 to 1993,
Mr. Knight was with Ernst & Young LLP, most recently as Senior Manager. Mr.
Knight is a member of the Alabama Society of Certified Public Accountants and
the American Institute of Certified Public Accountants.

Tracy P. Thrasher has been Executive Vice President of Administration of
MedPartners/Mullikin since November 10, 1994 and has been Secretary since March
10, 1994. Ms. Thrasher was Senior Vice President of Administration from March
10, 1994 to November 10, 1994 and, from January 8, 1993 to March 10, 1994, she
served as Corporate Comptroller and Vice President of Development. From 1990 to
1993, Ms. Thrasher was the Audit and Health Care Management Advisory Service
Manager with Burton, Canady, Moore & Carr, P.C., independent public accountants.
Ms. Thrasher began her career with Ernst & Young LLP in 1985, and became a
certified public accountant in 1986.

William R. Dexheimer has been Executive Vice President and Chief Operating
Officer -- East of MedPartners/Mullikin since August 27, 1993. From 1989 to
1993, Mr. Dexheimer was a principal stockholder and Chief Executive Officer of
Strategic Health Resources of the South, Inc., a health care development and
consulting firm. From 1986 to 1989, Mr. Dexheimer was employed by AMI Brookwood
Medical Center as Senior Vice President of Development and Chief Executive
Officer of AMI Brookwood Primary Care Centers, Inc.

J. Rodney Seay has been Executive Vice President of Mergers and
Acquisitions of MedPartners/ Mullikin since April 20, 1995. From August 27, 1993
to April 20, 1995, he served as Executive Vice President of Development. Mr.
Seay was also Secretary of MedPartners/Mullikin from August 27, 1993 to March
10, 1994. From 1992 to 1993, he was Vice President of Finance of HEALTHSOUTH.
From 1988 to 1992, Mr. Seay was a Senior Manager with KPMG Peat Marwick. From
1982 to 1988, he served as Chief Executive Officer of Medical Data Services, a
physician practice management company with over 650 employees and over 1,500
physician clients.

J. Brooke Johnston, Jr. has been Senior Vice President and General Counsel
of MedPartners/Mullikin since April 25, 1996. Prior to that, Mr. Johnston was a
senior principal of the law firm of Haskell Slaughter Young & Johnston,
Professional Association, Birmingham, Alabama where he practiced corporate and
securities law for over seventeen years. Prior to that he was engaged in the
practice of law in New York, New York and at another firm in Birmingham. Mr.
Johnston is a member of the Alabama State Bar and the New York and American Bar
Associations. Mr. Johnston is a member of the Board of Directors of United
Leisure Corporation, a publicly traded leisure time company.

Peter J. Clemens IV has been Vice President of Finance and Treasurer of
MedPartners/Mullikin since April 20, 1995. From 1991 to 1995 Mr. Clemens worked
in Corporate Banking with Wachovia Bank of

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Georgia, N.A. Mr. Clemens began his career with AmSouth Bank, N.A. in 1987, and
received an M.B.A. from Vanderbilt University in 1991.

Richard M. Scrushy has been a member of the MedPartners/Mullikin Board of
Directors since January 1993. Since 1984, Mr. Scrushy has been Chairman of the
Board and Chief Executive Officer of HEALTHSOUTH. Mr. Scrushy is also a member
of the Board of Directors of Capstone Capital Corporation, a publicly traded
real estate investment trust.

Larry D. Striplin, Jr. has been a member of the MedPartners/Mullikin Board
of Directors since January 1993. Since December 1995, Mr. Striplin has been the
Chairman and Chief Executive Officer of Nelson-Brantley Glass Contractors, Inc.
and Chairman and CEO of Clearview Properties, Inc. Until December 1995, Mr.
Striplin had been Chairman of the Board and Chief Executive Officer of Circle
"S" Industries, Inc., a privately owned bonding wire manufacturer. Mr. Striplin
is a member of the Board of Directors of Kulicke & Suffa, Inc. a publicly traded
manufacturer of electronic equipment, and of Capstone Capital Corporation, a
publicly traded real estate investment trust.

Charles W. Newhall III has been a member of the MedPartners/Mullikin Board
of Directors since September 1993. He has been a general partner of New
Enterprise Associates, a venture capital firm, since 1978. Mr. Newhall is a
member of the Board of Directors of HEALTHSOUTH, Integrated Health Services,
Inc. and OPTA Food Ingredients, Inc., all publicly traded companies. He is
Founder and Chairman of the Mid-Atlantic Venture Association, which was
organized in 1988.

Scott F. Meadow has been a member of the MedPartners/Mullikin Board of
Directors since September 1993. Since February 5, 1996, Mr. Meadow has been a
general partner of Sprout Group, a venture capital firm. He was a general
partner of the Frontenac Company, a venture capital firm, from August 1992 to
September 1995. Mr. Meadow was a general partner of William Blair Venture
Partners from 1982 to 1992 and a partner of William Blair and Company, an
investment banking firm, from 1985 to 1992.

Ted H. McCourtney, Jr. has been a member of the MedPartners/Mullikin Board
of Directors since September 1993. He has been a general partner of Venrock
Associates, a venture capital firm, since 1970. Mr. McCourtney is a member of
the Board of Directors of Cellular Communications, Inc., Cellular Communications
of Puerto Rico, Inc., Cellular Communications International, Inc., International
CabelTel Incorporated, SBSF, Inc. and Structural Dynamics Research Corporation,
all publicly traded companies.

Walter T. Mullikin, M.D., a surgeon, has been a member of the
MedPartners/Mullikin Board of Directors since November 29, 1995. Dr. Mullikin
had been Chairman of the Board of the general partner of MME since 1989. He
founded Pioneer Hospital and the predecessors to MME's principal professional
corporation in 1957. He was also the Chairman of the Board, President and a
shareholder of MME's IPA, MIPA, until November 1995. Dr. Mullikin is a member of
the Board of Directors of Health Net, a publicly traded HMO, and was one of the
founders and a past chairman of the Unified Medical Group Association.

John S. McDonald, J.D., has been a member of the MedPartners/Mullikin Board
of Directors since November 29, 1995. Mr. McDonald had been the Chief Executive
Officer of the general partner of MME since March 1, 1994, and he has been an
executive of MME's principal professional corporation, Pioneer Hospital, and
their related entities since 1967. Mr. McDonald was also a director, the
Secretary and a shareholder of MME's general partner. Mr. McDonald is on the
Board of Directors of the Truck Insurance Exchange and is a past president of
the Unified Medical Group Association.

Rosalio J. Lopez, M.D. has been a member of the MedPartners/Mullikin Board
of Directors since November 29, 1995. Mr. Lopez had been a director of the
general partner of MME since 1989. Dr. Lopez joined MME's principal professional
corporation in 1984 and serves as the Chairman of its Medical Council and Family
Practice and Managed Care committees. He also acted as a director and a Vice
President of MME's principal professional corporation. He is also a director and
shareholder of MIPA.

Richard J. Kramer has been a member of the MedPartners/Mullikin Board of
Directors since November 29, 1995. Mr. Kramer is President/Chief Executive
Officer and a Director of Catholic Healthcare West ("CHW"). Before joining CHW
in September 1989, Mr. Kramer served as the Executive Vice

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<PAGE> 72

President of LifeSpan, Inc., a multi-hospital/health care system headquartered
in Minneapolis. He had been with LifeSpan since 1971, serving in a variety of
capacities, including Vice President of Planning and Marketing and administrator
for Abbott-Northwestern Hospital. Mr. Kramer is currently a member of the Board
of Directors of the California Association of Hospitals and Health Systems and
the Hospital Council of Northern and Central California, the Board of Directors
of the California Chamber of Commerce, the Governing Council of the American
Hospital Association Section on Health Systems and the House of Delegates of the
American Hospital Association, the Advisory Council for the Center for Clinical
Integration and the Board of Directors of the Alumni Association of the
University of Minnesota Program in Health Care Administration.

CLASSIFIED BOARD OF DIRECTORS

Pursuant to the terms of the MedPartners/Mullikin Certificate and the
MedPartners/Mullikin By-Laws, the MedPartners/Mullikin Board is divided into
three classes, with each class being as nearly equal in number as reasonably
possible. One class holds office for a term that will expire at the annual
meeting of stockholders to be held in 1997, a second class holds office for a
term that will expire at the annual meeting of stockholders to be held in 1998
and a third class holds office for a term that will expire at the annual meeting
of stockholders to be held in 1999. Each director holds office for the term to
which he is elected and until his successor is duly elected and qualified. At
each annual meeting of stockholders of MedPartners/Mullikin, the successors to
the class of directors whose terms expire at such meeting are elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election. Messrs. Scrushy and McCourtney
and Dr. Lopez have terms expiring in 1997, Messrs. House, McDonald, Kramer and
Newhall have terms expiring in 1998, and Messrs. Meadow and Striplin and Dr.
Mullikin have terms expiring in 1999. The Board of Directors elects officers
annually and such officers serve at the discretion of the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of MedPartners/Mullikin currently has two
committees: the Audit Committee and the Compensation Committee.

The Audit Committee has the responsibility for reviewing and supervising
the financial controls of MedPartners/Mullikin. The Audit Committee makes
recommendations to the MedPartners/Mullikin Board of Directors with respect to
MedPartners/Mullikin's financial statements and the appointment of independent
auditors, reviews significant audit and accounting policies and practices, meets
with MedPartners/Mullikin's independent public accountants concerning, among
other things, the scope of audits and reports, and reviews the performance of
overall accounting and financial controls of MedPartners/Mullikin. The Audit
Committee consists of Messrs. Striplin and Meadow and Dr. Lopez.

The Compensation Committee has the responsibility for reviewing the
performance of the officers of MedPartners/Mullikin and recommending to the
MedPartners/Mullikin Board of Directors annual salary and bonus amounts for all
officers of MedPartners/Mullikin. The Compensation Committee consists of Messrs.
House, Newhall, McCourtney and McDonald.

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EXECUTIVE OFFICER COMPENSATION

Executive Officer Compensation. The following table presents certain
information concerning compensation paid or accrued for services rendered to
MedPartners/Mullikin in all capacities during the years ended December 31, 1995
and 1994, for the chief executive officer and the four other most highly
compensated executive officers of MedPartners/Mullikin whose total annual salary
and bonus in the last fiscal year exceeded $100,000 (collectively, the "Named
Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES ALL OTHER
---------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION HELD YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)
- ------------------------------------------- ----- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Larry R. House(2).......................... 1995 $ 349,908 $ 600,000 828,000 $ 28,335(3)
Chairman of the Board, President and 1994 335,000 -- 457,000 25,474(4)
Chief Executive Officer
Harold O. Knight, Jr....................... 1995 132,920 102,230 200,000 12,227(5)
Executive Vice President and Chief 1994 90,000 -- 30,000 3,541(6)
Financial Officer
William R. Dexheimer....................... 1995 172,996 2,196 55,000 12,254(7)
Executive Vice President and Chief 1994 162,940 -- 15,000 6,596(8)
Operating Officer -- East
Mark L. Wagar(9)........................... 1995 346,601 -- 250,000 30,485(10)
President -- Western Operations
Tracy P. Thrasher.......................... 1995 115,250 42,240 185,000 12,145(11)
Executive Vice President of 1994 83,000 -- 50,000 3,510(12)
Administration and Secretary
</TABLE>

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

(1) Dollar value of perquisites and other benefits were less than the lesser of
$50,000 or 10% of total salary and bonus for each Named Executive Officer.
(2) Pursuant to a reimbursement agreement, MedPartners/Mullikin paid
HEALTHSOUTH the sum of $150,195 as reimbursement for services rendered by
Mr. House from January 1, 1994 to August 31, 1994, when the agreement
terminated. See "-- Compensation Committee Interlocks and Insider
Participation".
(3) Represents $585 paid for life, long-term disability, health, dental and
accidental death insurance; $2,750 paid for automobile allowance; and
$25,000 paid for split premium life insurance for Mr. House for 1995.
(4) Represents $434 paid for life, long-term disability, health, dental and
accidental death insurance; $2,200 paid for automobile allowance; and
$22,840 paid for split premium life insurance for Mr. House for 1994.
(5) Represents $477 paid for life, long-term disability, health, dental and
accidental death insurance; $1,750 paid for automobile allowance; and
$10,000 paid for split premium life insurance for Mr. Knight for 1995.
(6) Represents $391 paid for life, long-term disability, health, dental and
accidental death insurance; and $3,150 paid for automobile allowance for
Mr. Knight for 1994.
(7) Represents $504 paid for life, long-term disability, health, dental and
accidental death insurance; $1,750 paid for automobile allowance; and
$10,000 paid for split premium life insurance for Mr. Dexheimer for 1995.
(8) Represents $2,396 paid for life, long-term disability, health, dental and
accidental death insurance; and $4,200 paid for automobile allowance for
Mr. Dexheimer for 1994.
(9) Mr. Wagar commenced employment on January 1, 1995.

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<PAGE> 74

(10) Represents $5,084 paid for life, long-term disability, health, dental and
accidental death insurance; $1,548 paid as a flex allowance; and $23,853
paid as an executive life insurance benefit for Mr. Wagar for 1995.
(11) Represents $395 paid for life, long-term disability, health, dental and
accidental death insurance; $1,750 paid for automobile allowance; and
$10,000 paid for split premium life insurance for Ms. Thrasher for 1995.
(12) Represents $360 paid for life, long-term disability, health, dental and
accidental death insurance; and $3,150 paid for automobile allowance for
Ms. Thrasher for 1994.

Option Grants in 1995. The following table contains information concerning
the grant of stock options under the MedPartners/Mullikin Option Plans (as
defined below) to the Named Executive Officers in 1995:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUALS GRANTS(1) POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#)(2) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------- ------------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Larry R. House............ 328,000(3) 11.9% $ 12.00 2005 $2,475,329 $6,272,970
500,000(3) 18.1 27.25 2005 8,568,689 21,714,741
Harold O. Knight, Jr. .... 50,000 1.8 12.00 2005 377,337 956,245
150,000 5.4 27.25 2005 2,570,607 6,514,422
William R. Dexheimer...... 15,000 0.5 12.00 2005 113,201 286,874
40,000 1.4 27.25 2005 685,495 1,737,179
Mark L. Wagar............. 150,000 5.4 28.25 2005 2,664,941 6,753,484
100,000(3) 3.6 28.25 2005 1,776,627 4,502,322
Tracy P. Thrasher......... 85,000 3.1 12.00 2005 641,473 1,625,617
100,000 3.6 27.25 2005 1,713,738 4,342,948
</TABLE>

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

(1) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years). It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option
is exercised and sold on the last day of its term for the appreciated stock
price. No gain to the optionee is possible unless the stock price increases
over the option term, which will benefit all stockholders.
(2) The vesting of each option is cumulative and no vested portion expires until
the expiration of the option. Unless otherwise noted, options vest at the
rate of 20% per year over a five-year period beginning on the date of
grant.
(3) These options are 100% vested.

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<PAGE> 75

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. The following table provides information with respect to options
exercised by the Named Executive Officers during 1995 and the number and value
of securities underlying unexercised options held by the Named Executive
Officers at December 31, 1995.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
NAME OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT FY-END(#) AT FY-END($)(1)
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Larry House............... 402,000 $ 5,226,000 883,000/0 $11,567,000/$0
Harold O. Knight, Jr. .... 72,000 1,417,000 40,000/218,000 382,500/3,432,400
William R. Dexheimer...... 3,000 39,000 14,000/53,000 207,400/731,200
Mark L. Wagar............. -- -- 130,000/120,000 747,528/570,000
Tracy P. Thrasher......... 32,000 567,500 37,000/186,000 472,000/3,134,400
</TABLE>

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

(1) Based on the closing sale price of MedPartners/Mullikin Common Stock on
December 29, 1995, of $33.00 per share.

DIRECTOR COMPENSATION

Directors of MedPartners/Mullikin who are not also employed by
MedPartners/Mullikin are paid Directors' fees of $2,500 for each meeting of the
MedPartners/Mullikin Board of Directors attended in person, $500 for each
meeting of the Board of Directors attended by phone, and $1,000 for each meeting
of the Audit Committee or the Compensation Committee attended in person. In
addition, Directors are reimbursed for travel costs and other out-of-pocket
expenses incurred in attending each directors' meeting and committee meeting.
Outside directors are eligible to receive the grant of stock options under the
MedPartners/Mullikin Option Plans. In November 1995, each of Messrs. Scrushy,
Striplin, Newhall, Meadow, McCourtney, McDonald and Kramer and Dr. Mullikin were
granted ten-year options to purchase 10,000 shares of Common Stock and Dr. Lopez
was granted a ten-year option to purchase 20,000 shares, all at an exercise
price of $28.25 per share, the market price on the date of grant. See
" -- Executive Officer Compensation -- Option Grants in 1995" and "Principal
Stockholders of MedPartners/Mullikin".

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. House, Newhall and McCourtney served on the Compensation Committee
of the MedPartners/ Mullikin Board during 1995, joined by Mr. McDonald in
November 1995. Mr. House also served as Chairman of the Board, President and
Chief Executive Officer of MedPartners/Mullikin while serving on the
Compensation Committee.

On August 31, 1993, MedPartners entered into a Reimbursement Agreement with
HEALTHSOUTH to allow Mr. House to serve as President of HEALTHSOUTH
International, Inc. The Reimbursement Agreement provided for the reimbursement
by MedPartners to HEALTHSOUTH of one-half of Mr. House's compensation and
benefits. Under the Reimbursement Agreement, MedPartners paid HEALTHSOUTH the
sum of $150,195 for the period from January 1, 1994 to August 31, 1994, when the
Reimbursement Agreement terminated. On September 1, 1994, MedPartners entered
into a Consulting Agreement, terminated in February 1995, with HEALTHSOUTH,
under which MedPartners agreed to make available to HEALTHSOUTH from time to
time at reasonable times and upon reasonable requests the services of Mr. House
as a consultant in connection with the activities of HEALTHSOUTH International,
Inc. In exchange for such services, HEALTHSOUTH paid MedPartners/Mullikin a
consulting fee equal to one-half of Mr. House's compensation and benefits.

In connection with the sale of the Convertible Preferred Stock described
below, MedPartners/Mullikin entered into a non-competition and severance
agreement with Mr. House. The agreement provides, subject to certain
limitations, for severance payments equal to 12 months' salary if Mr. House's
employment is

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<PAGE> 76

terminated without cause. Moreover, pursuant to this agreement, Mr. House agreed
that during the term of his employment with MedPartners/Mullikin and for 18
months thereafter, he will not compete with MedPartners/Mullikin, without the
prior written consent of MedPartners/Mullikin, by engaging in any capacity in
any business which is competitive with the business of MedPartners/Mullikin.

In September 1993 and March 1994, MedPartners issued shares of Series A and
Series B Convertible Preferred Stock in private transactions. Entities
affiliated with Messrs. House, Newhall and McCourtney purchased shares in each
transaction as follows: HEALTHSOUTH -- 157,500 shares of Series A and 250,000
shares of Series B; New Enterprise Associates VI, L.P. -- 875,000 shares of
Series A and 625,000 shares of Series B; New Venture Partners III,
L.P. -- 125,000 shares of Series A and 37,500 shares of Series B; and Venrock
Associates -- 750,000 shares of Series A and 500,000 shares of Series B. All of
such shares of Preferred Stock were automatically converted into shares of
Common Stock upon the consummation of the MedPartners initial public offering in
February 1995. See "Principal Stockholders of MedPartners/Mullikin".

In connection with the acquisition of MME described under "Business of
MedPartners/Mullikin -- Recent Major Acquisitions", MedPartners/Mullikin entered
into Termination and Consulting Agreements with Mr. McDonald. Under the
Termination Agreement, Mr. McDonald's employment agreement with MME was
terminated in consideration of which Mr. McDonald received a lump sum payment of
$796,000, continuation of certain fringe benefits and perquisites under the
former employment agreement for 36 months, access to an office and support staff
until death or disability, payments from MedPartners/Mullikin and a trust set up
by MedPartners/Mullikin to fund the remainder of MME's pension obligations to
Mr. McDonald, and payment of all health and medical care (including
prescriptions) for Mr. McDonald for the remainder of his life through a
Company-sponsored health insurance plan. MedPartners/Mullikin and Mr. McDonald
also entered into a five-year Consulting Agreement whereby Mr. McDonald will
receive in consideration for his services a consulting fee of $2,230,000, to be
paid over five years with an initial payment of $669,000 on November 29, 1995
and equal payments of $390,250 on each anniversary of such date, access to an
office and support staff and certain other benefits. See "Certain
Transactions -- MedPartners/Mullikin -- MME Acquisition Agreements".

See also "Certain Transactions -- MedPartners/Mullikin".

NON-COMPETITION AND SEVERANCE AGREEMENTS

In September 1993, MedPartners/Mullikin entered into non-competition and
severance agreements with Mr. House and Mr. Dexheimer, each of which contains
the terms described above under "-- Compensation Committee Interlocks and
Insider Participation" related to the agreement with Mr. House. MedPartners/
Mullikin also entered into non-competition, nondisclosure and development
agreements with each of Messrs. Knight, Seay and Dexheimer and Ms. Thrasher
pursuant to which each has agreed not to disclose any of MedPartners/Mullikin's
confidential information or assist or work for any of MedPartners/Mullikin's
competitors for a period of one year after termination of employment. In
addition, each of such executive officers agreed to assign any rights in any
design, invention, software, process, trade secret or intellectual property that
relates to or resulted from work performed at MedPartners/Mullikin.

STOCK OPTION PLANS

MedPartners/Mullikin has a 1993 Stock Option Plan (the "1993 Option Plan")
and a 1995 Stock Option Plan (the "1995 Option Plan", together with the 1993
Option Plan, the "MedPartners/Mullikin Option Plans"). The objectives of the
MedPartners/Mullikin Option Plans are to attract and retain qualified personnel,
to provide incentives to employees, officers, and directors of
MedPartners/Mullikin and to promote the success of MedPartners/Mullikin. A total
of 1,555,000 shares of Common Stock, including 1,055,000 shares of Common Stock
for issuance upon the exercise of options granted to officers, directors,
consultants and employees of MedPartners/Mullikin and 500,000 shares of Common
Stock for issuance upon the exercise of options issued in connection with the
acquisition of the assets of physician practices, are covered by the 1993 Option
Plan. A total of 7,099,150 shares of Common Stock are covered by the 1995 Option
Plan. Additionally, the 1995 Option Plan contains a provision whereby the number
of shares of MedPartners/

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<PAGE> 77

Mullikin Common Stock for which options may be granted under the 1995 Option
Plan shall automatically increase on the first trading day of each calendar year
during the term of the 1995 Option Plan by an amount equal to 1% of the shares
of MedPartners/Mullikin's Common Stock outstanding on December 31 of the
immediately preceding year. However, such additional shares shall be available
only for the grant of non-qualified stock options and not for the grant of
incentive options. The MedPartners/Mullikin Option Plans authorize the grant of
options to purchase Common Stock intended to qualify as incentive stock options
("Incentive Options") under Section 422 of the Code and the grant of options
that do not qualify as Incentive Options ("Non-Qualified Options") under Section
422 of the Code.

The MedPartners/Mullikin Option Plans are administered by the Compensation
Committee of the MedPartners/Mullikin Board of Directors (the "Committee"). The
Committee, subject to the approval of the MedPartners/Mullikin Board of
Directors and the provisions of the MedPartners/Mullikin Option Plans, has full
power to select the individuals to whom awards will be granted, to fix the
number of shares that each optionee may purchase, to set the terms and
conditions of each option, and to determine all other matters relating to the
MedPartners/Mullikin Option Plans. The MedPartners/Mullikin Option Plans provide
that the Committee will select grantees from among full-time employees,
officers, directors and consultants of MedPartners/Mullikin or its subsidiaries,
and individuals or entities subject to an acquisition or management agreement
with MedPartners/Mullikin.

The option exercise price of each option shall be determined by the
Committee, but shall not be less than 100% of the fair market value of the
shares on the date of grant in the case of Incentive Options and not less than
85% of the fair market value of the shares on the date of grant in the case of
Non-Qualified Options granted to employees. No Incentive Option may be granted
to any employee who owns at the date of grant stock representing in excess of
10% of the combined voting power of all classes of stock of MedPartners/
Mullikin or a parent or a subsidiary unless the exercise price for stock subject
to such options is at least 110% of the fair market value of such stock at the
time of grant and the option term does not exceed five years. The aggregate fair
market value of stock with regard to which Incentive Options are exercisable by
an individual for the first time during any calendar year may not exceed
$100,000.

The term of each option shall be fixed by the Committee and may not exceed
ten years from the date of grant. If a participant who holds options ceases to
be an employee, consultant or director or otherwise affiliated with
MedPartners/Mullikin (the "Termination"), for cause (as defined), and such
person shall not have fully exercised any option granted under the
MedPartners/Mullikin Option Plans, the option or the remaining portion thereof
will expire on the date of termination. Any option or portion thereof which has
not expired or been exercised on or before the date of Termination, without
cause, expires 90 days after the date of Termination. Notwithstanding the
foregoing, in the event of Termination due to the optionee's death or
incapacity, the option will terminate 12 months following the date of such
optionee's death or incapacity. Options granted under the MedPartners/Mullikin
Option Plans may be exercisable in installments.

Upon the exercise of options, the option exercise price must be paid in
full, either in cash or other form acceptable to the Committee, including
delivery of a full recourse promissory note, delivery of shares of Common Stock
already owned by the optionee or delivery of other property. Unless terminated
earlier, the 1993 Option Plan will terminate in 2003 and the 1995 Option Plan
will terminate in 2005.

As of June 30, 1996, MedPartners/Mullikin had outstanding options at
exercise prices ranging from $0.20 to $19.25 to acquire 648,370 shares of Common
Stock under the 1993 Option Plan. At the same date, there were outstanding
options under the 1995 Option Plan to acquire 5,116,040 shares of Common Stock
at exercise prices ranging from $12.00 to $33.00 per share.

401(K) PLANS

MedPartners/Mullikin has the MedPartners, Inc. and Subsidiaries Employee
Retirement Savings Plan (the "MedPartners Plan"). The MedPartners Plan is a Code
Section 401(k) plan which requires, subject to certain limited exceptions, the
attainment of age 21 and one year of service, with a minimum of 1,000 hours
worked, to become a participant in the plan. MedPartners/Mullikin, in its sole
discretion, may contribute an amount which it designates as a discretionary
employer contribution to all non-highly compensated and all

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<PAGE> 78

non-key employees. In years for which the MedPartners Plan is "top-heavy" (as
defined in the Code), a participant is entitled to the top heavy minimum
allocation if the participant was employed by MedPartners on the last day of the
MedPartners Plan year, unless the employee is a key employee. Participants in
the MedPartners Plan may elect to contribute from 2% to 15% of their gross
compensation subject to annual Code limitations.

Effective November 28, 1989, MME's principal professional corporation and
Pioneer Hospital adopted the Savings and Salary Deferral Plan (the "Mullikin
Plan"), which MedPartners/Mullikin has assumed. MME adopted the Mullikin Plan
retroactively to January 1, 1994, and assumed the administration responsibility
of the Mullikin Plan. The Mullikin Plan is also a Code Section 401(k) plan which
requires, subject to certain limited exceptions, the attainment of age 21 and
one year of service, with a minimum of 1,000 hours worked to become a
participant in the plan. Participants in the Mullikin Plan may elect to
contribute from 1% to 20% of their gross compensation, subject to annual Code
limitations. MedPartners/ Mullikin will make a minimum matching contribution of
50% of the first 3% of salary deferred into the Mullikin Plan, up to a maximum
of $750 for any Mullikin Plan year.

In addition to these Plans, certain of the employee retirement plans of
various of the entities acquired during 1995 have been or will be merged into
the MedPartners Plan or the Mullikin Plan, while others may continue as prior to
the acquisition. MedPartners/Mullikin continues to investigate the feasibility
of the combination of the MedPartners Plan and the Mullikin Plan consistent with
applicable law and regulations and its desire to provide a comprehensive benefit
package for all employees.

CERTAIN TRANSACTIONS -- MEDPARTNERS/MULLIKIN

MME ACQUISITION AGREEMENTS

In connection with the acquisition of MME described under "Business of
MedPartners/Mullikin -- Recent Major Acquisitions", MedPartners/Mullikin entered
into certain termination and consulting agreements with Walter T. Mullikin, M.D.
and John S. McDonald, J.D., now directors of MedPartners/Mullikin, and an
employment agreement with Mark L. Wagar, Executive Vice President and Chief
Operating Officer -- West of MedPartners/Mullikin.

Termination Agreements. On November 29, 1995, MedPartners/Mullikin and
each of Dr. Walter T. Mullikin, M.D. and John S. McDonald, J.D., entered into a
Termination Agreement that terminated their previous employment agreements with
MME, in consideration of which they received, or shall receive, a lump sum
payment of $1,064,000, in the case of Dr. Mullikin, and $796,000 in the case of
Mr. McDonald, continuation of certain fringe benefits and perquisites for 36
months, payments from MedPartners/Mullikin and a trust set up by
MedPartners/Mullikin to fund the remainder of MME's pension obligations to Dr.
Mullikin or to Dr. Mullikin's spouse, should she survive him, and Mr. McDonald,
payment of all health and medical care (including prescriptions) for Dr.
Mullikin and his spouse and Mr. McDonald for the remainder of their lives
through a Company-sponsored health insurance plan, a death payment benefit to be
paid to Dr. Mullikin's designated beneficiary or estate of $2,700,000, and
certain other benefits. See "MedPartners/Mullikin's Management -- Compensation
Committee Interlocks and Insider Participation".

Consulting Agreements. On November 29, 1995, MedPartners/Mullikin and each
of Dr. Mullikin and Mr. McDonald entered into five-year Consulting Agreements
whereby they will receive in consideration for their services: consulting fees
of $2,480,000 to Dr. Mullikin, to be paid over five years with an initial
payment of $744,000 on November 29, 1995, and equal payments of $434,000 on each
anniversary of such date, and $2,230,000 to Mr. McDonald, to be paid over five
years with an initial payment of $669,000 on November 29, 1995, and equal
payments of $390,250 on each anniversary thereof, access to an office and
support staff and certain other benefits.

Wagar Employment Agreement. On November 29, 1995, MedPartners/Mullikin and
Mark L. Wagar, President -- Western Operations of MedPartners/Mullikin entered
into an amended employment agreement for the remainder of the term of Mr.
Wagar's employment agreement with MME which terminates on

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<PAGE> 79

January 18, 1998, subject to certain renewal provisions (the "Wagar Employment
Agreement"), pursuant to which Mr. Wagar will receive a base annual salary of
$350,000, participation in any long-term incentive plan designed specifically
for Mr. Wagar or provided to the Senior Executive Group (as defined in the Wagar
Employment Agreement), participation in any benefits and perquisites provided to
the Senior Executive Group, reasonable vacation and eligibility to participate
in a cash bonus plan. The Wagar Employment Agreement provides that if Mr. Wagar
voluntarily resigns such that such resignation constitutes constructive
termination or should his services be terminated by MedPartners/Mullikin without
"cause" (as defined in the Wagar Employment Agreement), Mr. Wagar (or his
beneficiaries should Mr. Wagar thereafter die) shall be entitled to receive (i)
the full amount of any previously unpaid base salary through the date of Mr.
Wagar's termination of service, (ii) payment of Mr. Wagar's annual base salary
in effect as of the date of Mr. Wagar's termination of service payable in 12
equal monthly installments, (iii) continuation of fringe benefits and
perquisites under the Wagar Employment Agreement, (iv) immediate vesting of any
stock options or other rights provided under MedPartners/Mullikin's long term
incentive plan, and (v) payment of any life insurance, disability or other
benefits provided to Mr. Wagar by MedPartners/Mullikin in accordance with the
terms and conditions of the Wagar Employment Agreement. The Wagar Employment
Agreement contains other severance arrangements relating to termination of Mr.
Wagar's services due to death, disability or resignation.

FINANCINGS

In September 1993 and February 1994, MedPartners, the predecessor of
MedPartners/Mullikin, issued an aggregate of 4,000,562 shares of Series A
Convertible Preferred Stock in a private placement transaction for aggregate
consideration of $8,001,124. Certain directors and officers of
MedPartners/Mullikin, or entities affiliated with such individuals, purchased
shares of Series A Convertible Preferred Stock as follows: New Enterprise
Associates VI, L.P. -- 875,000 shares; New Venture Partners III, L.P.
-- 125,000 shares; Venrock Associates -- 750,000 shares; Frontenac Venture VI,
L.P. -- 1,000,000 shares; HEALTHSOUTH -- 157,500 shares; and Ms.
Thrasher -- 11,250 shares.

In March 1994 and May 1994, MedPartners issued an aggregate of 3,000,000
shares of Series B Convertible Preferred Stock in a private placement
transaction for aggregate consideration of $12,000,000. Certain directors and
officers of MedPartners, or entities affiliated with such individuals, purchased
shares of Series B Convertible Preferred Stock as follows: New Enterprise
Associates, VI, L.P. -- 625,000 shares; New Venture Partners III, L.P. -- 37,500
shares; Venrock Associates -- 500,000 shares; Frontenac Venture VI,
L.P. -- 625,000 shares; HEALTHSOUTH -- 250,000 shares; Mr. Scrushy -- 100,000
shares; Mr. Striplin -- 25,000 shares; and Ms. Thrasher -- 10,000 shares. See
"MedPartners/Mullikin's Management -- Compensation Committee Interlocks and
Insider Participation".

All of the shares of preferred stock of MedPartners were automatically
converted into shares of MedPartners common stock upon the consummation of
MedPartners' initial public offering in February 1995. See "Principal
Stockholders of MedPartners/Mullikin" for information about affiliations between
directors and executive officers of MedPartners/Mullikin and certain of the
entities who purchased shares of MedPartners Preferred Stock.

The Mullikin Family Trust, a trust formed for the benefit of Dr. Mullikin
and his spouse, was the holder of two notes issued in November 1992 by 5000
Airport Plaza, a California limited partnership which is controlled by
MedPartners/Mullikin, one in the principal amount of $2,975,000, having a
20-year term and bearing an interest rate of 10% per annum, and the other in the
principal amount of $850,000, having a 10-year term and bearing an interest rate
of 10% per annum, each secured by the 5000 Airport Plaza building, where
MedPartners/Mullikin's western executive offices are located.

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<PAGE> 80

PRINCIPAL STOCKHOLDERS OF MEDPARTNERS/MULLIKIN

The following table sets forth certain information regarding beneficial
stock ownership of MedPartners/ Mullikin as of June 30, 1996: (i) each director
and Named Executive Officer of MedPartners/Mullikin. (ii) all directors and
executive officers as a group, and (iii) each stockholder known by
MedPartners/Mullikin to be the beneficial owner of more than 5% of the
outstanding MedPartners/Mullikin Common Stock. Except as otherwise indicated,
each person or entity listed below has sole voting and investment power with
respect to all shares shown to be beneficially owned by him or it except to the
extent such power is shared by a spouse under applicable law. Shares of Common
Stock subject to options held by directors and executive officers that are
exercisable within 60 days of June 30, 1996, are deemed outstanding for the
purpose of computing such director's or executive officer's beneficial ownership
and the beneficial ownership of all directors and executive officers as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE
MEDPARTNERS/MULLIKIN OF COMMON
NAME POSITION HELD COMMON STOCK(16) STOCK OWNED
- ------------------------------- ------------------------------- -------------------- -----------
<S> <C> <C> <C>
Larry R. House................. Chairman, President and Chief 2,605,000(1) 4.85%
Executive Officer and
Director
William R. Dexheimer........... Executive Vice President and 254,000(2) *
Chief Operating
Officer -- East
Harold O. Knight, Jr........... Executive Vice President and 148,000(3) *
Chief Financial Officer
Tracy P. Thrasher.............. Executive Vice President of 129,800(4) *
Administration and Secretary
Mark L. Wagar.................. President -- Western Operations 163,005(5) *
Larry D. Striplin, Jr.......... Director 99,100(6) *
Richard M. Scrushy............. Director 1,915,500(7) 3.66
Charles W. Newhall III......... Director 1,502,000(8) 2.87
Scott F. Meadow................ Director 2,000(9) *
Ted H. McCourtney, Jr.......... Director 56,901(10) 1.05
Walter T. Mullikin, M.D........ Director 432,424(11) *
John S. McDonald............... Director 303,281(12) *
Richard J. Kramer.............. Director 1,869,674(13) 3.57
Rosalio J. Lopez, M.D.......... Director 93,069(14) *
All executive officers and 9,710,254(15) 17.91
directors as a group (17
persons).....................
</TABLE>

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

* Less than 1%.
(1) Includes options to purchase 1,428,000 shares.
(2) Includes options to purchase 40,000 shares and 1,000 shares held in trust.
(3) Includes options to purchase 86,000 shares.
(4) Includes options to purchase 74,000 shares and 2,000 shares held in trust
for a minor child.
(5) Includes options to purchase 160,000 shares.
(6) Includes options to purchase 2,000 shares.
(7) Includes options to purchase 17,000 shares, 250,000 shares held in trust
for minor children, and 1,098,500 shares owned of record by HEALTHSOUTH.
Mr. Scrushy is Chairman of the Board, President and Chief Executive Officer
of HEALTHSOUTH and disclaims beneficial ownership of the shares owned by
HEALTHSOUTH.
(8) Includes options to purchase 2,000 shares, and 1,500,000 shares owned of
record by New Enterprise Associates VI, Limited Partnership ("NEA"), of
which Mr. Newhall is the general partner. Mr. Newhall shares voting and
investment power with respect to such shares owned by NEA.
(9) Includes options to purchase 2,000 shares.

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(10) Includes options to purchase 2,000 shares, 45 shares owned of record by
Venrock Associates and 15 shares owned of record by Venrock Associates II,
L.P. Mr. McCourtney is a general partner of Venrock Associates and Venrock
Associates II, L.P., and shares voting and investment power with respect to
such shares. Mr. McCourtney disclaims beneficial ownership of the shares
owned by Venrock Associates and Venrock Associates, II, L.P., except to the
extent of his pro rata interest.
(11) Includes options to purchase 2,000 shares and 430,424 shares held by the
Mullikin Family Trust U/D/T, dated February 10, 1976.
(12) Includes options to purchase 2,000 shares and 301,281 shares held by
certain trusts for the benefit of Mr. McDonald.
(13) Includes options to purchase 2,000 shares and 1,867,674 shares owned of
record by DCNHS-West Partnership, L.P. Mr. Kramer is the President and
Chief Executive Officer of CHW, which is the sole general partner of DCNHS.
Mr. Kramer disclaims beneficial ownership of the shares owned by DCNHS.
(14) Includes options to purchase 4,000 shares and 89,069 shares held of record
by certain trusts for the benefit of Dr. Lopez and members of his family.
(15) Includes options to purchase a total of 1,911,000 shares.

72
<PAGE> 82

SELECTED FINANCIAL DATA
EMERGENCY PROFESSIONAL SERVICES, INC.

The following table sets forth selected financial data for EPS derived from
EPS's financial statements. The selected financial data should be read in
conjunction with the financial statements of EPS and the related notes thereto
included elsewhere in this Prospectus-Proxy Statement.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED JANUARY 31, ENDED APRIL 30,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................. $19,646 $20,667 $30,259 $33,340 $35,031 $8,182 $7,796
Operating expenses:
Cost of affiliated physician services..... 14,369 15,566 22,635 24,852 25,962 5,913 5,987
Clinic salaries, wages and benefits....... 786 852 1,234 1,357 1,481 330 316
Clinic rent and lease expense............. 79 85 110 111 119 37 23
Clinic supplies........................... 20 21 36 34 39 9 9
Other clinic costs........................ 3,794 4,110 5,980 6,781 6,986 1,588 916
General corporate expenses................ 570 618 913 956 1,124 253 363
Depreciation.............................. 39 42 43 31 25 7 7
------- ------- ------- ------- ------- ------ ------
Net operating expenses............. 19,657 21,294 30,951 34,122 35,736 8,137 7,621
------- ------- ------- ------- ------- ------ ------
(Loss) income before tax benefit............ (11) (627) (692) (782) (705) 45 175
Net income tax benefit (expense)............ 4 247 273 305 270 (20) (70)
------- ------- ------- ------- ------- ------ ------
Net (loss) income.................. $ (7) $ (380) $ (419) $ (477) $ (435) $ 25 $ 105
======== ======== ======== ======== ======== ====== ======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- APRIL 30,
1992 1993 1994 1995 1996 1996
------ ------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $1,144 $ 1,211 $1,398 $1,482 $1,367 $ 2,411
Working capital (deficit).............................. 4,234 4,202 2,929 1,823 1,687 1,848
Total assets........................................... 9,496 10,197 7,922 8,496 9,067 10,230
Long-term debt, less current portion................... -- -- -- -- -- --
Total stockholders' equity............................. 2,631 2,251 1,832 738 325 583
</TABLE>

73
<PAGE> 83

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF EMERGENCY PROFESSIONAL SERVICES, INC.

The following discussion and analysis should be read in conjunction with
the financial statements of EPS and the notes thereto and other financial
information included elsewhere in this Prospectus-Proxy Statement.

OVERVIEW

EPS began operations in January of 1978 with a contract to provide
physician staffing and medical direction for the emergency department of
Lakewood Hospital in Lakewood, Ohio. Since that time, EPS has increased the
number of emergency departments so covered to 15. In addition, in conjunction
with its client hospitals, EPS provides medical staffing and direction for six
urgent care centers and provides physician house staff coverage to two hospital
sites.

The revenues of EPS are derived principally from fee-for-service and
contractually reimbursed medical services provided at hospital emergency
departments and urgent care centers. The growth of EPS has been achieved
principally through the acquisition of new hospital contract relationships. EPS'
total revenues have grown during the past two fiscal years at the annual rate of
approximately 7.9% from approximately $30 million in the fiscal year ended
January 31, 1994 to approximately $35 million in the fiscal year ended January
31, 1996.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
from EPS's statements of income, expressed as a percentage of total revenues:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JANUARY 31, APRIL 30,
----------------------------------------- --------------
1992 1993 1994 1995 1996 1995 1996
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of affiliated physician
services........................... 73.1 75.3 74.8 74.5 74.1 72.3 76.8
Clinic salaries, wages and benefits... 4.0 4.1 4.1 4.1 4.2 4.0 4.1
Clinic rent and base expense.......... 0.4 0.4 0.4 0.3 0.3 0.5 0.3
Clinic supplies....................... 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Other clinic costs.................... 19.3 19.9 19.8 20.3 20.0 19.4 11.7
General corporation expenses.......... 2.9 3.0 3.0 2.9 3.2 3.1 4.7
Depreciation.......................... 0.2 0.2 0.1 0.1 0.1 0.1 0.1
Income tax expense (benefit).......... 0.0 (1.2) (0.9) (0.9) (0.8) 0.2 0.9
----- ----- ----- ----- ----- ----- -----
Net (loss) income............. 0.0% (1.8)% (1.4)% (1.4)% (1.2)% 0.3% 1.3%
===== ===== ===== ===== ===== ===== =====
</TABLE>

RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED APRIL 30, 1996 AND 1995

Revenues for the three months ended April 30, 1996 decreased 4.9% to $7.8
million from $8.2 million earned in the comparable three-month period in 1995.
The closing of a hospital facility and the loss of a contract at another
hospital resulted in a loss of $800,000 of revenues during such three-month
period in 1995. An additional $100,000 revenue loss during such period was
attributable to a general decline in patient volume at the facilities serviced
by EPS. This total $900,000 decline in revenues during such three-month period
was offset by revenues from a new contract which generated $400,000 of revenues
during such period.

Cost of affiliated physician services for the three months ended April 30,
1996 was $6.0 million, compared to $5.9 million for the comparable three-month
period in 1995, representing an increase of $100,000 or 1.7%. The increase was
generally attributable to the startup of a new facility contract, increased
staffing needs at three hospitals, and an increase in the hourly physician rate
paid one hospital.

74
<PAGE> 84

Operating expenses for the three months ended April 30, 1996 were $1.6
million, compared to $2.2 million for the comparable three-month period in 1995,
representing a decrease of $600,000 or 27.3%. Most of this decrease was
attributable to a reduction in bad debt expenses and the loss of a hospital
contract.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 31, 1996 AND 1995

Revenues for the fiscal year ended January 31, 1996 rose $1.7 million or
5.1% to $35.0 million from the $33.3 million recorded for the fiscal year ended
January 31, 1995. This increase was generally attributable to an increase in
patient visits at various facilities.

Cost of affiliated physician services for the fiscal year ended January 31,
1996 increased to $26.0 million compared to $24.9 million for the fiscal year
ended January 31, 1995, representing an increase of $1.1 million or 4.4%.
Doctors' compensation as a percentage of revenues decreased slightly to 74.1%
for the fiscal year ended January 31, 1996, from 74.5% for the fiscal year ended
January 31, 1995.

Operating expenses for the fiscal year ended January 31, 1996 were $9.8
million, compared to $9.3 million for the fiscal year ended January 31, 1995,
representing an increase of $500,000 or 5.4%. Operating expenses as a percentage
of revenues remained relatively constant at 28.0% for the fiscal year ended
January 31, 1996 versus 27.9% for the fiscal year ended January 31, 1995.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JANUARY 31, 1995 AND 1994

Revenues for the fiscal year ended January 31, 1995 increased $3.1 million
or 10.3% to $33.3 million from the $30.2 million recorded in the 1994 fiscal
year. This increase was generally attributable to the addition of a new hospital
contract, which generated $2.1 million in its first full year ended January 31,
1995 and increased business at existing contracts.

Cost of affiliated physician services for the fiscal year ended January 31,
1995 increased to $24.9 million compared to $22.6 million for the fiscal year
ended January 31, 1994, representing an increase of $2.3 million or 10.2%. This
increase was generally due to the additional hospital contract referred to above
and related staffing requirements. Doctors' compensation as a percentage of
revenues remained constant at 74.5% for the fiscal year ended January 31, 1995
versus 74.8% for the fiscal year ended January 31, 1994.

Operating expenses for the fiscal year ended January 31, 1995 increased to
$9.3 million compared to $8.3 million for the fiscal year ended January 31,
1994, representing an increase of $1.0 million or 12.0%. This increase was
attributable to an increased bad debt expense of $700,000, due to a decline in
collections at certain locations, a $300,000 increase in malpractice expense
(due to the increased number of hospital locations and an increase in general
corporate coverage cost).

LIQUIDITY AND CAPITAL RESOURCES

EPS's principal capital requirements have been to fund startup hospital
contracts, working capital needs and minor capital expenditures. EPS
historically has funded its capital requirements through its own operations.

Net cash provided (used) by operating activities was ($117,224), $55,791
and $183,720 in the fiscal years ended January 31, 1996, 1995 and 1994,
respectively, and $1.0 million and $1.6 million in the three-month periods ended
April 30, 1996 and 1995 respectively. Cash provided by operations remained
relatively stable over such three-year period. Temporary fluctuations in net
cash provided from operations during such three-year period were generally
attributable to EPS's historical practice of accruing for payroll, bonus and
profit-sharing throughout the fiscal year and paying such expenses in the last
two months of the fiscal year. Net cash used in financing activities and from
financing activities was not significant.

EPS historically has met is cash requirements and financed new facility
contracts with funds generated from its operations. Since 1985, EPS has not
incurred any bank debt to finance new contracts or otherwise. EPS has managed
its annual cash flow through the years through its "Quarterly Distribution"
program of physician compensation. Historically, doctors' hourly rates have been
calculated based on actual professional

75
<PAGE> 85

fee cash receipts collected at each facility. Doctors have been given monthly
payments, however, according to a flat hourly rate based on the number of hours
worked. Quarterly, the doctors' hourly rates have been partially adjusted to
reflect actual rates (based on professional fee receipts collected) and a
quarterly distribution of 50% of the difference between the flat hourly rates
and the actual rates has then been paid to the doctors. At fiscal year-end, a
final quarterly distribution has been made to adjust the flat hourly
compensation rates (plus quarterly distributions) to the actual rates.

EPS generally expects to meet future financing needs principally with cash
generated from its operations. However, any attempt to significantly expand
EPS's operations or to acquire other physician practice groups may require
significant additional capital.

Inflation may have an adverse impact on EPS's costs and expenses related to
office space, office supplies and administrative salaries.

76
<PAGE> 86

BUSINESS OF EPS

EMERGENCY PROFESSIONAL SERVICES, INC.

EPS is an Ohio for profit corporation that was organized in 1978 under the
name Emergency Professional Services of Ohio, Inc. and subsequently changed its
name in 1990 to Emergency Professional Services, Inc. Its sole business is the
management of a physician group practice. EPS employs 80 full-time employee
physicians and contracts with 122 independent contracting physicians at 16
hospital sites and six urgent care centers in eight counties in northern Ohio
and western Pennsylvania. EPS also employs 20 physician assistants, 41 billing
and operations personnel and 7 administrative and finance personnel. During the
1995 calendar year, EPS physicians treated approximately 400,000 patients. The
geographic spread of the 16 hospitals and six urgent care centers provides EPS
with a primary patient service area population in the eight counties served of
approximately 2,400,000 people. The principal offices of EPS are located at 7123
Pearl Road, Suite 200, Middleburg Heights, Ohio 44130, and the telephone number
of EPS is (216) 842-7990.

HEALTH CARE MARKET DYNAMICS

Consolidation of the Health Care Industry

Fully capitated managed health care may become a more prominent form of
health care reimbursement in the future. This has motivated many health care
providers to affiliate with other health care providers, offer global fee plans
and services and otherwise implement integrated delivery systems.

Hospitals, individual physicians, medical groups and other health care
providers are forming integrated partnerships to achieve more efficient methods
to deliver care. Although the degree of health care integration varies by
region, the process is occurring throughout the country as payors encourage
hospitals to link together directly or through affiliation, which in turn
encourages physicians to group together and become affiliated with hospital
networks.

The health care market in northern Ohio is becoming increasingly
competitive. A number of hospitals have recently established integrated
networks. Other hospitals are buying physician practices, or merging or
affiliating with other hospitals. Most hospitals are attempting to increase
their market presence so as to attract large employee groups and managed care
plans.

Primary Care

Primary care services include general practice, internal medicine,
obstetrics/gynecology, pediatrics, emergency medicine and basic orthopedic and
general surgical services. Most medical care begins at the primary care level
and many entities that pay for health care services have designated primary care
physicians as "gatekeepers." The role of such "gatekeepers" is to monitor and
minimize the quantity and range of services provided and the resources consumed
during the treatment of patients. As health care plans in northern Ohio continue
to move toward capitation systems, the role of primary care physicians may
become more prominent. A majority of the professional medical services delivered
at hospital emergency departments is primary, nonacute care. The EPS network of
16 hospitals and 6 urgent care sites provides a platform for delivering primary
care in northern Ohio and western Pennsylvania

Physician Practice Management

The increasing influence of managed health care organizations has
encouraged the growth of physician practice management companies. A number of
HMOs and other managed care payers have encouraged physicians to combine into
larger groups. Many physicians in turn are attracted to joining larger practice
groups as a vehicle to participate in and benefit from the changes occurring in
the health care industry.

GOVERNMENTAL REGULATION

The health care industry is highly regulated and there can be no assurance
that the regulatory environment in which EPS operates will not change
significantly. Various legislative proposals affecting

77
<PAGE> 87

federal and state regulation of the health care industry, including limitations
on Medicare and Medicaid payments, have been introduced in the past, including
various plans to dramatically restructure the financing and delivery of health
care in the United States. There can be no assurance that significant health
care reforms will not be approved in the future, resulting in substantial
changes to the health care industry. In addition, a number of states have
enacted various forms of health care cost containment legislation. These changes
could have a material adverse effect on the operations of EPS.

EPS is unable to predict whether any additional laws and regulations
affecting its business may be enacted in the future or the potential effect of
such laws and regulations on EPS. The failure of EPS, the contracting hospitals
or any clients of EPS to comply with applicable laws or regulations could have a
material adverse effect on EPS.

Federal law and the laws of the State of Ohio generally specify who may
practice medicine and limit the scope of relationships between medical
practitioners and other parties. Under such laws, EPS is prohibited from
practicing medicine or exercising control over the provision of medical
services. In order to comply with such laws, the relationship between EPS and
the network hospitals is organized so that all physician services are offered by
physicians who are affiliated with the network hospitals. The contracts between
EPS and each of the network hospitals delegates to EPS the performance of
administrative, management and support functions, while the hospitals retain
control over the provision of medical services.

LITIGATION

EPS and its physician-employees are defendants in several lawsuits alleging
medical malpractice. The ultimate outcome of these lawsuits or potential losses
in relation to EPS's malpractice insurance coverage cannot presently be
determined. Significant losses or legal settlements could have a material
adverse effect on EPS, regardless of whether such losses or legal settlements
are fully covered under EPS's malpractice insurance policies.

RISK MANAGEMENT; MALPRACTICE INSURANCE

EPS has malpractice insurance coverage in Ohio through PIE Mutual Insurance
Company. This insurance provides for $1,000,000 primary coverage per claim and
$10,000,000 excess coverage per claim for each contract site. There is thus
$11,000,000 of malpractice insurance coverage per claim with a maximum annual
coverage of $11,000,000 for all claims at each contract site in Ohio. In
Pennsylvania, EPS has malpractice insurance coverage through PHICO Insurance
Company and PIC Insurance Company. At Northwest Medical Center, the Medical
Center has added EPS and its physicians onto its malpractice insurance policy
with PHICO Insurance Company providing for $200,000/$600,000 coverage limits. At
Horizon Hospital System, the System has added EPS onto its malpractice insurance
policy with PHICO Insurance Company providing for the same coverage limits as at
Northwest Medical Center. EPS physicians also are covered by the State of
Pennsylvania Catastrophic Loss Fund providing for $1,000,000/$3,000,000
malpractice insurance coverage. However, EPS as a corporation is not covered
through the State of Pennsylvania Catastrophic Loss Fund. Therefore, EPS has
obtained a separate policy through PIC Insurance Company providing for
$1,000,000/$3,000,000 malpractice insurance coverage for EPS in Pennsylvania.

CORPORATE GOVERNANCE

EPS is governed by a five member Board of Directors elected by the
Company's physician shareholders. All board members are physicians and Dr. James
J. Rybak serves as Chairman of the Board and President of the Company.
Additionally, there is an Executive Director responsible for physician practice
management who reports directly to Dr. Rybak.

PROPERTIES

EPS entered into a lease agreement with Commerce Place Associates in March
of 1987 for approximately 7,920 square feet of space in Suite 201 of the
Commerce Place building located at 7123 Pearl Road in Middleburg Heights, Ohio.
In May of 1995, EPS extended the term of the lease through May 31, 1997. The
monthly rental amount for such leased space is $7,920. EPS also rents storage
units for files and other items at U-Store It in Middleburg Heights, Ohio. EPS
does not own any real property.

78
<PAGE> 88

NO PUBLIC MARKET FOR EPS SHARES

There is no established public trading market for the capital stock of EPS.
As of August 29, 1996, EPS had 57 shareholders of record.

DIVIDEND HISTORY

During each of its fiscal years ended January 31, 1995 and 1996, EPS
declared a dividend of $25.00 per common share, payable to the shareholders
prior to December 31, 1994 and 1995, respectively. EPS previously declared an
additional dividend of $25.00 per share payable to the shareholders prior to
December 31, 1996, but such dividend shall be cancelled pursuant to the terms of
the Plan of Merger.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT -- EPS

The following table sets forth information regarding the beneficial
ownership of EPS Shares as of August 31, 1996 by directors and executive
officers and by all directors and officers of EPS as a group.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENTAGE
- -------------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
James J. Rybak, M.D................................................. 15 5.73%
Michael C. Thomas, M.D.............................................. 13 4.96
G. Malcolm Hope, M.D................................................ 9 3.44
Philip L. Stout, M.D................................................ 9 3.44
James M. Sudimack, M.D.............................................. 6 2.29
All executive officers and directors as a group (5)................. 52 19.86
</TABLE>

79
<PAGE> 89

PRO FORMA CONDENSED FINANCIAL INFORMATION

MEDPARTNERS, INC.

SELECTED PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following selected pro forma financial information for the combined
companies gives effect to the Merger as a pooling of interests. All of the
following selected pro forma financial information should be read in conjunction
with the pro forma financial information, including the notes thereto, appearing
elsewhere in this Prospectus-Proxy Statement. The pro forma financial
information set forth in this Prospectus-Proxy Statement is not necessarily
indicative of the results that actually would have occurred had the Merger been
consummated on the date indicated or that may be obtained in the future.

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................................ $1,787,021 $2,626,669 $3,637,914 $1,677,282 $2,352,731
Operating expenses:
Affiliated physician services............................ 296,318 436,927 689,740 298,418 469,011
Outside referral expenses................................ 70,427 102,496 149,185 64,556 156,506
Other clinic expenses.................................... 277,839 397,840 696,485 293,733 495,584
Cost of goods and services sold.......................... 884,009 1,365,203 1,688,075 829,681 985,231
Other nonclinic operating expenses....................... 72,576 88,064 92,527 46,378 42,062
General corporate expenses............................... 62,643 81,472 87,859 40,931 53,931
Depreciation and amortization............................ 25,453 40,847 61,549 26,878 43,090
Net interest expense..................................... 7,021 14,885 18,061 8,451 12,414
Merger expenses.......................................... -- -- 66,564 1,051 35,232
Loss on disposal of assets............................... 122 1,627 86,600 -- --
---------- ---------- ---------- ---------- ----------
Net operating expenses............................. 1,696,408 2,529,361 3,636,645 1,610,077 2,293,061
---------- ---------- ---------- ---------- ----------
Income (loss) before pro forma income taxes and
discontinued operations.................................. 90,613 97,308 1,269 67,205 59,670
Pro forma income tax expense (benefit)..................... 42,853 43,717 (16,638) 24,733 23,519
Cumulative effect of change in method of accounting for
income taxes............................................. 298 -- -- -- --
---------- ---------- ---------- ---------- ----------
Income from continuing operations.......................... 47,462 53,591 17,907 42,472 36,151
Loss (income) from discontinued operations................. (30,808) (25,902) 136,528 139,531 66,799
---------- ---------- ---------- ---------- ----------
Pro forma net income (loss)................................ $ 78,270 $ 79,493 $ (118,621) $ (97,059) $ (30,648)
========== ========== ========== ========== ==========
Pro forma net income (loss) per share(1)................... $ 0.64 $ 0.61 $ (0.83) $ (0.72) $ (0.20)
========== ========== ========== ========== ==========
Number of shares used in pro forma net income (loss) per
share calculations(1)(2)................................. 121,424 129,453 142,924 135,100 152,924
========== ========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30,
1996
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................................................... $ 125,787
Working capital (deficit)....................................................................... (89,955)
Total assets.................................................................................... 2,119,435
Long-term debt, less current portion............................................................ 201,102
Total stockholders' equity...................................................................... 733,183
</TABLE>

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

(1) Pro forma net income (loss) per share is computed by dividing net income
(loss) by the number of common equivalent shares outstanding during the
periods in accordance with the applicable rules of the SEC. All stock
options and warrants issued have been considered as outstanding common
share equivalents for all periods presented, even if anti-dilutive, under
the treasury stock method. Shares of MedPartners Common Stock issued in
February 1995 upon conversion of the then outstanding MedPartners
Convertible Preferred Stock are assumed to be common share equivalents for
all periods presented.
(2) Number of shares used in pro forma net income (loss) per share gives effect
to the Merger by using the fixed exchange ratio of 1.21 to the Caremark
shares outstanding, an exchange ratio of 8244 to the Emergency Professional
Services shares outstanding and gives effect to the merger of insignificant
entities.

80
<PAGE> 90

MEDPARTNERS, INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------------
MEDPARTNERS/ NEW
MULLIKIN CAREMARK CARDINAL SUMMIT MRA CHS MANAGEMENT
----------- ---------- -------- ------- ------- ------ ----------
(A) (B)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 56,221 $ 63,000 $ 206 $1,275 $ 372 $2,127 $ 175
Accounts receivable less allowance for bad
debts........................................... 165,105 376,300 3,254 8,677 -- 211 --
Inventory......................................... 11,087 99,600 -- 188 -- -- --
Prepaid expenses and other current assets......... 23,839 23,800 21 44 -- 910 59
Deferred tax assets............................... 4,139 64,200 -- -- -- 97 --
-------- ---------- ------ ------- ------- ------ ---------
Total current assets........................ 260,391 626,900 3,481 10,184 372 3,345 234
Property and equipment.............................. 167,502 366,700 2,175 -- 9,626 133 --
Intangible assets, net.............................. 139,169 320,500 -- -- -- -- --
Deferred tax assets................................. 34,285 -- -- -- -- 227 --
Other assets........................................ 16,837 89,500 1,067 961 92 67 544
-------- ---------- ------ ------- ------- --------- ---------
Total assets................................ $ 618,184 $1,403,600 $ 6,723 $11,145 $10,090 $3,772 $ 778
======== ========== ====== ======= ======= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 29,084 $ 357,000 $ 733 $1,764 $ 79 $ 75 $ 5
Payable to physician groups....................... 28,616 -- -- -- -- -- --
Accrued medical claims payable.................... 44,235 29,700 -- -- -- -- --
Other accrued expenses and liabilities............ 49,770 137,200 2,247 4,634 -- 1,071 18
Short-term debt and current portion of long-term
debt............................................ 7,648 289,600 3,061 53 3,388 2,550 129
-------- ---------- ------ ------- ------- ------- --------
Total current liabilities................... 159,353 813,500 6,041 6,451 3,467 3,696 152
Long-term debt, net of current portion.............. 35,080 130,200 1,636 -- 2,403 41 2,642
Other long-term liabilities......................... 9,140 71,900 -- 600 344 310 --
Stockholders' equity:
Common stock...................................... 52 82,200 -- -- -- 1 --
Additional paid-in capital........................ 435,618 199,600 566 -- -- 250 --
Shares held in trust.............................. -- (150,200) -- -- -- -- --
Notes receivable from shareholders................ (1,818) -- -- -- -- -- --
Unrealized loss on marketable equity securities... -- -- -- -- -- -- --
Accumulated earnings (deficit).................... (19,241) 256,400 (1,520 ) 4,094 3,876 (526) (2,016)
Treasury stock, at cost........................... -- -- -- -- -- -- --
-------- ---------- ------ ------- ------- ------- ------
Total stockholders' equity.................. 414,611 388,000 (954 ) 4,094 3,876 (275) (2,016)
-------- ---------- ------ ------- ------- ------- ---------
Total liabilities and stockholders'
equity.................................... $ 618,184 $1,403,600 $ 6,723 $11,145 $10,090 $3,772 $ 778
======== ========== ====== ======= ======= ====== ========

<CAPTION>
HISTORICAL
------------
EMERGENCY
PROFESSIONAL PRO FORMA PRO FORMA
SERVICES ADJUSTMENTS COMBINED
------------ ----------- ----------
(C)
<S> <C> <C> <C>
ASSETS
Current assets:

Cash and cash equivalents......................... $ 2,411 $ -- $ 125,787
Accounts receivable less allowance for bad
debts........................................... 5,801 -- 559,348
Inventory......................................... -- -- 110,875
Prepaid expenses and other current assets......... 182 -- 48,855
Deferred tax assets............................... -- 96,500(D) 164,936
Total current assets........................ 8,394 96,500 1,009,801
Property and equipment.............................. 66 (130,350)(D) 415,852
Intangible assets, net.............................. -- 88,763(I) 548,432
Deferred tax assets................................. 1,760 -- 36,272
Other assets........................................ 10 -- 109,078
Total assets................................ $10,230 $ 54,913 $2,119,435
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 180 $ 100,550(D) $ 489,470
Payable to physician groups....................... -- -- 28,616
Accrued medical claims payable.................... -- -- 73,935
Other accrued expenses and liabilities............ 6,366 -- 201,306
Short-term debt and current portion of long-term
debt............................................ -- -- 306,429
Total current liabilities................... 6,546 100,550 1,099,756
Long-term debt, net of current portion.............. -- 29,100(D) 201,102
Other long-term liabilities......................... 3,100 -- 85,394
Stockholders' equity:
Common stock...................................... -- (82,098)(E) 155
Additional paid-in capital........................ 264 82,098(E) 656,959
(150,200)(F)
88,763(I)
Shares held in trust.............................. -- 150,200(F) --
Notes receivable from shareholders................ -- (1,818)
Unrealized loss on marketable equity securities... -- --
Accumulated earnings (deficit).................... 320 (163,500)(D) 77,887
Treasury stock, at cost........................... --
Total stockholders' equity.................. 584 (74,737) 733,183
Total liabilities and stockholders'
equity.................................... $10,230 $ 54,913 $2,119,435
</TABLE>

81
<PAGE> 91

MEDPARTNERS, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------
MEDPARTNERS/
MULLIKIN CAREMARK CARDINAL SUMMIT MRA CHS
------------ ---------- -------- ------- ------ -------
(A) (B)
<S> <C>
Net revenue............................................. $703,683 $1,569,587 $ 17,085 $23,770 $1,082 $29,496
Operating expenses:
Affiliated physician services......................... 301,280 121,663 6,994 8,512 -- 24,575
Outside referral expenses............................. 83,516 72,990 -- -- -- --
Other clinic expenses................................. 230,521 243,525 8,434 12,922 -- --
Cost of goods and services sold....................... -- 985,231 -- -- -- --
Other nonclinic operating expenses.................... -- 42,062 -- -- -- --
General corporate expenses............................ 39,540 5,687 708 2,185 449 4,792
Depreciation and amortization......................... 16,482 24,700 217 -- 565 9
Net interest expense.................................. 2,811 9,289 99 -- 107 --
Merger expenses....................................... 34,448 -- -- -- -- 784
Loss on disposal of assets............................ -- -- -- -- -- --
-------- -------- -------- -------- ------- -------
Net operating expenses.......................... 708,598 1,505,147 16,452 23,619 1,121 30,160
-------- -------- -------- -------- ------- -------
Income (loss) before pro forma income taxes and
discontinued operations............................... (4,915) 64,440 633 151 (39) (664)
Pro forma income tax expense (benefit).................. 360 22,988 11 60 -- 30
-------- -------- -------- -------- ------- -------
Income (loss) from continuing operations................ (5,275) 41,452 622 91 (39) (694)
Loss from discontinued operations....................... -- 66,799 -- -- -- --
-------- -------- -------- -------- ------- -------
Pro forma net income (loss)............................. $ (5,275) $ (25,347) $ 622 $ 91 $ (39) $ (694)
======== ======== ======== ======== ======= =======
Pro forma net income (loss) per share................... $ (0.11) $ (0.33) $ -- $ -- $(0.12) $(14.16)
======== ======== ======== ======== ======= =======
Number of shares used in pro forma net income (loss) per
share
calculations.......................................... 50,034 77,400 -- -- 333(G) 49
======== ======== ======== ======== ======= =======

<CAPTION>
HISTORICAL
-------------------------
EMERGENCY
NEW PROFESSIONAL PRO FORMA PRO FORMA
MANAGEMENT SERVICES ADJUSTMENTS COMBINED
---------- ------------ ----------- ----------
(C)
<S> <C> <C> <C> <C>
Net revenue............................................. $1,314 $ 7,796 $(1,082)(K) $2,352,731
Operating expenses:
Affiliated physician services......................... -- 5,987 -- 469,011
Outside referral expenses............................. -- -- -- 156,506
Other clinic expenses................................. -- 1,264 (1,082)(K) 495,584
Cost of goods and services sold....................... -- -- -- 985,231
Other nonclinic operating expenses.................... -- -- -- 42,062
General corporate expenses............................ 207 363 -- 53,931
Depreciation and amortization......................... -- 7 1,110(J) 43,090
Net interest expense.................................. 108 -- -- 12,414
Merger expenses....................................... -- -- -- 35,232
Loss on disposal of assets............................ -- -- -- --
----- ------ ------- ----------
Net operating expenses.......................... 315 7,621 28 2,293,061
----- ------ ------- ----------
Income (loss) before pro forma income taxes and
discontinued operations............................... 999 175 (1,110) 59,670
Pro forma income tax expense (benefit).................. -- 70 -- 23,519
----- ------ ------- ----------
Income (loss) from continuing operations................ 999 105 (1,110) 36,151
Loss from discontinued operations....................... -- -- -- 66,799
----- ------ ------- ----------
Pro forma net income (loss)............................. $ 999 $ 105 $(1,110) $ (30,648)
===== ====== ======= ==========
Pro forma net income (loss) per share................... $ 2.87 $ -- $ (0.20)
===== ====== ==========
Number of shares used in pro forma net income (loss) per
share
calculations.......................................... 348(G) -- 24,760(H) 152,924
===== ====== ======= ==========
</TABLE>

82
<PAGE> 92

MEDPARTNERS, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------
MEDPARTNERS/ NEW
MULLIKIN CAREMARK CHS MANAGEMENT
------------ ---------- -------- ----------
(A) (B)
<S> <C>
Net revenue............................................................. $547,450
Operating expenses:
Affiliated physician services......................................... 240,225 52,280 -- --
Outside referral expenses............................................. 50,364 14,192 -- --
Other clinic expenses................................................. 191,172 100,598 -- --
Cost of goods and services sold....................................... -- 829,681 -- --
Other nonclinic operating expenses.................................... -- 46,378 -- --
General corporate expenses............................................ 32,167 8,363 -- 148
Depreciation and amortization......................................... 13,962 12,909 -- --
Net interest expense.................................................. 3,367 4,971 -- 113
Merger expenses....................................................... 1,051 -- -- --
Loss on disposal of assets............................................ -- -- -- --
------------ ---------- -------- ----------
Net operating expenses.................................................. 532,308 1,069,372 -- 261
------------ ---------- -------- ----------
Income (loss) before pro forma income taxes and discontinued
operations............................................................ 15,142 50,754 -- 1,263
Pro forma income tax expense............................................ 4,411 20,302 -- --
------------ ---------- -------- ----------
Income from continuing operations....................................... 10,731 30,452 -- 1,263
(Income) from discontinued operations................................... -- 139,531 -- --
------------ ---------- -------- ----------
Pro forma net income.................................................... $ 10,731 $ (109,079) $ -- $1,263
=========== ========= ======== ==========
Pro forma net income per share.......................................... $ 0.26 $ (1.47) $ -- $ 3.63
=========== ========= ======== ==========
Number of shares issued in pro forma net income (loss) per share
calculations.......................................................... 41,867 74,800 -- 348(G)
=========== ========= ======== ==========

<CAPTION>
HISTORICAL
------------
EMERGENCY PRO PRO
PROFESSIONAL FORMA FORMA
SERVICE ADJUSTMENTS COMBINED
------------ ----------- ----------
(C)
<S> <C> <C> <C>
Net revenue............................................................. $8,182 $ -- $1,677,282
Operating expenses:
Affiliated physician services......................................... 5,913 -- 298,418
Outside referral expenses............................................. -- -- 64,556
Other clinic expenses................................................. 1,963 -- 293,733
Cost of goods and services sold....................................... -- -- 829,681
Other nonclinic operating expenses.................................... -- -- 46,378
General corporate expenses............................................ 253 -- 40,931
Depreciation and amortization......................................... 7 -- 26,878
Net interest expense.................................................. -- -- 8,451
Merger expenses....................................................... -- -- 1,051
Loss on disposal of assets............................................ -- -- --
------ ----------- ----------
Net operating expenses.................................................. 8,136 -- 1,610,077
------ ----------- ----------
Income (loss) before pro forma income taxes and discontinued
operations............................................................ 46 -- 67,205
Pro forma income tax expense............................................ 20 -- 24,733
------ ----------- ----------
Income from continuing operations....................................... 26 -- 42,472
(Income) from discontinued operations................................... -- -- 139,531
------ ----------- ----------
Pro forma net income.................................................... $ 26 $ -- $ (97,059)
========= ========== =========
Pro forma net income per share.......................................... $ -- $ (0.72)
========= =========
Number of shares issued in pro forma net income (loss) per share
calculations.......................................................... -- $ 18,085(H) 135,100
========= ========== =========
</TABLE>

83
<PAGE> 93

MEDPARTNERS, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------
MEDPARTNERS/
MULLIKIN CAREMARK CARDINAL SUMMIT MRA CHS
------------ ---------- -------- -------- -------- ------
(A) (B)
<S> <C> <C> <C> <C> <C> <C>
Net revenue.................................... $1,153,557 $2,374,263 $ 20,881 $ 48,576 $ 2,540 $2,658
Operating expenses:
Affiliated physician services................ 506,811 124,596 10,366 22,005 -- --
Outside referral expenses.................... 109,934 39,251 -- -- -- --
Other clinic expenses........................ 394,679 260,410 11,371 23,939 -- --
Cost of goods and services sold.............. -- 1,688,075 -- -- -- --
Other nonclinic operating expenses........... -- 92,527 -- -- -- --
General corporate expenses................... 64,713 14,044 1,068 3,289 933 2,374
Depreciation and amortization................ 29,088 28,555 297 -- 1,356 9
Net interest expense......................... 8,443 8,780 144 -- 470 --
Merger expenses.............................. 66,564 -- -- -- -- --
Loss on investment........................... -- 86,600 -- -- -- --
---------- ---------- -------- -------- -------- ------
Net operating expenses................. 1,180,232 2,342,838 23,246 49,233 2,759 2,383
---------- ---------- -------- -------- -------- ------
Income (loss) before pro forma income taxes and
discontinued operations...................... (26,675) 31,425 (2,365) (657) (219) 275
Pro forma income tax expense (benefit)......... (27,233) 11,267 (26) (483) -- 107
---------- ---------- -------- -------- -------- ------
Income (loss) from continuing operations....... 558 20,158 (2,339) (174) (219) 168
Loss from discontinued operations.............. -- 136,528 -- -- -- --
---------- ---------- -------- -------- -------- ------
Pro forma net income (loss).................... $ 558 $ (116,370) $ (2,339) $ (174) $ (219) $ 168
========== ========== ======== ======== ======== ======
Pro forma net income (loss) per share.......... $ 0.01 $ (1.55) $ -- $ -- $ (0.66) $ 3.43
========== ========== ======== ======== ======== ======
Number of shares used in pro forma net income
(loss) per share calculations................ 42,720 75,100 -- -- 333(G) 49
========== ========== ======== ======== ======== ======

<CAPTION>
HISTORICAL
-----------------------------
EMERGENCY
NEW PROFESSIONAL PRO FORMA PRO FORMA
MANAGEMENT SERVICES COMBINED COMBINED
---------- ------------ ---------- ----------
(C)
<S> <C> <C> <C> <C>
Net revenue.................................... $2,948 $ 35,031 $(2,540)(K) $3,637,914
Operating expenses:
Affiliated physician services................ -- 25,962 -- 689,740
Outside referral expenses.................... -- -- -- 149,185
Other clinic expenses........................ -- 8,626 (2,540)(K) 696,485
Cost of goods and services sold.............. -- -- -- 1,688,075
Other nonclinic operating expenses........... -- -- -- 92,527
General corporate expenses................... 314 1,124 -- 87,859
Depreciation and amortization................ -- 25 2,219(J) 61,549
Net interest expense......................... 224 -- -- 18,061
Merger expenses.............................. -- -- -- 66,564
Loss on investment........................... -- -- -- 86,600
------ ------- ------- ----------
Net operating expenses................. 538 35,737 (321) 3,636,645
------ ------- ------- ----------
Income (loss) before pro forma income taxes and
discontinued operations...................... 2,410 (706) (2,219) 1,269
Pro forma income tax expense (benefit)......... -- (270) -- (16,638)
------ ------- ------- ----------
Income (loss) from continuing operations....... 2,410 (436) (2,219) 17,907
Loss from discontinued operations.............. -- -- -- 136,528
------ ------- ------- ----------
Pro forma net income (loss).................... $2,410 $ (436) $(2,219) $ (118,621)
====== ======= ======= ==========
Pro forma net income (loss) per share.......... $ 6.93 $ -- $ (0.83)
====== ======= ==========
Number of shares used in pro forma net income
(loss) per share calculations................ 348(G) -- 24,374(H) (I) 142,924
====== ======= ======= ==========
</TABLE>

84
<PAGE> 94

MEDPARTNERS, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------
MEDPARTNERS/ NEW
MULLIKIN CAREMARK CHS MANAGEMENT
------------ ---------- ------ ----------
(A) (B)
<S> <C> <C> <C> <C>
Net revenue......................................................... $815,041 $1,775,203 $ -- $3,085
Operating expenses:
Affiliated physician services..................................... 349,036 63,039 -- --
Outside referral expenses......................................... 86,974 15,522 -- --
Other clinic expenses............................................. 288,623 100,933 -- --
Cost of goods and services sold................................... -- 1,365,203 -- --
Other nonclinic operating expenses................................ -- 88,064 -- --
General corporate expenses........................................ 56,653 23,643 -- 220
Depreciation and amortization..................................... 21,892 18,924 -- --
Net interest expense.............................................. 5,958 8,695 -- 232
Merger expenses................................................... -- -- -- --
Loss on disposal of assets........................................ 1,627 -- -- --
-------- ---------- ------ ------
Net operating expenses...................................... 810,763 1,684,023 -- 452
-------- ---------- ------ ------
Income (loss) before pro forma income taxes and discontinued
operations........................................................ 4,278 91,180 -- 2,633
Pro forma income tax expense (benefit).............................. 7,350 36,672 -- --
-------- ---------- ------ ------
Income (loss) from continuing operations............................ (3,072) 54,508 -- 2,633
Income from discontinued operations................................. -- (25,902) -- --
-------- ---------- ------ ------
Pro forma net income (loss)......................................... $ (3,072) $ 80,410 $ -- $2,633
======== ========== ====== ======
Pro forma net income (loss) per share............................... $ (0.08) $ 1.08 $ -- $ 7.57
======== ========== ====== ======
Number of shares issued in pro forma net income (loss) per share.... 36,553 74,800 -- 348(G)
======== ========== ====== ======

<CAPTION>
HISTORICAL
------------
EMERGENCY PRO PRO
PROFESSIONAL FORMA FORMA
SERVICES ADJUSTMENTS COMBINED
------------ ----------- ----------
(C)
<S> <C> <C> <C>
Net revenue......................................................... $ 33,340 $ -- $2,626,669
Operating expenses:
Affiliated physician services..................................... 24,852 -- 436,927
Outside referral expenses......................................... -- -- 102,496
Other clinic expenses............................................. 8,284 -- 397,840
Cost of goods and services sold................................... -- -- 1,365,203
Other nonclinic operating expenses................................ -- -- 88,064
General corporate expenses........................................ 956 -- 81,472
Depreciation and amortization..................................... 31 -- 40,847
Net interest expense.............................................. -- -- 14,885
Merger expenses................................................... -- -- --
Loss on disposal of assets........................................ -- -- 1,627
------- ------- ----------
Net operating expenses...................................... 34,123 -- 2,529,361
------- ------- ----------
Income (loss) before pro forma income taxes and discontinued
operations........................................................ (783) -- 97,308
Pro forma income tax expense (benefit).............................. (305) -- 43,717
------- ------- ----------
Income (loss) from continuing operations............................ (478) -- 53,591
Income from discontinued operations................................. -- -- (25,902)
------- ------- ----------
Pro forma net income (loss)......................................... $ (478) $ -- $ 79,493
======= ======= ==========
Pro forma net income (loss) per share............................... $ -- $ 0.61
======= ==========
Number of shares issued in pro forma net income (loss) per share.... -- 17,752(H) 129,453
======= ======= ==========
</TABLE>

85
<PAGE> 95

MEDPARTNERS, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------
EMERGENCY
MEDPARTNERS/ NEW PROFESSIONAL
MULLIKIN CAREMARK CHS MANAGEMENT SRVICES
------------ ---------- ---------- ---------- ------------
(A) (B) (C)
<S> <C> <C> <C> <C> <C>
Net revenue.................................................... $549,695 $1,203,957 $ -- $3,110 $ 30,259
Operating expenses:
Affiliated physician services................................ 224,770 48,913 -- -- 22,635
Outside referral expenses.................................... 59,861 10,566 -- -- --
Other clinic expenses........................................ 197,098 73,381 -- -- 7,360
Cost of goods and services sold.............................. -- 884,009 -- -- --
Other nonclinic operating expenses........................... -- 72,576 -- -- --
General corporate expenses................................... 42,196 19,449 -- 85 913
Depreciation and amortization................................ 14,057 11,353 -- -- 43
Net interest expense......................................... 3,338 3,444 -- 239 --
Merger expenses.............................................. -- -- -- -- --
Loss on disposal of assets................................... 122 -- -- -- --
-------- ---------- ------ ------ -------
Net operating expenses................................ 541,442 1,123,691 -- 324 30,951
-------- ---------- ------ ------ -------
Income (loss) before pro forma income taxes and discontinued
operations................................................... 8,253 80,266 -- 2,786 (692)
Pro forma income tax expense (benefit)......................... 9,723 33,403 -- -- (273)
Cumulative effect of change in method of accounting for income
taxes........................................................ 298 -- -- -- --
-------- ---------- ------ ------ -------
Income (loss) from continuing operations....................... (1,768) 46,863 -- 2,786 (419)
Income from discontinued operations............................ -- (30,808) -- -- --
-------- ---------- ------ ------ -------
Pro forma net income (loss).................................... $ (1,768) $ 77,671 $ -- $2,786 $ (419)
======== ========== ====== ====== =======
Pro forma net income (loss) per share.......................... $ (0.06) $ 1.04 $ -- $ 8.01 $ --
======== ========== ====== ====== =======
Number of shares used in pro forma net income (loss) per share
calculations................................................. 28,403 74,900 -- 348(G) --
======== ========== ====== ====== =======

PRO PRO
FORMA FORMA
ADJUSTMENTS COMBINED
----------- ----------

<S> <C> <C>
Net revenue.................................................... $ -- $1,787,021
Operating expenses:
Affiliated physician services................................ -- 296,318
Outside referral expenses.................................... -- 70,427
Other clinic expenses........................................ -- 277,839
Cost of goods and services sold.............................. -- 884,009
Other nonclinic operating expenses........................... -- 72,576
General corporate expenses................................... -- 62,643
Depreciation and amortization................................ -- 25,453
Net interest expense......................................... -- 7,021
Merger expenses.............................................. -- --
Loss on disposal of assets................................... -- 122
------- ----------
Net operating expenses................................ -- 1,696,408
------- ----------
Income (loss) before pro forma income taxes and discontinued
operations................................................... -- 90,613
Pro forma income tax expense (benefit)......................... -- 42,853
Cumulative effect of change in method of accounting for income
taxes........................................................ -- 298
------- ----------
Income (loss) from continuing operations....................... -- 47,462
Income from discontinued operations............................ -- (30,808)
------- ----------
Pro forma net income (loss).................................... $ -- $ 78,270
======= ==========
Pro forma net income (loss) per share.......................... $ 0.64
==========
Number of shares used in pro forma net income (loss) per share
calculations................................................. 17,773(H) 121,424
======= ==========
</TABLE>

86
<PAGE> 96

NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION

The proposed mergers with Caremark, CHS and Emergency Professional Services
and the acquisition of New Management are intended to be accounted for as
poolings-of-interests. The proposed mergers with Cardinal and Summit and the
acquisition of MRA are accounted for under the purchase method of accounting
(see below). The pro forma combined statements of operations assume that the
mergers were consummated at the beginning of the earliest period presented. The
pro forma condensed combined balance sheet assumes that the transactions were
consummated on June 30, 1996.

The pro forma financial information contains no adjustments to conform the
accounting policies of these companies because any such adjustments have been
determined to be immaterial.

The following adjustments are necessary to reflect the mergers:

A. These historical amounts for MedPartners/Mullikin for the years ended
December 31, 1995, 1994 and 1993 do not agree with the Form 10-K filed with the
SEC because the amounts have been restated to reflect the merger with PPSI which
was accounted for as a pooling-of-interests.

B. CHS was incorporated in August 1995 and commenced operations in
September 1995.

C. For purposes of combining with MedPartners/Mullikin, the Emergency
Professional Services balance sheet at April 30, 1996 was combined with the
MedPartners/Mullikin balance sheet at June 30, 1996. The Emergency Professional
Services income statements for the twelve month periods ended January 31, 1994,
1995 and 1996 and for the three month period ended April 30, 1995 and 1996 were
combined with the MedPartners/Mullikin statements of operations for the years
ended December 31, 1993, 1994 and 1995 and the six month period ended June 30,
1995 and 1996, respectively.

D. The pro forma combined statements of operations do not reflect
nonrecurring costs and charges resulting directly from the proposed mergers.
These costs and charges are estimated as follows:

<TABLE>
<CAPTION>
PROPERTY LONG-TERM TOTAL
DEFERRED AND ACCOUNTS DEBT, ACCUMULATED MERGER
TAX ASSET EQUIPMENT PAYABLE NET EARNINGS CHARGE
--------- --------- -------- --------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Caremark.................. $92,800 $(128,100) $ 92,800 $29,100 $(157,200) $250,000
CHS and New
Management.............. 1,900 -- 5,000 -- (3,100) 5,000
Emergency Professional
Services................ 1,800 (2,250) 2,750 -- (3,200) 5,000
------- --------- -------- ------- --------- --------
$96,500 $(130,350) $100,550 $29,100 $(163,500) $260,000
======= ========= ======== ======= ========= ========
</TABLE>

The following is a detail of the estimated merger expense related to the
Caremark Acquisition.

<TABLE>
<S> <C>
Severance and related benefits................................. $ 62,700
Operational restructuring...................................... 47,000
Lease abandonment.............................................. 30,500
Non-compatible technology...................................... 27,000
Brokerage fees................................................. 25,300
Professional fees.............................................. 24,900
Other transaction related costs................................ 20,600
Transition costs............................................... 6,000
Debt restructuring costs....................................... 5,000
Filing fees.................................................... 1,000
--------
$250,000
========
</TABLE>

The excess capacity, restructuring and market rationalization primarily
relates to computer hardware and software and leases that will be abandoned
after the merger. These assets are currently being utilized in the operations of
Caremark but are not compatible with the planned operations for
MedPartners/Mullikin. Severance and related benefits represent anticipated
payments to identified employees, as required by their respective employment
agreements, who will be terminated after the merger.

87
<PAGE> 97

NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION -- (CONTINUED)

E. To reflect the approximate number of MedPartners/Mullikin Common Stock
exchanged for the stock or assets of the proposed acquirees as follows:

<TABLE>
<S> <C>
Caremark.................................................... 93,654,000
CHS......................................................... 1,986,000
New Management.............................................. 348,000
Emergency Professional Services............................. 2,160,000
Cardinal.................................................... 2,135,000
Summit...................................................... 2,274,000
MRA......................................................... 333,000
-----------
102,890,000
===========
</TABLE>

F. To reflect the termination of the trust holding the shares held in
trust.

G. Represents the approximate shares of MedPartners/Mullikin Common Stock
to be distributed in exchange for partnership interest based on an assumed
trading price of $20.14 per share.

<TABLE>
<S> <C> <C>
New Management........................... $(7,000,000/$20.14) 348,000
MRA...................................... $(6,700,000/$20.14) 333,000
</TABLE>

H. To adjust pro forma amounts based on historical share amounts,
converting each outstanding share of the acquirees stock into
MedPartners/Mullikin Common Stock based on the following exchange ratios:

<TABLE>
<CAPTION>
EXCHANGE
RATIO
---------
<S> <C>
Caremark...................................................... 1.21(1)
Cardinal...................................................... 46,414.23(2)
Summit........................................................ 39,896.17(2)
CHS........................................................... 40.66(2)
Emergency Professional Services............................... 8,244(3)
</TABLE>

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

(1) The exchange ratio is fixed.
(2) The exchange ratio was based on an assumed trading price of $20.14 per share
(10 day average).
(3) The exchange ratio was based on an assumed trading price of $20.37 per share
(15 day average).

The proposed mergers with Cardinal, Summit and MRA are accounted for under
the purchase method of accounting in the pro forma condensed financial
information, although consummation of the transactions are conditioned upon the
mergers being accounted for as poolings of interests. The Company and its
independent auditors are in the process of determining compliance of the
transactions with pooling accounting requirements; however, that determination
is not complete. If the mergers were accounted for as poolings of interests,
amortization expense and net loss in the pro forma condensed statement of
operations for the year ended December 31, 1995 and six months ended June 30,
1996 would be reduced by the following amounts:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Amortization expense..................................... $ 2,219,000 $ 1,110,000
Pro forma net loss....................................... 1,331,000 660,000
</TABLE>

The following adjustments are necessary to reflect the Cardinal, Summit and
MRA mergers:

I. To reflect excess purchase price over net assets acquired related to the
purchase of Cardinal, Summit and MRA. For purposes of these pro forma financial
statements, all of the excess purchase price over net assets acquired is
allocated to goodwill. Goodwill is amortized over 40 years which is the period
of the practice management agreement.

88
<PAGE> 98

NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION -- (CONTINUED)

The final amount of the excess purchase price and the allocation among the
net assets may differ from the amounts estimated. The approximate goodwill is as
follows:

<TABLE>
<S> <C>
Cardinal.................................................... $43,940,000
Summit...................................................... 42,054,000
MRA......................................................... 2,769,000
------------
$88,763,000
==========
</TABLE>

J. To record the amortization related to the recorded goodwill.

K. To eliminate rent income and expense between affiliated entities (Summit
and MRA).

89
<PAGE> 99

DESCRIPTION OF CAPITAL STOCK OF MEDPARTNERS/MULLIKIN

AUTHORIZED CAPITAL STOCK

The MedPartners/Mullikin Certificate of Incorporation currently provides
that MedPartners/Mullikin may issue 9,500,000 shares of Preferred Stock, par
value $.001 per share, 500,000 shares of MedPartners/ Mullikin Series C
Preferred Stock, par value $.001 per share, and 200,000,000 shares of
MedPartners/ Mullikin Common Stock, par value $.001 per share.

MEDPARTNERS/MULLIKIN COMMON STOCK

Holders of MedPartners/Mullikin Common Stock are entitled to one vote for
each share held of record on all matters to be submitted to a vote of the
stockholders and do not have preemptive rights. Subject to preferences that may
be applicable to any outstanding shares of MedPartners/Mullikin Preferred Stock,
holders of MedPartners/Mullikin Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the
MedPartners/Mullikin Board of Directors out of funds legally available therefor.
See "Summary of Prospectus-Proxy Statement -- Market and Market Prices". All
outstanding shares of MedPartners/Mullikin Common Stock are, and the shares to
be issued in the Merger will be, when issued pursuant to the Plan of Merger,
fully paid and nonassessable. In the event of any liquidation, dissolution or
winding-up of the affairs of MedPartners/Mullikin, holders of
MedPartners/Mullikin Common Stock will be entitled to share ratably in the
assets of MedPartners/Mullikin remaining after payment or provision for payment
of all of MedPartners/Mullikin's debts and obligations and liquidation payments
to holders of any outstanding shares of MedPartners/Mullikin Preferred Stock.

MEDPARTNERS/MULLIKIN PREFERRED STOCK

The MedPartners/Mullikin Board of Directors, without further stockholder
authorization, is authorized to issue shares of MedPartners/Mullikin Preferred
Stock in one or more series and to determine and fix the rights, preferences and
privileges of each series, including dividend rights and preferences over
dividends on the MedPartners/Mullikin Common Stock and one or more series of
MedPartners/Mullikin Preferred Stock, conversion rights, voting rights (in
addition to those provided by law), redemption rights and the terms of any
sinking fund therefor, and rights upon liquidation, dissolution or winding up,
including preferences over the MedPartners/Mullikin Common Stock and one or more
series of MedPartners/Mullikin Preferred Stock. Although MedPartners/Mullikin
has no present plans to issue any shares of MedPartners/Mullikin Preferred
Stock, the issuance of shares of MedPartners/Mullikin Preferred Stock, or the
issuance of rights to purchase such shares, may have the effect of delaying,
deferring or preventing a change in control of MedPartners/ Mullikin or an
unsolicited acquisition proposal.

CERTAIN PROVISIONS OF THE MEDPARTNERS/MULLIKIN CERTIFICATE AND THE DGCL

Classified Board of Directors. The MedPartners/Mullikin Certificate and
MedPartners/Mullikin By-laws provide for the MedPartners/Mullikin Board of
Directors to be divided into three classes of directors, as nearly equal in
number as is reasonably possible, serving staggered terms so that directors'
terms expire either at the 1997, 1998 or 1999 annual meeting of stockholders of
MedPartners/Mullikin. One class, consisting of three directors (Richard M.
Scrushy, Ted H. McCourtney, Jr. and Rosalio J. Lopez, M.D.), has been elected to
a term which expires in 1997. One class, consisting of four directors (Larry R.
House, Charles W. Newhall III, John S. McDonald, J.D. and Richard J. Kramer),
has been elected to a term which expires in 1998. One class, consisting of three
directors (Scott F. Meadow, Larry D. Striplin, Jr. and Walter T. Mullikin,
M.D.), has been elected to a term which expires in 1999. See
"MedPartners/Mullikin's Management -- Classified Board of Directors".

MedPartners/Mullikin believes that a classified board of directors will
help to assure the continuity and stability of the MedPartners/Mullikin Board of
Directors and MedPartners/Mullikin's business strategies and policies as
determined by the MedPartners/Mullikin Board of Directors, since a majority of
the directors at any given time will have had prior experience as directors of
MedPartners/Mullikin. MedPartners/Mullikin

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believes that this, in turn, will permit the MedPartners/Mullikin Board of
Directors to more effectively represent the interests of stockholders.

With a classified board of directors, at least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in
the majority of the MedPartners/Mullikin Board of Directors. As a result, a
provision relating to a classified MedPartners/Mullikin Board of Directors may
discourage proxy contests for the election of directors or purchases of a
substantial block of the MedPartners/Mullikin Common Stock because its
provisions could operate to prevent obtaining control of the
MedPartners/Mullikin Board of Directors in a relatively short period of time.
The classification provision could also have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
MedPartners/Mullikin. Under the DGCL, unless the certificate of incorporation
otherwise provides, a director on a classified board may be removed by the
stockholders of the corporation only for cause. The MedPartners/ Mullikin
Certificate does not provide otherwise.

Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. The MedPartners/Mullikin By-laws establish an advance
notice procedure with regard to the nomination, other than by or at the
direction of the MedPartners/Mullikin Board of Directors or a committee thereof,
of candidates for election as directors (the "Nomination Procedure") and with
regard to other matters to be brought by stockholders before an annual meeting
of stockholders of MedPartners/Mullikin (the "Business Procedure").

The Nomination Procedure requires that a stockholder give prior written
notice, in proper form, of a planned nomination for the MedPartners/Mullikin
Board of Directors to the Secretary of MedPartners/ Mullikin. The requirements
as to the form and timing of that notice are specified in the
MedPartners/Mullikin By-laws. If the Chairman of the MedPartners/Mullikin Board
of Directors determines that a person was not nominated in accordance with the
Nomination Procedure, such person will not be eligible for election as a
director.

Under the Business Procedure, a stockholder seeking to have any business
conducted at an annual meeting must give prior written notice, in proper form,
to the Secretary of MedPartners/Mullikin. The requirements as to the form and
timing of that notice are specified in the MedPartners/Mullikin By-Laws. If the
Chairman of the MedPartners/Mullikin Board of Directors determines that the
other business was not properly brought before such meeting in accordance with
the Business Procedure, such business will not be conducted at such meeting.

Although the MedPartners/Mullikin By-laws do not give the
MedPartners/Mullikin Board of Directors any power to approve or disapprove
stockholder nominations for the election of directors or of any other business
desired by stockholders to be conducted at an annual or any other meeting, the
MedPartners/ Mullikin By-laws (i) may have the effect of precluding a nomination
for the election of directors or precluding the conduct of business at a
particular annual meeting if the proper procedures are not followed or (ii) may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
MedPartners/Mullikin, even if the conduct of such solicitation or such attempt
might be beneficial to MedPartners/Mullikin and its stockholders.

Delaware Takeover Statute. MedPartners/Mullikin is subject to Section 203
of the DGCL which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any of a broad range of business combinations with
any "interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the Board of Directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) on or after such date, the business combination is approved by the
Board of Directors and authorized at an annual

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or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. An "interested stockholder" is defined
as any person that is (a) the owner of 15% or more of the outstanding voting
stock of the corporation or (b) an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the corporation
at any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested stockholder.

MEDPARTNERS/MULLIKIN STOCKHOLDER RIGHTS PLAN

The following is a description of the MedPartners/Mullikin Stockholder
Rights Plan (the "MedPartners/Mullikin Rights Plan"). The description thereof
set forth below is qualified in its entirety by reference to the
MedPartners/Mullikin Rights Plan, a copy of which has been filed as an exhibit
to the Registration Statement of which this Prospectus-Proxy Statement is a
part. See "Available Information".

The MedPartners/Mullikin Rights Plan provides that one right (a "Right")
will be issued with each share of MedPartners/Mullikin Common Stock (whether
originally issued or from MedPartners/Mullikin's treasury) prior to the Rights
Distribution Date (as defined below). The Rights are not exercisable until the
Rights Distribution Date and will expire at the close of business on the date
which is 10 years from the date of the distribution unless previously redeemed
by MedPartners/Mullikin as described below. When exercisable, each Right will
entitle the owner to purchase from MedPartners/Mullikin one one-hundredth of a
share of MedPartners/Mullikin Series C Preferred Stock (as defined herein) at a
purchase price of $52.00 per share. The MedPartners/Mullikin Series C Preferred
Stock may be issued in fractional shares.

Except as described below, the Rights will be evidenced by all the
MedPartners/Mullikin Common Stock certificates and will be transferred with the
MedPartners/Mullikin Common Stock certificates, and no separate Rights
certificates will be distributed. The Rights will separate from the
MedPartners/Mullikin Common Stock and a "Rights Distribution Date" will occur
upon the earlier of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 10% or more of the
outstanding MedPartners/ Mullikin Common Stock (the "Stock Acquisition Date")
and (ii) 10 business days following the commencement of a tender offer or
exchange offer that would result in a person or group becoming an Acquiring
Person.

After the Rights Distribution Date, Rights certificates will be mailed to
holders of record of shares of MedPartners/Mullikin Common Stock as of the
Rights Distribution Date and thereafter the separate Rights certificates alone
will represent the Rights.

The MedPartners/Mullikin Series C Preferred Stock issuable upon exercise of
the Rights will be entitled to a minimum preferential quarterly dividend payment
of $.001 per share and will be entitled to an aggregate dividend of 100 times
the dividend, if any, declared for each share of MedPartners/Mullikin Common
Stock. In the event of liquidation, the holders of the MedPartners/Mullikin
Series C Preferred Stock will be entitled to a minimum preferential liquidation
payment of $52.00 per share and will be entitled to an aggregate payment of 100
times the payment made per share of MedPartners/Mullikin Common Stock. Each
share of MedPartners/Mullikin Series C Preferred Stock will have 100 votes and
will vote together with the shares of MedPartners/Mullikin Common Stock. In the
event of any merger, consolidation or other transaction in which shares of
MedPartners/Mullikin Common Stock are changed or exchanged, each share of
MedPartners/Mullikin Series C Preferred Stock will be entitled to receive 100
times the amount received per share of MedPartners/Mullikin Common Stock. These
rights are protected by customary anti-dilution provisions. The
MedPartners/Mullikin Series C Preferred Stock will, if issued, be junior to any
other series of Preferred Stock which may be authorized and issued by
MedPartners/Mullikin, unless the terms of any such other series provide
otherwise. The MedPartners/Mullikin Series C Preferred Stock will not be
redeemable. Once the shares of MedPartners/Mullikin Series C Preferred Stock are
issued, the MedPartners/Mullikin Certificate may not be amended in a manner
which would materially alter or change the powers, preferences or special rights
of the MedPartners/Mullikin Series C Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-thirds or more of
the outstanding shares of MedPartners/Mullikin Series C Preferred Stock, voting
separately as a class. Because of the nature of the MedPartners/Mullikin Series
C Preferred Stock dividend, liquidation and voting rights, the value of a share
of MedPartners/Mullikin

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Series C Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of MedPartners/Mullikin Common Stock.

In the event that (i) a person becomes an Acquiring Person (except pursuant
to a tender offer or an exchange offer for all outstanding shares of
MedPartners/Mullikin Common Stock at a price and on terms determined by at least
a majority of the members of the MedPartners/Mullikin Board of Directors who are
not officers of MedPartners/Mullikin and who are not representatives, nominees,
affiliates or associates of an Acquiring Person, to be (a) at a price which is
fair to MedPartners/Mullikin stockholders and (b) otherwise in the best
interests of MedPartners/Mullikin and its stockholders (a "Qualifying Offer")),
(ii) an Acquiring Person engages in certain self-dealing transactions involving
MedPartners/Mullikin, such as, (a) merging or consolidating into or with
MedPartners/Mullikin where MedPartners/Mullikin survives and the
MedPartners/Mullikin Common Stock remains outstanding, (b) transferring assets
to MedPartners/Mullikin in exchange for MedPartners/Mullikin securities, or
acquiring securities from MedPartners/Mullikin other than on the same basis as
from all other stockholders, (c) transferring assets to or from
MedPartners/Mullikin on terms less favorable than arm's length, (d) transferring
to or from MedPartners/Mullikin's assets having a fair market value in excess of
$5,000,000, (e) receiving unusual compensation or (f) receiving any other
financial benefit not provided to all other stockholders, or (iii) during such
time as there is an Acquiring Person, there is any reclassification of
securities, recapitalization, merger or consolidation which increases by more
than 1% the amount of MedPartners/Mullikin Common Stock beneficially owned by
the Acquiring Person, each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price, shares of
MedPartners/Mullikin Common Stock (or, in certain circumstances, cash, property
or other securities of MedPartners/Mullikin) having a value equal to two times
the exercise price of the Right. Notwithstanding any of the foregoing, following
the occurrence of any such events, all Rights that are, or (under certain
circumstances specified in the Rights Plan) were, beneficially owned by any
Acquiring Person (or certain related parties), will be null and void. However,
Rights are not exercisable following the occurrence of the events set forth
above until such time as the Rights are no longer redeemable by
MedPartners/Mullikin as set forth below.

In the event that, at any time following the Stock Acquisition Date, (i)
MedPartners/Mullikin is acquired in a merger or other business combination
transaction in which MedPartners/Mullikin is not the surviving corporation or
the MedPartners/Mullikin Common Stock is changed or exchanged (other than a
merger which follows an Qualifying Offer and satisfied certain other
requirements), or (ii) 50% or more of MedPartners/Mullikin's assets or earning
power is sold or transferred, each holder of a Right (except Rights which
previously have been voided as set forth above) shall thereafter have the right
to receive upon the exercise thereof at the then current exercise price, common
stock of the acquiring company having a value equal to two times the exercise
price of the Right.

At any time until 10 days following the Stock Acquisition Date,
MedPartners/Mullikin may redeem the Rights in whole, but not in part, at a price
of $.001 per Right. Immediately upon the action of the MedPartners/Mullikin
Board of Directors ordering redemption of the Rights, the Rights will terminate,
and the only right of the holders of the Rights will be to receive the $.001
redemption price.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of MedPartners/Mullikin, including without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to MedPartners/Mullikin, stockholders
may, depending upon the circumstances, recognize taxable income in the event
that the Rights become exercisable for shares of MedPartners/Mullikin Common
Stock (or other consideration) or for common stock of the acquiring company as
set forth above.

Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Plan may be amended by the
MedPartners/Mullikin Board of Directors prior to the Rights Distribution Date.
After the Rights Distribution Date, the provisions of the Rights Agreement may
be amended by the MedPartners/Mullikin Board of Directors in order to cure any
ambiguity, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring

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Person) or to shorten or lengthen any time period under the Rights Agreement,
provided that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.

The Rights have certain anti-takeover effects as they will cause
substantial dilution to a person or group that acquires a substantial interest
in MedPartners/Mullikin without the prior approval of the MedPartners/ Mullikin
Board of Directors. The effect of the Rights may be to inhibit a change in
control of MedPartners/ Mullikin (including through a third party tender offer
at a price which reflects a premium to then prevailing trading prices) that may
be beneficial to MedPartners/Mullikin stockholders.

LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS

MedPartners/Mullikin's Certificate contains a provision eliminating or
limiting director liability to MedPartners/Mullikin and its stockholders for
monetary damages arising from acts or omissions in the director's capacity as a
director. The provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty to
MedPartners/Mullikin or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under the DGCL making directors personally liable, under a negligence
standard, for unlawful dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the MedPartners/Mullikin
Board of Directors protection against awards of monetary damages resulting from
breaches of their duty of care (except as indicated above). As a result of this
provision, the ability of MedPartners/Mullikin or a stockholder thereof to
successfully prosecute an action against a director for a breach of his duty of
care is limited. However, the provision does not affect the availability of
equitable remedies such as an injunction or rescission based upon a director's
breach of his duty of care. The SEC has taken the position that the provision
will have no effect on claims arising under the federal securities laws.

In addition, the MedPartners/Mullikin Certificate of Incorporation and the
MedPartners/Mullikin By-laws provide for mandatory indemnification rights,
subject to limited exceptions, to any director, officer, employee, or agent of
MedPartners/Mullikin who by reason of the fact that he or she is a director,
officer, employee, or agent of MedPartners/Mullikin, is involved in a legal
proceeding of any nature. Such indemnification rights include reimbursement for
expenses incurred by such director, officer, employee, or agent in advance of
the final disposition of such proceeding in accordance with the applicable
provisions of the DGCL.

REGISTRATION RIGHTS

Pursuant to a Registration Agreement entered into in August 1993 and
amended in March 1994 (the "Registration Agreement"), the prior holders of the
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock of
MedPartners, which Preferred Stock has now been converted into
MedPartners/Mullikin Common Stock, were entitled to certain rights with respect
to the registration under the Securities Act of the 7,000,562 shares of Common
Stock into which the Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock were converted. The shares of MedPartners/Mullikin
Common Stock covered by the foregoing registration rights are eligible for
resale either under Rule 144 of the Securities Act or without restriction.
Accordingly, at the request of MedPartners/Mullikin, most of the holders of the
Common Stock have agreed to terminate their rights with respect to the
Registration Agreement, leaving approximately 1,200,000 shares that are
presently covered by the Registration Agreement.

MedPartners/Mullikin has entered into a Registration Rights Agreement with
certain of the holders of MedPartners/Mullikin Common Stock pursuant to which
such persons will have the right to require that MedPartners/Mullikin register
shares of MedPartners/Mullikin Common Stock owned by them for sale, at one year
intervals up to three times during 1997, 1998 and 1999. Unlimited piggyback
registration rights have also been granted. The holders of these registration
rights are Walter T. Mullikin, M.D., John S. McDonald, Rosalio J. Lopez, M.D.
and DCNHS, who are the only persons deemed to be "affiliates" of MedPartners/
Mullikin, following the combination of MedPartners and MME. In the March 1996
public offering carried out by MedPartners/Mullikin, 1,358,921 shares of
MedPartners/Mullikin Common Stock were sold by

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Drs. Mullikin and Lopez and Mr. McDonald at $30.25 per share pursuant to the
rights granted under the Agreement. See "Principal Stockholders of
MedPartners/Mullikin".

In addition, from time-to-time, MedPartners/Mullikin will grant
registration rights, both on a contractual and a piggyback basis to various
persons in connection with acquisitions made on a private placement basis. At
June 30, 1996, a total of 2,207,318 shares of MedPartners/Mullikin Common Stock
were subject to such registration rights.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for MedPartners/Mullikin Common Stock is
ChaseMellon Shareholder Services, L.L.C., New York, New York.

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COMPARISON OF RIGHTS OF EPS SHAREHOLDERS
AND MEDPARTNERS/MULLIKIN STOCKHOLDERS

MedPartners/Mullikin is incorporated in Delaware. EPS is incorporated in
Ohio. Holders of the EPS Shares will have their rights and obligations as
stockholders of MedPartners/Mullikin after the Merger governed by Delaware law.
Set forth below is a summary comparison of the material rights of a MedPartners/
Mullikin stockholder under the MedPartners/Mullikin Certificate and the
MedPartners/Mullikin By-laws, on the one hand, and the rights of an EPS
shareholder under the EPS Articles of Incorporation, as amended (the "EPS
Articles"), and EPS's Code of Regulations, as amended (the "EPS Code of
Regulations"), on the other hand. The information set forth below is qualified
in its entirety by reference to the MedPartners/ Mullikin Certificate, the
MedPartners/Mullikin By-laws, the EPS Articles and the EPS Code of Regulations.

After the Merger, the rights and obligations of the holders of EPS Shares
exchanged for MedPartners/ Mullikin Common Stock with respect to the classes and
series of capital stock of MedPartners/Mullikin and other matters described
below will be governed by the MedPartners/Mullikin Certificate and the
MedPartners/Mullikin By-laws.

CLASSES AND SERIES OF CAPITAL STOCK

EPS. The authorized capital stock of EPS consists of 500 Common Shares,
par value $.01 per share ("EPS Shares"). As of August 29, 1996, there were 262
issued and outstanding EPS Shares.

MedPartners/Mullikin. MedPartners/Mullikin is authorized by the
MedPartners/Mullikin Certificate to issue up to 210,000,000 shares of capital
stock, of which 200,000,000 shares are designated MedPartners/ Mullikin Common
Stock, par value $.001 per share, 9,500,000 shares are designated Preferred
Stock, par value $.001 per share ("MedPartners/Mullikin Preferred Stock"), and
500,000 shares are designated Series C Junior Participating Preferred Stock, par
value $.001 per share (the "MedPartners/Mullikin Series C Preferred Stock"). As
of April 30, 1996, there were 50,786,775 shares of MedPartners/Mullikin Common
Stock outstanding. In addition, there were outstanding options under
MedPartners/Mullikin stock option plans to purchase an additional 5,872,530
shares of MedPartners/Mullikin Common Stock. An additional 1,920,900 shares of
MedPartners/Mullikin Common Stock have been reserved for future option grants
under such plans. The Board of Directors of MedPartners/Mullikin has the
authority to issue the MedPartners/ Mullikin Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions for each
such series, without any further vote or action by the stockholders. As of April
30, 1996, there were no shares of MedPartners/Mullikin Preferred Stock issued
and outstanding, and the Board of Directors of MedPartners/Mullikin has no
present intention of issuing shares of MedPartners/Mullikin Preferred Stock.

As a consequence of and following the Merger, EPS shareholders will not
hold EPS Shares but will instead hold shares of MedPartners/Mullikin Common
Stock with associated rights to acquire MedPartners/ Mullikin Series C Preferred
Stock.

SIZE AND ELECTION OF THE BOARD OF DIRECTORS

EPS. The EPS Code of Regulations provides that the EPS Board of Directors
shall consist of five directors and that all of such directors must be
shareholders of EPS. Directors of EPS are elected by a plurality of votes cast
at the annual meeting of shareholders or, if not so elected, at a special
meeting of shareholders called for that purpose. Two of the five directors serve
for terms of two years and the remaining three directors serve for terms of one
year. Pursuant to the OGCL, the shareholders of EPS have the right to vote
cumulatively in the election of directors.

MedPartners/Mullikin. The MedPartners/Mullikin By-laws provide that the
MedPartners/Mullikin Board of Directors shall consist of not more than eleven
directors, but in any event shall consist of at least three directors and that
the size of the MedPartners/Mullikin Board of Directors shall be fixed by the
MedPartners/Mullikin By-laws. Directors of MedPartners/Mullikin are elected by a
plurality of votes cast at the annual meeting of stockholders.

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As a consequence of and following the Merger, the rights and obligations of
holders of EPS Shares exchanged for MedPartners/Mullikin Common Stock with
respect to the size and composition of the MedPartners/Mullikin Board of
Directors will be as discussed under "Operations and Management of
MedPartners/Mullikin After the Merger -- Management" and as otherwise governed
by the MedPartners/ Mullikin By-laws as described in the immediately preceding
paragraph. At the Effective Time of the Caremark Acquisition, the
MedPartners/Mullikin By-laws shall be amended to provide that the
MedPartners/Mullikin Board of Directors shall consist of thirteen directors.

REMOVAL OF DIRECTORS

EPS. The EPS Code of Regulations provides that the directors of EPS are
subject to removal as provided by statute or by other lawful procedures. Under
the OGCL, all of the directors of EPS, all of the directors of a particular
class, or any individual director may be removed from office, without cause, by
the vote of the holders of a majority of the voting power entitling them to
elect directors in place of those directors to be removed, except that, unless
all of the directors, or all of the directors of a particular class, are
removed, no individual director may be removed if the votes of a sufficient
number of shares are cast against his removal that, if cumulatively voted at an
election of all of the directors, or all of the directors of a particular class,
as the case may be, would be sufficient to elect at least one director.

MedPartners/Mullikin. The MedPartners/Mullikin By-laws provide that a
director may be removed only with cause and only by the vote of the holders of a
majority of the shares of capital stock entitled to vote thereon.

As a consequence of and following the Merger, the holders of EPS Shares
exchanged for MedPartners/ Mullikin Common Stock will be able to remove a
director from the MedPartners/Mullikin Board of Directors only with cause and
only by the vote of the holders of a majority of the shares of capital stock
entitled to vote thereon.

CONVERSION AND DISSOLUTION

EPS. The EPS Shares have no conversion features.

MedPartners/Mullikin. The MedPartners/Mullikin Common Stock has no
conversion features. The MedPartners/Mullikin Certificate authorizes for
issuance 9,500,000 shares of Preferred Stock and provides that such shares of
MedPartners/Mullikin Preferred Stock may have such voting powers, preferences
and other special rights (including, without limitation, the right to convert
the shares of such MedPartners/ Mullikin Preferred Stock into shares of
MedPartners/Mullikin Common Stock) as shall be stated in the
MedPartners/Mullikin Certificate or resolutions providing for the issuance of
MedPartners/Mullikin Preferred Stock. If the Board of Directors were to
designate such a series of MedPartners/Mullikin Preferred Stock in addition to
the MedPartners/Mullikin Series C Preferred Stock, such MedPartners/Mullikin
Preferred Stock could be entitled to preferential payments in the event of
dissolution of MedPartners/ Mullikin.

As a consequence of and following the Merger, the rights and obligations of
holders of EPS Shares exchanged for MedPartners/Mullikin Common Stock with
respect to the conversion and dissolution features of the MedPartners/Mullikin
Common Stock will be governed by the MedPartners/Mullikin Certificate as
described in the preceding paragraph.

AMENDMENT OR REPEAL OF THE ARTICLES OR CERTIFICATE OF INCORPORATION AND CODE OF
REGULATIONS OR BY-LAWS

Under the OGCL, the amendment of a corporation's Articles of Incorporation
generally requires the approval of the holders of two-thirds of the voting power
of the corporation or, if the Articles provide or permit, the affirmative vote
of a greater or lesser proportion, but not less than a majority, of such voting
power, and by such affirmative vote of the holders of shares of any particular
class as is required by the Articles. Under the DGCL, unless its certificate of
incorporation or by-laws otherwise provide, amendment of a corporation's
certificate of incorporation generally requires the approval of the holders of a
majority of the

97
<PAGE> 107

outstanding stock entitled to vote thereon, and if such amendment would increase
or decrease the number of authorized shares of any class or series or the par
value of such shares or would adversely affect the shares of such class or
series, requires the approval of the holders of a majority of the outstanding
stock of such class or series.

EPS. The EPS Articles do not contain any provisions increasing the vote
required to amend the EPS Articles. The EPS Code of Regulations may be amended
by the affirmative vote of shareholders entitled to exercise a majority of the
voting power of EPS.

MedPartners/Mullikin. The MedPartners/Mullikin Certificate provides that
the powers and rights of the Series C Preferred Stock cannot be materially
altered adversely without the affirmative vote of the holders of a majority of
the outstanding shares of MedPartners/Mullikin Series C Preferred Stock, voting
separately as a class. The MedPartners/Mullikin Certificate and
MedPartners/Mullikin By-laws provide that the MedPartners/Mullikin By-laws may
be altered, amended or repealed by a vote of a majority of the entire
MedPartners/Mullikin Board of Directors.

As a consequence of and following the Merger, the holders of EPS Shares
exchanged for MedPartners/Mullikin Common Stock will not be able to materially
alter adversely the powers and rights of the Series C Preferred Stock without
the affirmative vote of the holders of a majority of the outstanding
MedPartners/Mullikin Series C Preferred Stock, voting separately as a class.

SPECIAL MEETINGS OF STOCKHOLDERS

EPS. The OGCL and the EPS Code of Regulations provide that a special
meeting of shareholders may be called by the Chairman of the Board or the
President of EPS, or by the directors of EPS at a meeting or by a majority of
the directors of EPS acting without a meeting, or by the holders of all of the
issued and outstanding shares of EPS entitled to vote thereat.

MedPartners/Mullikin. The MedPartners/Mullikin By-laws provide that a
special meeting of the MedPartners/Mullikin stockholders may be called by the
President and shall be called by the President or the Secretary at the request
in writing by a majority of the MedPartners/Mullikin Board of Directors or by
the holders of at least a majority of the outstanding shares of capital stock of
MedPartners/Mullikin entitled to vote.

As a consequence of and following the Merger, the rights and obligations of
holders of EPS Shares exchanged for MedPartners/Mullikin Common Stock with
respect to special meetings of stockholders will be governed by the
MedPartners/Mullikin By-laws as described in the preceding paragraph.

LIABILITY OF DIRECTORS

The OGCL and the DGCL permit a corporation to include a provision in its
articles or certificate of incorporation eliminating or limiting the personal
liability of a director or officer to the corporation or its stockholders for
damages for breach of the director's fiduciary duty, subject to certain
limitations. Each of the MedPartners/Mullikin Certificate and the EPS Articles
includes such a provision which limits such liability to the fullest extent
permitted under applicable law.

The MedPartners/Mullikin Certificate provides that a director will not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
which concerns unlawful payments of dividends or expenditures of funds for
unlawful stock purchases or redemptions or (iv) for any transaction from which
the director derived an improper personal benefit.

While these provisions provide directors with protection from awards of
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her

98
<PAGE> 108

duty of care. The provisions described above apply to an officer of
MedPartners/Mullikin only if he or she is a director of MedPartners/Mullikin and
is acting in his or her capacity as director, and do not apply to officers of
MedPartners/Mullikin who are not directors.

STOCKHOLDER RIGHTS PLAN

EPS. EPS does not have a stockholder rights plan.

MedPartners/Mullikin. The MedPartners/Mullikin Common Stock is subject to
a Rights Plan, which may inhibit a change in control of MedPartners/Mullikin
that might be beneficial to MedPartners/Mullikin stockholders. See "Description
of Capital Stock of MedPartners/Mullikin -- MedPartners/Mullikin Stockholder
Rights Plan".

As a consequence of and following the Merger, the rights and obligations of
holders of EPS Shares exchanged for MedPartners/Mullikin Common Stock will be
subject to the Stockholder Rights Plan which may inhibit a change of control of
MedPartners/Mullikin that might be beneficial to MedPartners/Mullikin
Stockholders.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER NOMINATIONS
OF DIRECTORS

EPS. Neither the EPS Articles nor the EPS Code of Regulations contains any
advance notice provisions for shareholder proposals or shareholder nominations
of directors other than the notice requirements imposed by the OGCL.

MedPartners/Mullikin. The MedPartners/Mullikin By-laws establish an
advance notice procedure with regard to the nomination, other than by or at the
direction of the MedPartners/Mullikin Board of Directors or a committee thereof,
of candidates for election as directors and with regard to other matters to be
brought by stockholders before an annual meeting of stockholders of
MedPartners/Mullikin.

The MedPartners/Mullikin By-laws provide that nominations of persons for
election to the MedPartners/Mullikin Board of Directors may be made at a meeting
of stockholders by or at the direction of the MedPartners/Mullikin Board of
Directors, by any nominating committee or person appointed by the
MedPartners/Mullikin Board of Directors, or by any stockholder of
MedPartners/Mullikin who complies with the notice procedures set forth below.
Such nominations, other than those made by or at the direction of the
MedPartners/Mullikin Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of MedPartners/Mullikin. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of MedPartners/Mullikin not less than sixty days nor
more than ninety days prior to the meeting. Such notice shall set forth (i) the
name, age, business address and residence address of the nominee, (ii) the
principal occupation or employment of the nominee, (iii) the class and number of
shares of capital stock of MedPartners/Mullikin which are beneficially owned by
the nominee, and (iv) any other information relating to the nominee that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Section 14 of the Exchange Act, and as to the stockholder giving the
notice, (i) the name and address of the stockholder, (ii) the class or series
and number of shares of capital stock of MedPartners/Mullikin which are owned by
the stockholder, (iii) a description of all arrangements or understandings
between the stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by the stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in
such notice, and (v) any other information relating to the stockholder that
would be required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for the election of
directors pursuant to Section 14 of the Exchange Act. Such notice must be
accompanied by a written consent of each nominee to serve as a director if
elected. MedPartners/ Mullikin may require any proposed nominee to furnish such
other information as may reasonably be required by MedPartners/Mullikin to
determine the eligibility of such proposed nominee to serve as a director of
MedPartners/Mullikin.

99
<PAGE> 109

The MedPartners/Mullikin By-laws provide that at an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the MedPartners/Mullikin Board of Directors,
otherwise properly brought before the meeting by or at the direction of the
MedPartners/Mullikin Board of Directors or otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to
MedPartners/Mullikin. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of
MedPartners/Mullikin, not less than sixty days nor more than ninety days prior
to the meeting. The notice must set forth (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and record address
of the stockholder proposing such business, (iii) the class or series and number
of shares of capital stock of MedPartners/Mullikin which are owned beneficially
or of record by the stockholder, (iv) a description of all arrangements or
understandings between the stockholder and any other person or persons
(including their names) in connection with the proposal of such business by the
stockholder and any material interest of the stockholder in such business, and
(v) a representation that the stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.

As a consequence of and following the Merger, EPS shareholders wishing to
nominate candidates to the MedPartners/Mullikin Board of Directors or bring
business before a meeting of stockholders will have to comply with notice
procedures of MedPartners/Mullikin, including with respect to the time such
notice must be given.

ACTION BY WRITTEN CONSENT

EPS. Any action which can be taken at any meeting of shareholders may be
taken, without prior notice, by unanimous written consent. Such consent must set
forth the action being taken and must be signed by the holders of all of the
shares who would be entitled to notice of a meeting for such purpose.

MedPartners/Mullikin. The MedPartners/Mullikin Certificate provides that,
since MedPartners/Mullikin Common Stock is listed on a national securities
exchange, any action required or permitted to be taken by the stockholders of
MedPartners/Mullikin must be effected at a duly called meeting and may not be
effected by any consent in writing by such stockholders.

As a consequence of and following the Merger, the holders of EPS Shares
exchanged for MedPartners/Mullikin Common Stock may not effect action by any
consent in writing.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The OGCL and the DGCL permit a corporation to indemnify officers,
directors, employees and agents for actions taken in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, which they had no
reasonable cause to believe was unlawful. The OGCL and the DGCL provide that a
corporation may advance expenses of defense (upon receipt of a written
undertaking to reimburse the corporation if indemnification is not appropriate)
and must reimburse a successful defendant for expenses, including attorneys'
fees, actually and reasonably incurred, and permits a corporation to purchase
and maintain liability insurance for its directors and officers. The OGCL and
the DGCL provide that indemnification may not be made for any claim, issue or
matter as to which a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation, unless and only to the extent a court determines that the person is
entitled to indemnity for such expenses as the court deems proper.

EPS. The EPS Articles and the EPS Code of Regulations provide for
indemnification to the full extent permitted by the OGCL for directors, officers
and employees. The Plan of Merger provides that all rights to indemnification
for acts or omissions occurring prior to the Effective Time of the Merger now
existing in favor of the current or former directors, officers or employees of
EPS as provided in the EPS Articles and EPS Code

100
<PAGE> 110

of Regulations shall survive the Merger and shall continue in full force and
effect in accordance with their terms.

MedPartners/Mullikin. The MedPartners/Mullikin By-laws provide that each
person who is involved in any actual or threatened action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director, officer, employee or agent of
MedPartners/Mullikin, or is or was serving at the request of
MedPartners/Mullikin as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, will be indemnified
by MedPartners/Mullikin to the full extent permitted by the DGCL, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits MedPartners/Mullikin to provide
broader indemnification rights than said law permitted prior to such amendment)
or by other applicable laws then in effect.

EXPERTS

The consolidated financial statements of MedPartners/Mullikin, Inc. and the
financial statements of Cardinal Healthcare, P.A., CHS Management, Inc., New
Management and Emergency Professional Services, Inc. for the indicated periods
detailed in the Index to Financial Statements appearing in this Prospectus-Proxy
Statement and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.

The consolidated financial statements of Caremark International Inc. as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995 included in this Prospectus-Proxy Statement and Registration
Statement have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

LEGAL MATTERS

The validity of the shares of MedPartners/Mullikin Common Stock to be
issued to the shareholders of EPS pursuant to the Merger will be passed upon by
Haskell Slaughter & Young, LLC, Birmingham, Alabama.

ADDITIONAL INFORMATION

OTHER BUSINESS

The Board of Directors of EPS is not aware of any business to be acted upon
at the Special Meeting other than as described in the Notice of the Special
Meeting or as otherwise described herein. If, however, other matters are
properly brought before the Special Meeting, or any adjournments or
postponements thereof, the persons appointed as proxies will have discretion to
vote or act thereon according to their best judgment and applicable SEC rules.

101
<PAGE> 111

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
MEDPARTNERS/MULLIKIN, INC.
Report of Independent Auditors...................................................... F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995........................ F-4
Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995.......................................................................... F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993, 1994 and 1995............................................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995.......................................................................... F-7
Notes to Consolidated Financial Statements.......................................... F-8
MEDPARTNERS/MULLIKIN, INC. (UNAUDITED)
Consolidated Balance Sheet as of June 30, 1996 (unaudited).......................... F-22
Consolidated Statements of Operations for the six months ended June 30, 1995 and
1996 (unaudited).................................................................. F-23
Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and
1996 (unaudited).................................................................. F-24
Notes to Unaudited Consolidated Financial Statements................................ F-25
CAREMARK INTERNATIONAL INC.
Report of Independent Accountants................................................... F-29
Consolidated Balance Sheets as of December 31, 1994 and 1995........................ F-30
Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995.......................................................................... F-31
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993, 1994,
and 1995.......................................................................... F-32
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994,
and 1995.......................................................................... F-33
Notes to Consolidated Financial Statements.......................................... F-34
CAREMARK INTERNATIONAL INC. (UNAUDITED)
Consolidated Balance Sheet as of June 30, 1996 (unaudited).......................... F-50
Consolidated Statements of Operations for the six months ended June 30, 1995 and
1996 (unaudited).................................................................. F-51
Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and
1996 (unaudited).................................................................. F-52
Notes to Consolidated Financial Statements (unaudited).............................. F-53
CARDINAL HEALTHCARE, P.A.(1)
Report of Independent Auditors...................................................... F-57
Balance Sheet as of December 31, 1995............................................... F-58
Statement of Operations for the year ended December 31, 1995........................ F-59
Statement of Changes in Stockholders' Deficit for the year ended December 31,
1995.............................................................................. F-60
Statement of Cash Flows for the year ended December 31, 1995........................ F-61
Notes to Financial Statements....................................................... F-62
CARDINAL HEALTHCARE, P.A. (UNAUDITED)(1)
Balance Sheet as of December 31, 1994 (unaudited)................................... F-67
Statements of Income for the years ended December 31, 1993 and 1994 (unaudited)..... F-68
Statements of Changes in Stockholders' Equity for the years ended December 31, 1993
and 1994 (unaudited).............................................................. F-69
Statements of Cash Flows for the years ended December 31, 1993 and 1994
(unaudited)....................................................................... F-70
Notes to Unaudited Financial Statements............................................. F-71
Balance Sheet as of June 30, 1996 (unaudited)....................................... F-75
Statements of Income for the six months ended June 30, 1995 and 1996 (unaudited).... F-76
Statements of Cash Flows for the six months ended June 30, 1995 and 1996
(unaudited)....................................................................... F-77
Note to Unaudited Financial Statements.............................................. F-78
</TABLE>

F-1
<PAGE> 112

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
CHS MANAGEMENT, INC.(1)
Report of Independent Auditors...................................................... F-79
Balance Sheet as of December 31, 1995............................................... F-80
Statement of Income for the period from September 1, 1995 (inception) through
December 31, 1995................................................................. F-81
Statement of Stockholders' Equity for the period from September 1, 1995 (inception)
through December 31, 1995......................................................... F-82
Statement of Cash Flows for the period from September 1, 1995 (inception) through
December 31, 1995................................................................. F-83
Notes to Financial Statements....................................................... F-84
CHS MANAGEMENT, INC. (UNAUDITED)(1)
Condensed Balance Sheet as of June 30, 1996 (unaudited)............................. F-89
Condensed Statement of Operations and Accumulated Deficit for the six months ended
June 30, 1996 (unaudited)......................................................... F-90
Condensed Statement of Cash Flows for the six months ended June 30, 1996
(unaudited)....................................................................... F-91
Notes to Unaudited Condensed Financial Statements................................... F-92
NEW MANAGEMENT(1)
Report of Independent Auditors...................................................... F-93
Balance Sheets as of December 31, 1994 and 1995..................................... F-94
Statements of Income for the years ended December 31, 1994 and 1995................. F-95
Statements of Partners' Deficiency for the years ended December 31, 1994 and 1995... F-96
Statements of Cash Flows for the years ended December 31, 1994 and 1995............. F-97
Notes to Financial Statements....................................................... F-98
NEW MANAGEMENT (UNAUDITED)(1)
Balance Sheet as of December 31, 1993 (unaudited)................................... F-100
Statement of Income for the year ended December 31, 1993 (unaudited)................ F-101
Statement of Cash Flows for the year ended December 31, 1993 (unaudited)............ F-102
Notes to Unaudited Financial Statements............................................. F-103
Condensed Balance Sheet as of June 30, 1996 Unaudited).............................. F-105
Condensed Statements of Income for the six months ended June 30, 1995 and 1996
(unaudited)....................................................................... F-106
Condensed Statements of Cash Flows for the six months ended June 30, 1995 and 1996
(unaudited)....................................................................... F-107
Note to Unaudited Condensed Financial Statements.................................... F-108
EMERGENCY PROFESSIONAL SERVICES, INC.(1)
Report of Independent Auditors...................................................... F-109
Balance Sheets as of January 31, 1995 and 1996...................................... F-110
Statements of Operations for the years ended January 31, 1994, 1995 and 1996........ F-111
Statements of Changes in Stockholders' Equity for the years ended January 31, 1994,
1995 and 1996..................................................................... F-112
Statements of Cash Flows for the years ended January 31, 1994, 1995 and 1996........ F-113
Notes to Financial Statements....................................................... F-114
EMERGENCY PROFESSIONAL SERVICES, INC. (UNAUDITED)(1)
Balance Sheet as of April 30, 1996 (unaudited)...................................... F-117
Statements of Income for the three months ended April 30, 1995 and 1996
(unaudited)....................................................................... F-118
Statements of Cash Flows for the three months ended April 30, 1995 and 1996
(unaudited)....................................................................... F-119
Note to Unaudited Financial Statements.............................................. F-120
</TABLE>

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

(1) These entities are probable combinations with or acquisitions of
MedPartners/Mullikin.

F-2
<PAGE> 113

REPORT OF INDEPENDENT AUDITORS

Board of Directors
MedPartners/Mullikin, Inc.

We have audited the accompanying consolidated balance sheets of
MedPartners/Mullikin, Inc. as of December 31, 1994 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
MedPartners/Mullikin, Inc. at December 31, 1994 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Birmingham, Alabama
February 22, 1996

F-3
<PAGE> 114

MEDPARTNERS/MULLIKIN, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 66,623 $ 55,328
Marketable equity securities........................................... 37,689 35,567
Accounts receivable, less allowances for bad debts of
$21,504,000 and $29,777,000......................................... 88,340 135,176
Inventories............................................................ 5,543 9,779
Income taxes........................................................... -- 977
Prepaid expenses and other current assets.............................. 8,759 19,214
-------- --------
Total current assets........................................... 206,954 256,041
Property and equipment, net.............................................. 122,023 155,376
Intangible assets, net................................................... 74,933 111,971
Deferred tax asset....................................................... 1,267 35,002
Other assets............................................................. 12,797 18,343
-------- --------
Total assets................................................... $417,974 $576,733
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 21,980 $ 32,158
Payable to physician groups............................................ 24,669 31,810
Accrued compensation................................................... 15,557 15,949
Other accrued expenses and liabilities................................. 9,834 31,650
Accrued medical claims payable......................................... 44,924 43,433
Income taxes payable................................................... 1,729 --
Current portion of long-term liabilities............................... 12,656 9,149
-------- --------
Total current liabilities...................................... 131,349 164,149
Long-term debt, net of current portion................................... 146,498 200,814
Other long-term liabilities.............................................. 5,936 6,272
Estimated malpractice liability.......................................... 4,958 2,781
Redeemable convertible preferred stock:
Series A $.001 par value; 4,500,000 shares authorized; 4,001,000 shares
issued.............................................................. 8,001 --
Series B $.001 par value; 3,500,000 shares authorized; 3,000,000 shares
issued.............................................................. 12,000 --
Stockholders' equity:
Common stock, $.001 par value; 75,000,000 shares authorized; issued --
28,123,000 in 1994 and 42,508,000 in 1995........................... 28 42
Additional paid-in capital............................................. 116,240 214,422
Notes receivable from stockholders..................................... (2,349) (1,930)
Unrealized gain (loss) on marketable equity securities, net of deferred
taxes............................................................... 14 (7)
Unamortized deferred compensation...................................... (3,552) (2,682)
Accumulated deficit.................................................... (1,149) (7,128)
-------- --------
Total stockholders' equity..................................... 109,232 202,717
-------- --------
Total liabilities and stockholders' equity..................... $417,974 $576,733
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 115

MEDPARTNERS/MULLIKIN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1994 1995
-------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net revenue........................................... $549,695 $815,041 $1,153,557
Operating expenses:
Cost of affiliated physician services............... 224,770 349,036 506,811
Clinic salaries, wages and benefits................. 112,489 159,010 216,119
Outside hospitalization expense..................... 59,861 86,974 109,934
Clinic rent and lease expense....................... 18,832 27,515 41,825
Clinic supplies..................................... 24,529 34,453 47,744
Other clinic costs.................................. 41,248 67,645 88,991
General corporate expenses.......................... 42,196 56,653 64,713
Depreciation and amortization....................... 14,057 21,892 29,088
Net interest expense................................ 3,338 5,958 8,443
Merger expenses..................................... -- -- 66,564
Loss on disposal of assets.......................... 122 1,627 --
-------- -------- ----------
Net operating expenses...................... 541,442 810,763 1,180,232
-------- -------- ----------
Income (loss) before income taxes and cumulative
effect of change in method of accounting............ 8,253 4,278 (26,675)
Income tax expense (benefit).......................... 4,685 5,071 (27,233)
-------- -------- ----------
Income (loss) before cumulative effect of change in
method of accounting................................ 3,568 (793) 558
Cumulative effect of change in method of accounting
for income taxes.................................... 298 -- --
-------- -------- ----------
Net income (loss)..................................... 3,270 (793) 558
Pro forma income taxes................................ 5,038 2,279 --
-------- -------- ----------
Pro forma net income (loss)........................... $ (1,768) $ (3,072) $ 558
======== ======== =========
Pro forma net income (loss) per share................. $ (0.06) $ (0.08) $ 0.01
======== ======== =========
Number of shares used in pro forma net income (loss)
per share........................................... 28,403 36,553 42,720
======== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 116

MEDPARTNERS/MULLIKIN, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNREALIZED
NOTES GAIN/(LOSS)
COMMON STOCK ADDITIONAL RECEIVABLE ON MARKETABLE UNAMORTIZED RETAINED TOTAL
--------------- PAID-IN FROM EQUITY DEFERRED EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCKHOLDERS SECURITIES COMP. (DEFICIT) EQUITY
------ ------ ---------- ------------ ------------- ----------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1992..................... 15,709 $ 16 $ 33,466 $ (2,042) $ -- $ (11) $ 14,166 $ 45,595
Capital contributions.... 5,219 5 32,326 -- -- -- -- 32,331
Capital distributions.... (76) -- (389) -- -- -- -- (389)
Dividends and
distributions
paid................... -- -- -- -- -- -- (13,114) (13,114)
Net change in notes
receivable from
stockholders........... -- -- -- (354) -- -- -- (354)
Unrealized loss on
marketable equity
securities, net of
deferred taxes......... -- -- -- -- (166) -- -- (166)
Expenses related to
offering............... -- -- (71) -- -- -- -- (71)
Purchase of Medical
Business Solutions,
Inc.................... 60 -- 60 -- -- -- -- 60
Redemption of shares at
par on September 1,
1993................... (675) (1) -- -- -- -- -- (1)
Pro forma tax provision
of pooled entities..... -- -- -- -- -- -- 5,038 5,038
Stock options............ 251 -- 2,287 -- -- -- -- 2,287
Amortization of deferred
compensation........... -- -- -- -- -- 11 -- 11
Pro forma net loss....... -- -- -- -- -- -- (1,768) (1,768)
------ ------ ---------- ------------ ------ ----------- -------- -------------
Balances at December 31,
1993..................... 20,488 20 67,679 (2,396) (166) -- 4,322 69,459
Capital contributions.... 7,605 8 47,052 -- -- -- -- 47,060
Capital distributions.... (42) -- (3,594) -- -- -- -- (3,594)
Dividends and
distributions
paid................... -- -- -- -- -- -- (4,678) (4,678)
Net change in notes
receivable from
stockholders........... -- -- -- 47 -- -- -- 47
Unrealized gain on
marketable equity
securities, net of
deferred taxes......... -- -- -- -- 180 -- -- 180
Expenses related to
redeemable convertible
preferred stock........ -- -- (49) -- -- -- -- (49)
Pro forma tax provision
of pooled entities..... -- -- -- -- -- -- 2,279 2,279
Deferred compensation on
issuance of options.... -- -- 4,350 -- -- (4,350) -- --
Stock options............ 72 -- 802 -- -- -- -- 802
Amortization of deferred
compensation........... -- -- -- -- -- 798 -- 798
Pro forma net loss....... -- -- -- -- -- -- (3,072) (3,072)
------ ------ ---------- ------------ ------ ----------- -------- -------------
Balances at December 31,
1994..................... 28,123 28 116,240 (2,349) 14 (3,552) (1,149) 109,232
Balance for immaterial
pooling-of-interests
entities................. -- -- 2 -- -- -- (308) (306)
Capital contributions.... 6,605 6 77,532 -- -- -- -- 77,538
Capital distributions.... (26) -- (470) -- -- -- -- (470)
Dividends and
distributions
paid................... -- -- -- -- -- -- (6,229) (6,229)
Net change in notes
receivable from
stockholders........... -- -- -- 419 -- -- -- 419
Unrealized loss on
marketable equity
securities, net of
deferred taxes......... -- -- -- -- (21) -- -- (21)
Conversion of preferred
stock.................. 7,001 7 19,994 -- -- -- -- 20,001
Stock options............ 805 1 1,124 -- -- -- -- 1,125
Amortization of deferred
compensation........... -- -- -- -- -- 870 -- 870
Pro forma net income..... -- -- -- -- -- -- 558 558
------ ------ ---------- ------------ ------ ----------- -------- -------------
Balances at December 31,
1995..................... 42,508 $ 42 $214,422 $ (1,930) $ (7) $(2,682) $ (7,128) $ 202,717
====== ====== ======== ========== =========== ========== ======== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 117

MEDPARTNERS/MULLIKIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Pro forma net income (loss)................................. $(1,768) $ (3,072) $ 558
Adjustments to reconcile pro forma net income (loss) to net
cash and cash equivalents provided by (used in) operating
activities:
Depreciation and amortization............................ 14,057 21,892 29,088
Provision for deferred taxes............................. (371) (1,564) (33,171)
Merger expenses.......................................... -- -- 66,564
Loss on disposal of assets............................... 122 1,627 --
Amortization of premium on marketable securities......... 67 1,111 1,218
Pro forma tax provision of pooled entities............... 5,038 2,279 --
Other.................................................... (316) 349 (617)
Changes in operating assets and liabilities, net of effects
of acquisitions.......................................... 13,819 (8,896) (77,099)
------- --------- ---------
Net cash and cash equivalents provided by (used in)
operating activities.............................. 30,648 13,726 (13,459)
Investing activities:
Net cash used to fund acquisitions.......................... (14,313) (57,597) (61,531)
Additions to intangible assets, net of effects of
acquisitions............................................. (745) (1,728) (7,235)
Purchase of property and equipment.......................... (15,627) (32,082) (39,394)
Proceeds from sale of property and equipment................ 961 2,124 --
Net proceeds (purchases) of marketable securities........... (8,212) (17,560) 1,636
Other....................................................... 379 (1,701) 546
------- --------- ---------
Net cash and cash equivalents used in investing
activities........................................ (37,557) (108,544) (105,978)
Financing activities:
Capital contributions....................................... 42,713 116,298 65,764
Capital distributions....................................... (389) (3,625) (7,650)
Net proceeds from debt...................................... 16,334 35,075 139,496
Repayment of debt........................................... (17,940) (27,319) (83,011)
Dividends and distributions paid............................ (13,114) (4,453) (6,455)
Other....................................................... (188) 67 (2)
------- --------- ---------
Net cash and cash equivalents provided by financing
activities........................................ 27,416 116,043 108,142
------- --------- ---------
Net increase (decrease) in cash and cash equivalents.......... 20,507 21,225 (11,295)
Cash and cash equivalents at beginning of year................ 24,891 45,398 66,623
------- --------- ---------
Cash and cash equivalents at end of year...................... $45,398 $ 66,623 $ 55,328
======= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest................................................. $ 5,223 $ 7,809 $ 12,226
======= ========= =========
Income taxes............................................. $ 3,027 $ 6,036 $ 8,014
======= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 118

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. ACCOUNTING POLICIES

Description of Business

MedPartners, Inc. (MedPartners) and Mullikin Medical Enterprises, L.P.
(MME) merged on November 29, 1995 to form MedPartners/Mullikin, Inc. (the
Company). MedPartners was incorporated in January 1993 in Delaware. MedPartners'
business is to operate and/or manage physician practices. MedPartners, through
wholly owned subsidiaries, acquires certain assets of and manages physician
practices under long-term practice management agreements with affiliated
physician groups that practice through such practices. MME was formed on March
26, 1994 through the merger of Mullikin Management Partnership, L.P. (MMP) and
the limited partners of Pioneer Hospital. The Company operates a 99-bed acute
care hospital (Pioneer) and a 102-bed acute care hospital (U.S. Family Care
Medical Center) and provides management systems and services, nonphysician
health care personnel, facilities and equipment to affiliated medical
organizations and independent hospitals. The affiliated medical organizations
employ and contract with physicians and health maintenance organizations (HMOs)
to provide professional health care services to members of HMOs. The Company
also contracts with the HMOs to provide institutional (hospital) services to a
majority of the same members. In addition, through its wholly owned
subsidiaries, the Company contracts with hospitals to provide Medical Staff for
various hospital departments.

Basis of Presentation

The consolidated financial statements have been prepared on the accrual
basis of accounting and include the accounts of the Company and its wholly owned
subsidiaries. Through the 20 to 44-year practice management agreements between
the Company's wholly owned subsidiaries and the various professional
corporations, the Company has assumed full responsibility for the operating
expenses in return for the assignment of the revenue of the professional
corporations. The Company believes it has, as opposed to affiliates of the
Company, perpetual, unilateral control over the assets and operations of the
various professional corporations, and notwithstanding the lack of technical
majority ownership of the stock of such entities, consolidation of the various
professional corporations is necessary to present fairly the financial position
and results of operations of the Company because there exists a
parent-subsidiary relationship by means other than record ownership of a
majority of voting stock. Control by the Company is perpetual rather than
temporary because of (i) the length of the original terms of the agreements,
(ii) the successive extension periods provided by the agreements, (iii) the
continuing investment of capital by the Company, (iv) the employment of the
majority of the nonphysician personnel, and (v) the nature of the services
provided to the professional corporations by the Company. Two affiliated medical
organizations, Mullikin Medical Center, a Medical Group, Inc., and Moore-White
Medical Group have been treated as special purpose entities and consolidated
with the Company by virtue of the fact that these entities have nominal capital
and their activities and resulting substantive risks and rewards rest directly
or indirectly with the Company. On January 1, 1995, MMP entered into a long-term
management agreement with Mullikin Independent Physician Association, a Medical
Corporation (MIPA). This agreement expires in the year 2038 and provides for the
assignment of virtually all of MIPA's revenue to MMP. Accordingly, beginning
January 1, 1994, the revenues and expenses of MIPA are reflected in the
Company's consolidated statements of operations. All intercompany accounts and
transactions have been eliminated in the consolidation.

Nature of Physician Compensation Arrangements

MedPartners compensates PCs with which it has contracted to provide
healthcare services to MedPartners' clinics under four basic arrangements. In
all circumstances, MedPartners is responsible for the billing and collection of
the revenue related to services provided at MedPartners' clinics as well as for
paying all expenses of the clinic including physician compensation. In the
Company's financial statements, MedPartners records all such revenue for
services performed by the physicians at the clinics. In no instance is

F-8
<PAGE> 119

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MedPartners paid a fixed fee to cover clinic operating expenses. MedPartners
always remains at risk for the expenses of the clinics. In all four types of
arrangements described below, the Company is not sharing revenue with the PCs or
its physician owners.

Over one half of MedPartners' revenue (approximately 53.0% at December 31,
1995) is received under capitation arrangements. Under these arrangements,
MedPartners contracts with licensed HMOs for a broad range of health care
services and in turn subcontracts for the delivery of health care with
hospitals, ancillary providers, and professional medical organizations,
including PC's that are affiliated with MedPartners through management
agreements. Pursuant to these arrangements the PC is paid on a per member per
month basis by MedPartners. From this amount, the PC pays liability insurance
premiums and compensates its physician owners. The PCs do not have the authority
to participate in the negotiations of contracts with HMOs.

Under the second type of arrangement, which represents approximately 23.1%
of MedPartners' revenue at December 31, 1995, MedPartners pays the PC for the
health care services provided at MedPartners' clinics a negotiated fixed dollar
amount. At MedPartners' sole discretion, the physicians are eligible to receive
a bonus based on performance criteria and goals. The amount of the discretionary
bonus is determined solely by MedPartners management and is not directly
correlated to clinic revenue and gross profit. In these arrangements,
MedPartners is responsible for the billing and collection of all revenues for
the services provided at its clinics as well as paying all expenses, including
physicians compensation.

Under the third type of arrangement, which represents approximately 23.2%
of MedPartners' revenue at December 31, 1995, the PC is compensated on a
negotiated fee-for-service basis for health care services performed at
MedPartners' clinics. In these arrangements MedPartners bills and collects for
all services rendered at its clinics and pays all expenses of the clinics,
including physicians' compensation, which is based on the fee for service
revenue generated at the clinics (which typically represents between 40 to 70
percent of the clinic's net revenues). Again, the Company is not reimbursed for
the clinic expenses, rather it is responsible and at risk for all such expenses.

Under the fourth type of arrangement, representing approximately 0.7% of
MedPartners' revenue at December 31, 1995, MedPartners pays the PC a negotiated
percentage (typically 75 to 88 percent) of the gross profits of the clinic.
Gross profit represents net clinic revenues less operating expenses of the
clinic. In these arrangement, MedPartners is responsible for the billing and
collection for the services rendered at its clinics and the payment of the
clinic expenses, including physicians' compensation. In some instances under
these types of arrangements, the physicians are guaranteed a minimum salary.

The fee retained by MedPartners includes direct management expenses of
operating the clinics plus additional amounts which reflect a portion or all of
the residual equity interest in the clinics after payment of physician
compensation (including discretionary bonuses, if any), other medical costs and
management expenses. Under the four basic arrangements discussed above, these
additional amounts (representing clinic earnings) retained by MedPartners take
the following forms: (1) 100% of clinic earnings (as defined above); (2) 100% of
clinic earnings; (3) 100% of clinic earnings and (4) a variable percentage
(typically 12 to 25 percent) of the clinic's gross profits (as defined above).

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying consolidated
financial statements and notes. Actual results could differ from those
estimates.

F-9
<PAGE> 120

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash Equivalents

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The carrying amounts
of all cash and cash equivalents approximates fair value.

Marketable Securities

Effective August 1, 1994, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires that investments in equity
securities that have readily determinable fair values and investments in debt
securities be classified in three categories: held-to-maturity, trading and
available-for-sale. Based on the nature of the assets held by the Company and
management's investment strategy, the Company's investments have been classified
as available-for-sale.

Available-for-sale securities are carried at fair value, with the
unrealized gains and losses, net of tax, reported in a separate component of
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. The cost of securities sold is
based on the specific identification method.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or
market.

Property and Equipment

Property and equipment are stated at cost, which for the used assets being
acquired is usually determined by an independent appraisal. Depreciation of
property and equipment is calculated using either the declining balance or the
straight-line method over the shorter of the estimated useful lives of the
assets or the term of the underlying leases. Estimated useful lives range from 3
to 10 years for equipment, 5 to 20 years for leasehold improvements and 5 to 40
years for buildings and improvements based on type and condition of assets.
Routine maintenance and repairs are charged to expense as incurred, while costs
of betterments and renewals are capitalized.

Intangible Assets

Excess of cost over fair value of assets acquired (goodwill) is being
amortized using the straight-line method over terms of the related practice
management agreements, generally 20 to 40 years. As of December 31, 1995, the
Company had entered into practice management agreements with 14 physician groups
which contain a voluntary termination clause granting the affiliated physician
group the right to terminate the agreement after a specified time, typically on
the fifth anniversary of the agreement, these physician groups account for
approximately 6% of net revenue as of December 31, 1995, and the original
goodwill recorded related to the acquisition of these physician groups was
approximately $6,000,000. The Company believes that amortizing the related
goodwill over 20 years rather than the noncancellable term of the practice
management agreements generally is appropriate considering (i) termination
options are exercisable only during restrictive windows and (ii) the physician
groups exercising such option are required to purchase substantially all of the
assets used in the practice, which would make the termination of the practice
management agreements not probable. The goodwill that was previously on the
books of MME is generally being amortized over 30 years and that previously on
the books of PPSI over periods ranging from 5 to 25 years. The carrying value of
goodwill is reviewed if the facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows of the entity acquired over the
remaining amortization period, the carrying value of the goodwill is reduced by
the estimated shortfall of cash flows. Costs of obtaining practice management
agreements are capitalized as incurred and are amortized using the straight-line
method. These costs include all direct costs of obtaining such agreements, which
include such items as filing fees, legal fees and travel and related costs. The
Company has elected to amortize these costs over a shorter period than the term
of the

F-10
<PAGE> 121

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

related practice management agreements. Currently, these costs are being
amortized over three years. Other intangible assets include costs associated
with obtaining long-term financing, which are being amortized, and included in
interest expense, systematically over the terms of the related debt agreements.

Payable to Physician Groups

Amounts payable to physician groups primarily represent monthly
compensation to the physicians which, based on the practice management
agreements, are generally payable to the physicians by the 15th day following
the end of each month.

Net Revenue

During 1993, 1994 and 1995, approximately 5% of net revenue was received
under the Medicare program and approximately 4% was received under state
reimbursement programs. The Medicare program and state reimbursement programs
pay physician services based on fee schedules which are determined by the
related government agency.

The Company has contracts with various managed care organizations to
provide physician services based on negotiated fee schedules. Under various
contracts with HMOs, capitation is received to cover all physicians and hospital
services needed by the HMO members. Capitation payments are recognized as
revenue on the accrual basis, and represents approximately 67%, 62% and 54% of
the Company's net revenue in 1993, 1994 and 1995, respectively. Liabilities for
physician services provided and hospital services incurred are accrued in the
month services are rendered. The provision for accrued claims payable which
represents the amount payable for services incurred by patients not yet paid is
validated by actuarial review. Management believes that the provision at
December 31, 1995 is adequate to cover claims which will ultimately be paid.

Income Taxes

The Company is a corporation subject to federal and state income taxes.
Deferred income taxes are provided for temporary differences between financial
and income tax reporting relating primarily to net operating losses which must
be carried forward to future periods for income tax reporting purposes.

Unamortized Deferred Compensation

Unamortized deferred compensation represents the difference between the
grant price and the market price on the date that stock options were granted to
the physicians at Riverside Medical Clinic, Inc. This cost is being amortized
over the five year vesting period.

Reinsurance

The Company cedes reinsurance to allow management to control exposure to
potential losses arising from large risks. Reinsurance expense is estimated
based on the terms of the respective reinsurance agreements. The estimated
expense is continually reviewed and any adjustments which become necessary are
included in current operations. Amounts recoverable from reinsurers are
estimated in a manner consistent with the claim liability associated with the
reinsured policies.

F-11
<PAGE> 122

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Restatement of Financial Statements

The Company has merged with the following entities during 1995 and in the
first quarter of 1996 in transactions that were accounted for as poolings of
interests. Accordingly, the financial statements for all periods prior to the
effective dates of these mergers have been restated to include the results of
these entities. The Company issued 27,819,000 shares of its common stock in
these and other immaterial transactions.

<TABLE>
<CAPTION>
EFFECTIVE DATE OF
ENTITY NAME MERGER
- ------------------------------------------------------------------------ -------------------
<S> <C>
MEDCTR, Inc. (MEDCTR)................................................... June 20, 1995
Team Health............................................................. June 30, 1995
Texas Back Institute, Inc. (TBI)........................................ November 2, 1995
Vanguard Healthcare Group, Inc. (Vanguard).............................. November 13, 1995
Mullikin Medical Enterprises, L.P. (MME) and related real estate
partnerships.......................................................... November 29, 1995
Pacific Physician Services, Inc. (PPSI)................................. February 22, 1996
</TABLE>

Prior to the pooling, MEDCTR, TBI and RVAA were S Corporations and MME and
related real estate entities were partnerships and were therefore not subject to
federal and state income taxes. Proforma income tax provisions are reflected in
the consolidated statements of operations to provide for additional federal and
state income taxes which would have been incurred had these entities been taxed
as C Corporations.

Fiscal Year

At December 31, 1993, MME changed its fiscal year-end from January 31 to
December 31. As a result, the consolidated financial statements for the year
ended December 31, 1993 contain only eleven months of operations for MME. PPSI's
financial statements are for twelve month periods ending October 31.

Pro Forma Net Income (Loss) Per Share

Pro forma net income (loss) per share is computed, after adjusting
historical net income for the estimated tax provisions applicable to the pooled
companies described above, by dividing net income (loss) by the number of common
and common equivalent shares outstanding during the periods in accordance with
the applicable rules of the Securities and Exchange Commission. All stock
options issued have been considered as outstanding common stock equivalents for
all periods presented, even if anti-dilutive, under the treasury stock method
(based on initial public offering price). Shares of common stock issuable upon
conversion of the Series A and Series B Convertible Preferred Stock of
MedPartners are assumed to be common share equivalents for all periods
presented.

Stock Option Plans

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

Impairment of Long-Lived Assets

Effective December 31, 1995, the Company adopted FASB Statement 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. Statement 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The Statement also addresses the
accounting for long-lived assets that are expected to be disposed of. Statement
121 is applicable for most long-lived assets, identifiable intangibles, and
goodwill related to those assets; it does not apply to financial instruments and
deferred taxes. Management has

F-12
<PAGE> 123

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

determined that long-lived assets are fairly stated in the accompanying balance
sheet, and that no indicators of impairment are present. In accordance with the
new rules, the Company's prior year financial statements have not been restated
to reflect the change in accounting principle.

2. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash......................................................................... $ 6,467 $14,118
Certificates of deposit...................................................... 14,783 15,780
Commercial paper............................................................. 4,994 --
Money market accounts........................................................ 37,560 15,437
Repurchase agreements........................................................ 2,819 9,993
------- -------
$66,623 $55,328
======== ========
</TABLE>

The amounts above approximate the fair value of the respective cash
equivalents.

The repurchase agreements represent overnight funds purchased through a
bank and are secured by Treasury Bills held in the bank's name.

Interest income, including interest income from marketable debt securities,
was $2,150,000, $3,489,000 and $5,353,000 for the years ended December 31, 1993,
1994 and 1995, respectively.

3. MARKETABLE SECURITIES

The following is a summary of available-for-sale securities at December 31,
1995:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
GROSS COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Debt securities issued by:
Federal government..................................... $ 7,799 $ -- $ -- $ 7,799
State and state agencies............................... 13,884 3 (19) 13,868
Political subdivision of state......................... 13,895 38 (33) 13,900
---------- --- ----- ----------
$ 35,578 $ 41 $(52) $ 35,567
========= ======== ======== ========
</TABLE>

The amortized cost and estimated fair value of marketable securities
classified as available-for-sale at December 31, 1995, by contractual maturity,
are as follows:

<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
------- ----------
(IN THOUSANDS)
<S> <C> <C>
Debt securities:
Due in one year or less................................................... $19,180 $ 19,163
Due after one year through two years...................................... 13,506 13,480
Due after two years through three years................................... 1,007 1,004
Due after three years..................................................... 1,885 1,920
------- ----------
$35,578 $ 35,567
======== ========
</TABLE>

F-13
<PAGE> 124

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of available-for-sale securities at December 31,
1994:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
GROSS COST GAINS LOSSES FAIR VALUE
---------- ---------- ---------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Debt securities issued by:
Federal government................................. $ 5,890 $-- $ -- $ 5,890
State and state agencies........................... 15,108 -- (351) 14,757
Political subdivision of state..................... 14,855 -- (323) 14,532
Equity securities.................................... 2,510 -- -- 2,510
---------- --- ------ ----------
$ 38,363 $-- $ (674) $ 37,689
========= ======== ============= ========
</TABLE>

4. INTANGIBLE ASSETS

Intangible assets consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- --------
(IN THOUSANDS)
<S> <C> <C>
Excess of cost over fair value of assets acquired........................... $59,471 $ 99,683
Noncompetition agreements................................................... 8,370 3,771
Medical records............................................................. 6,387 2,257
Favorable lease rate on facilities.......................................... 2,740 2,740
Organizational costs........................................................ 845 1,075
Clinic service agreements................................................... 2,554 7,879
Other intangible assets..................................................... 6,986 7,169
------- --------
87,353 124,574
Less accumulated amortization............................................... 12,420 12,603
------- --------
$74,933 $111,971
======== =========
</TABLE>

Amortization expense was $3,642,000, $6,820,000 and $9,040,000 for the
years ended December 31, 1993, 1994 and 1995, respectively.

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land....................................................................... $ 11,937 $ 12,798
Buildings and improvements................................................. 54,953 49,358
Equipment.................................................................. 82,014 117,165
Equipment under capital leases............................................. 10,790 5,855
Leasehold improvements..................................................... 22,185 43,269
Construction in progress................................................... 1,305 3,079
-------- --------
183,184 231,524
Less accumulated depreciation and amortization............................. 61,161 76,148
-------- --------
$122,023 $155,376
========= =========
</TABLE>

Depreciation and amortization expense was $10,415,000, $15,072,000 and
$20,048,000 for the years ended December 31, 1993, 1994 and 1995, respectively.

F-14
<PAGE> 125

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Advances under Bank Credit Facility........................................ $ 17,900 $ 90,000
Convertible subordinated debentures with interest at 5.50%, interest only
paid semi-annually, due in 2003.......................................... 69,000 69,000
Notes payable to banks, collateralized by deeds of trust including
interest, at rates ranging from 6.5% to 10.5%, payable in monthly
installments through 2002................................................ 12,595 10,611
Notes payable to lenders secured by deeds of trust payable in monthly
installments, bearing interest at rates ranging from 8.75% to 10.25%..... 10,271 7,778
Notes payable to physicians and shareholders in annual installments through
2001, interest rates ranging from 7.0% to 12.0%.......................... 3,000 2,332
Notes payable to medical groups in annual installments through 1998,
interest rates ranging from 5.0% to 9.0%................................. 5,080 3,996
Notes payable to former partners for buyout of partnership interests,
unsecured, maturing through 1999, interest rates at 7.0% and 10.0%....... 3,165 4,456
10.0% note payable to Walter T. Mullikin and Kathryn D. Mullikin as
trustees of the Mullikin Family Trust, collateralized by deed of trust on
partnership property..................................................... 3,706 3,477
Notes payable to stockholders.............................................. 7,180 --
Other long-term notes payable.............................................. 22,318 13,066
Capital lease obligations.................................................. 4,939 5,247
-------- --------
159,154 209,963
Less amounts due within one year........................................... (12,656) (9,149)
-------- --------
$146,498 $200,814
========= =========
</TABLE>

The amounts recorded above approximate the fair value of the obligations.

On November 29, 1995, the Company entered into a Revolving Credit and
Reimbursement Agreement with a syndicate of banks which provides a revolving
credit facility (the Bank Credit Facility) of up to $150 million. Advances under
the Bank Credit Facility initially bear interest at the London Interbank Offered
Rate (LIBOR) plus 2.0% which approximates 7.9% at December 31, 1995. The Bank
Credit Facility has an expiration date of May 10, 1998 and is renewable for two
additional one-year periods. In conjunction with the Bank Credit Facility, the
Company granted the banks a first priority security interest in all shares of
stock of its subsidiaries and provided a negative pledge on substantially all
assets.

The Bank Credit Facility contains affirmative and negative covenants which,
among other things, require the Company to maintain certain financial ratios
(including maintain net worth, minimum fixed charge overage ratio, maximum
indebtedness to cash flow), limit the amount of additional indebtedness, and set
certain restrictions on investments, mergers and sales of assets. As of December
31, 1995, the Company was in compliance with the covenants in the Bank Credit
Facility. Additionally, the Company is required to obtain bank consent for
acquisitions with an aggregate purchase price in excess of $15 million.

In December 1993, PPSI issued $69 million of convertible subordinated
debentures for net proceeds of approximately $66,547,000. The debentures are
convertible into common stock of PPSI at the option of the holder at a
conversion price of $29 per share. Interest on the debentures at 5 1/2% is
payable semi-annually on June 15 and December 15. The debentures are redeemable
for cash at any time, at the option of PPSI and are subordinated to all senior
indebtedness, as defined in the Indenture Agreement. The Indenture Agreement
governing the debentures provides that upon a change in control over PPSI, the
holders of the debentures have the right to require PPSI to purchase all or part
of the debentures at 100% of the principal amount plus accrued interest. There
are no restrictions on the incurrence of additional indebtedness by PPSI or any
subsidiary. At December 31, 1995, the fair value of the convertible subordinated
debentures, based on quoted

F-15
<PAGE> 126

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

market price, was approximately $57,788,000. Subsequent to the acquisition of
PPSI in February of 1996, the Company paid off these debentures.

The following is a schedule of principal maturities of long-term debt as of
December 31, 1995.

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1996........................................................ $ 9,215
1997........................................................ 8,577
1998........................................................ 96,967
1999........................................................ 4,962
2000........................................................ 2,266
Thereafter.................................................. 87,976
--------------
Total............................................. $209,963
===========
</TABLE>

Operating Leases: Operating leases generally consist of short-term lease
agreements for professional office space where the medical practices are
located. These leases generally have five-year terms with renewal options.

The following is a schedule of future minimum lease payments under
noncancelable operating leases as of December 31, 1995.

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1996........................................................ $ 36,426
1997........................................................ 32,286
1998........................................................ 28,776
1999........................................................ 24,934
2000........................................................ 21,411
Thereafter.................................................. 111,110
--------------
$254,943
===========
</TABLE>

Interest expense was $5,488,000, $9,447,000 and $13,796,000 for the years
ended December 31, 1993, 1994 and 1995, respectively.

7. INCOME TAX EXPENSE

At December 31, 1995, the Company had a cumulative net operating loss
carryforward for federal income tax purposes of approximately $57 million
available to reduce future amounts of taxable income. If not utilized to offset
future taxable income, the net operating loss carryforwards will expire on
various dates through 2010. Approximately $1 million of the total $57 million
net operating loss carryforward (which was generated in 1993), is available at a
reduced rate due to certain tax limitations.

In 1994, the Company established a valuation allowance of $14,571,000
because it was more likely than not that the deferred tax asset would not be
utilized in future periods. The valuation allowance has been decreased by
$14,240,000 in 1995 because the realization of the deferred tax asset is now
more likely than not.

F-16
<PAGE> 127

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
-------- -------
<S> <C> <C>
(IN THOUSANDS)
Deferred tax assets:
Net operating losses............................................ $ 8,419 $22,992
Purchase reserves and restructuring............................. -- 14,724
Accrued payroll and vacation.................................... 2,129 3,383
Accrued and deferred compensation benefits...................... 2,464 3,375
Bad debts....................................................... 6,210 9,474
Other........................................................... 4,463 3,270
-------- -------
Gross deferred tax assets......................................... 23,685 57,218
Valuation allowance for deferred tax assets....................... (14,571) (331)
Deferred tax liabilities
Goodwill........................................................ -- 8,590
Excess tax depreciation......................................... 1,193 2,463
Prepaid expenses................................................ 504 2,419
Accrual to cash adjustment...................................... 1,863 273
Shared risk receivable.......................................... 4,041 7,182
Other........................................................... 246 958
-------- -------
Gross deferred tax liabilities.................................... 7,847 21,885
-------- -------
Net deferred tax asset............................................ $ 1,267 $35,002
======== =======
</TABLE>

Income tax expense (benefit) for the years ended December 31, 1993, 1994
and 1995 is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.................................................. $4,109 $5,454 $ 5,414
State.................................................... 1,068 1,417 1,323
------ ------ --------
5,177 6,871 6,737
Deferred:
Federal.................................................. (466) (1,629) (29,793)
State.................................................... (26) (171) (4,177)
------ ------ --------
(492) (1,800) (33,970)
------ ------ --------
$4,685 $5,071 $(27,233)
====== ====== ========
</TABLE>

The differences between the provision (benefit) for income taxes and the
amount computed by applying the statutory federal income tax rate to income
before taxes were as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal tax at statutory rate.............................. $3,944 $4,216 $ (8,484)
Add (deduct):
State income tax, net of federal tax benefit............. 608 684 (3,355)
Decrease in valuation allowance.......................... -- -- (14,240)
Other.................................................... 133 171 (1,154)
------ ------ --------
$4,685 $5,071 $(27,233)
====== ====== ========
</TABLE>

F-17
<PAGE> 128

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. CAPITALIZATION

The Company's Restated Certificate of Incorporation provides that the
Company may issue 9,500,000 shares of Preferred Stock, par value $0.001 per
share, 500,000 shares of Series C Junior Participating Preferred Stock, par
value $0.001 per share, and 75,000,000 shares of Common Stock.

On September 1, 1993, the Company committed to sell 4,001,000 shares of
Series A Convertible Preferred Stock at $2.00 per share. The Company received,
net of expenses, $7,230,000 in 1993 and $698,000 on February 1, 1994. During
1994, the Company sold 3,000,000 shares of Series B Convertible Preferred Stock
at $4.00 per share. The Company received, net of expenses, $11,958,000. Upon
consummation of the Company's initial public offering on February 28, 1995, all
of the issued and outstanding shares of Series A and Series B Convertible
Preferred Stock were converted into 7,001,000 shares of the Company's Common
Stock.

On February 28, 1995, the Company completed an initial public offering of
5,060,000 shares of its common stock. Gross and net proceeds of the offering
were $65,780,000 and $60,417,000, respectively. Proceeds of the offering were
used to pay all outstanding indebtedness under the bank credit facility of
$30,400,000. The remainder of the net proceeds were used to fund acquisitions of
certain assets of physician practices, expansion of physician services, working
capital and other general corporate purposes.

In March of 1996, 6,632,800 shares of the Company's Common Stock were sold
in a secondary offering. The net proceeds from this offering were approximately
$194 million. The offering provided for over-allotments of 1,237,500 shares
which have not yet been exercised. If exercised, the Company would receive an
additional $36 million from the over-allotments. These proceeds were used to
pay-off the line of credit and the debentures discussed in Note 6.

9. STOCK OPTIONS

The Company's Board of Directors adopted and a majority of the Company's
stockholders approved the 1993 and 1995 Stock Option Plans (the Plans), covering
a maximum of 1,555,000 and 5,899,150 shares of Common Stock, respectively. The
number of shares covered under the 1995 Stock Option Plan is subject to
expansion to 7,099,150 at the Annual Shareholders' Meeting on April 25, 1996.
The Plans, under which both incentive stock options and non-qualified stock
options may be issued, provide that options may be granted to officers,
directors, consultants and employees of the Company. Options granted under the
Plans generally vest equally over five years from the date of grant and
terminate ten years from the date of grant. All stock options were granted prior
to the initial public offering of the Company at estimated fair market value. As
of December 31, 1995, the Company had granted options to acquire 4,426,750
shares of its Common Stock under the Plans at option prices ranging from $.20 to
$28.25. All stock options granted in 1995 were granted at fair market value.
During 1995 options to acquire 702,380 shares of the Company's Common Stock were
exercised at prices ranging from $.20 to $22.00 per share. Gross proceeds from
the exercise of these options totaled $377,000.

10. ACQUISITIONS

During the year ended December 31, 1995, the Company, through its
wholly-owned subsidiaries, acquired certain operating assets of various medical
practices. Simultaneously with each medical practice acquisition, the Company
entered into practice management agreements which generally have a 20-year term.
Pursuant to the practice management agreements, the Company manages all aspects
of the affiliated practice other than the provision of medical services, which
is controlled by the physician groups. For providing services under the practice
management agreement, the physicians receive a fixed percentage of the accrual
net revenue of the practice. The percentage varies from practice to practice and
is based upon the overhead structure of the practice at the time of affiliation.
Generally, the practice management agreements cannot be terminated by the
physician group or Company without cause, which includes material default or
bankruptcy. Upon termination for cause or expiration of the clinic services
agreement, the physician group has the option to purchase some or all of the
assets owned by the Company, generally at current book values.

F-18
<PAGE> 129

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the net
assets based on the estimated fair values at the date of acquisition. The
accounts receivable were valued at net collective value based upon detailed
analyses by the Company and the property and equipment values were based upon
independent appraisals. The estimated fair value of assets acquired is
summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Accounts receivable, net............................................... $ 22,117
Prepaid expenses and other current assets.............................. 2,100
Property and equipment................................................. 15,128
Liabilities assumed.................................................... (9,888)
Excess of costs over fair value of assets acquired..................... 45,521
-------
74,978
Less value of stock issued............................................. 13,447
-------
Cash purchase price, net of cash received.............................. $ 61,531
=======
</TABLE>

11. RETIREMENT SAVINGS PLAN

Effective April 4, 1994, the Company adopted the MedPartners, Inc. and
Subsidiaries Employee Retirement Savings Plan (the "Plan"). The Plan is a Code
Section 401(k) Plan which requires the attainment of age 21 and one year of
service, with a minimum of 1,000 hours worked, to become a participant in the
Plan. Service for a predecessor employer will be considered for participation
requirements in the Plan for all employees employed through acquisition
activities. The Company, at its sole discretion, may contribute an amount which
it designates as a qualified nonelective contribution. The Company anticipates a
required contribution of three percent of non-key employee salaries for the Plan
year ended December 31, 1995, however, no additional contributions are
anticipated at this time. Company contributions are gradually vested over a
six-year service period. The various entities that were acquired or merged into
the Company during 1995 also had varying employee retirement plans, which may be
incorporated into the Company's plan during 1995 and 1996. The expenses related
to all plans during the years ended December 31, 1993, 1994 and 1995 were
approximately $1,464,000, $1,858,000 and $3,195,000, respectively.

F-19
<PAGE> 130

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. MERGERS

The Company merged with the following entities in transactions that were
accounted for as pooling of interests. Accordingly, the Company's historical
financial statements for all periods have been restated to include the results
of all transactions accounted for as pooling of interests.

<TABLE>
<CAPTION>
MME AND
RELATED PPSI
REAL OTHER AND
ESTATE IMMATERIAL TEAM
MEDPARTNERS PARTNERSHIPS MEDCTR TBI VANGUARD POOLINGS HEALTH COMBINED
----------- ------------ ------- ------- -------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1993
Net revenue.......... $ 1,277 $298,415 $11,410 $25,881 $17,128 $7,972 $187,612 $ 549,695
Net (loss) income.... (1,206) (1,495) (369 ) (177) (873 ) 276 7,114 3,270
Year ended December 31,
1994
Net revenue.......... 77,432 370,798 10,963 20,816 18,493 8,313 308,226 815,041
Net (loss) income.... (1,601) (4,647) 76 (1,346) (847 ) (26) 7,598 (793)
Year ended December 31,
1995
Net revenue.......... 238,887 431,875 11,343 23,679 28,684 7,957 411,132 1,153,557
Net (loss) income.... 3,022 (9,412) (11 ) (453) (2,905 ) 112 10,205 558
</TABLE>

Included in pre-tax loss for the year ended December 31, 1995 are merger
costs totaling $66.6 million. Approximately $55.6 million relates to the merger
with MME and related real estate partnerships. The components of this cost are
as follows:

<TABLE>
<S> <C>
Investment banking fees............................................... $ 8,771,200
Professional fees..................................................... 7,267,075
Other transaction costs............................................... 5,028,820
Restructuring charges:
Severance costs for identified employees............................ 19,625,728
Impairment of assets................................................ 8,095,411
Abandonment of facilities........................................... 6,401,246
Noncompatible technology............................................ 2,601,578
Unamortized loan costs.............................................. 2,323,667
Conforming of accounting policies................................... 2,248,810
Restructuring of benefits........................................... 1,888,749
Other restructuring charges......................................... 2,311,654
-----------
Total................................................................. $66,563,938
==========
</TABLE>

The PPSI merger was effective February 22, 1996, therefore, the merger
costs related to this transaction are not included in the amounts above. They
will be included in the results of operations for 1996.

13. CONTINGENCIES

In addition to the general liability and malpractice insurance carried by
the individual physicians, the Company is insured with respect to general
liability and medical malpractice risks on a claims made basis. Management is
not aware of any claims against the Company which might have a material impact
on the Company's consolidated financial position.

F-20
<PAGE> 131

MEDPARTNERS/MULLIKIN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

opinion of management that the ultimate resolution of any asserted or unasserted
claims will not have a
material adverse effect on the financial position or operating results of the
Company.

PPSI, through its wholly-owned captive insurance company, Pacific
Indemnity, Ltd., has provided for an estimate of the cost of the incurred but
not reported claims and deductible amounts for the employed physicians servicing
emergency departments. At July 31, 1995, Pacific Indemnity, Ltd. purchased
insurance to cover all claims for incidents occurring through July 31, 1995
("tail coverage") for all employee physicians of the affiliated medical
organizations. Team Health has an agreement with its insurance carrier to
purchase insurance associated with claims incurred and not yet reported.
Management believes that the recorded accruals for such losses and deductibles
related to malpractice claims for the hospital-based contracting physicians and
the hospital are sufficient to cover incidents occurring prior to December 31,
1995.

PPSI is self-insured for employee and dependent health insurance costs and
certain workers' compensation costs. Reinsurance of defined excess cost has been
purchased from an outside insurance company. Management believes that amounts
accrued are sufficient to cover claims and costs incurred through December 31,
1995.

14. MAJOR PAYORS

Two payors represented individually more than 10% of the Company's net
revenue as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF
NET REVENUE
----------------------
YEAR ENDED DECEMBER
31,
----------------------
CUSTOMER 1993 1994 1995
---------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Pacificare...................................................... 17% 19% 18%
Health Net...................................................... 13 11 9
</TABLE>

F-21
<PAGE> 132

MEDPARTNERS/MULLIKIN, INC.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
JUNE 30,
1996
---------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 56,221
Marketable securities........................................................ --
Accounts receivable, less allowances for bad debts of $39,574,000............ 165,105
Inventories.................................................................. 11,087
Income tax receivable........................................................ 4,139
Prepaid expenses and other current assets.................................... 23,839
---------------
Total current assets................................................. 260,391
Property and equipment, net.................................................... 167,502
Intangible assets, net......................................................... 139,169
Deferred tax asset............................................................. 34,285
Other assets................................................................... 16,837
---------------
Total assets......................................................... $ 618,184
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................. $ 29,084
Payable to physician groups.................................................. 28,616
Accrued compensation......................................................... 19,165
Accrued medical claims payable............................................... 44,235
Other accrued expenses and liabilities....................................... 30,605
Current portion of long-term liabilities..................................... 7,648
---------------
Total current liabilities............................................ 159,353
Long-term debt, net of current portion......................................... 35,080
Other long-term liabilities.................................................... 9,140
Stockholders' equity:
Common stock, $.001 par value; 200,000,000 shares authorized; 52,311,000
shares issued............................................................. 52
Additional paid-in capital................................................... 435,618
Notes receivable from stockholders........................................... (1,818)
Unrealized loss on marketable equity securities, net of deferred taxes....... --
Unamortized deferred compensation............................................ --
Accumulated deficit.......................................................... (19,241)
---------------
Total stockholders' equity........................................... 414,611
---------------
Total liabilities and stockholders' equity........................... $ 618,184
===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

F-22
<PAGE> 133

MEDPARTNERS/MULLIKIN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30,
---------------------
1995 1996
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net revenue............................................................ $547,450 $703,683
Operating expenses:
Cost of affiliated physician services................................ 240,225 301,280
Clinic salaries, wages and benefits.................................. 105,133 116,600
Outside hospitalization expense...................................... 50,364 83,516
Clinic rent and lease expense........................................ 19,744 23,814
Clinic supplies...................................................... 22,519 30,953
Other clinic costs................................................... 43,776 59,154
General corporate expenses........................................... 32,167 39,540
Depreciation and amortization........................................ 13,962 16,482
Net interest expense................................................. 3,367 2,811
Merger expenses...................................................... 1,051 34,448
-------- --------
Net operating expenses....................................... 532,308 708,598
-------- --------
Income (loss) before income taxes...................................... 15,142 (4,915)
Income tax expense (benefit)........................................... 4,411 360
-------- --------
Net income (loss)...................................................... $ 10,731 $ (5,275)
======== ========
Pro forma net income (loss) per share.................................. $ 0.26 $ (0.11)
======== ========
Number of shares used in pro forma net income (loss) per share......... 41,867 50,034
======== ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

F-23
<PAGE> 134

MEDPARTNERS/MULLIKIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Pro forma net income (loss)............................................ $ 10,731 $ (5,275)
Adjustments to reconcile pro forma net income (loss) to net cash and
cash provided by (used in) operating activities:
Depreciation and amortization....................................... 13,962 16,482
Provision for deferred taxes........................................ (1,425) (5,848)
Merger expenses..................................................... 1,051 34,448
Other............................................................... 129 --
Changes in operating assets and liabilities, net of effects of
acquisitions........................................................ (11,288) (33,762)
-------- --------
Net cash and cash equivalents provided by operating
activities.................................................... 13,160 6,045
INVESTING ACTIVITIES:
Cash paid for merger charges........................................... (541) (25,932)
Net cash used to fund acquisitions..................................... (27,237) (29,671)
Additions of intangible assets, net of effects of acquisitions......... (3,440) (4,478)
Purchase of property and equipment..................................... (15,571) (21,833)
Net proceeds (purchases) of marketable securities...................... (12,132) 27,482
Other.................................................................. (959) 5
-------- --------
Net cash and cash equivalents used in investing activities..... (59,880) (54,427)
FINANCING ACTIVITIES:
Capital contributions.................................................. 62,231 214,656
Capital distributions.................................................. (3,259) --
Net proceeds from debt................................................. 43,262 --
Repayment of debt...................................................... (46,256) (167,453)
Other.................................................................. (3,492) 105
-------- --------
Net cash and cash equivalents provided by financing
activities.................................................... 52,486 47,308
-------- --------
Net increase (decrease) in cash and cash equivalents........... 5,766 (1,074)
Cash and cash equivalents at beginning of period....................... 66,623 56,133
Beginning cash and cash equivalents of immaterial pooling-of-interests
entities............................................................ -- 1,162
-------- --------
Cash and cash equivalents at end of period............................. $ 72,389 $ 56,221
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest....................................................... $ 5,975 $ 4,252
======== ========
Income taxes................................................... $ 3,752 $ 476
======== ========
Issuance of 316,000 common shares as consideration for
acquisitions accounted for as purchases....................... $ -- $ 5,920
======== ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

F-24
<PAGE> 135

MEDPARTNERS/MULLIKIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries and have been prepared in accordance with
generally accepted accounting principles for interim financial reporting and in
accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. As a result of the merger with
Pacific Physician Services, Inc. (PPSI) in February 1996, certain
reclassifications have been made to the financial statements.

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal recurring
items) necessary for a fair presentation of results for the interim periods
presented. The results of operations for any interim period are not necessarily
indicative of results for the full year. These financial statements and footnote
disclosures should be read in conjunction with the December 31, 1995 audited
consolidated financial statements and the notes thereto.

Restatement of Financial Statements

During the first quarter of 1996 the Company combined with PPSI in a
business combination that was accounted for as a pooling of interests.
Accordingly, the financial statements for all periods prior to February 22,
1996, the effective date of the merger, have been restated to include the
results of PPSI (Note 3).

Pro Forma Net Income (Loss) Per Share

Pro forma net income (loss) per share is computed by dividing net income
(loss) by the number of common and common equivalent shares outstanding during
the periods in accordance with the applicable rules of the Securities and
Exchange Commission. All stock options issued have been considered as
outstanding common stock equivalents for all periods presented, even if
anti-dilutive, under the treasury stock method. Shares of common stock issuable
upon conversion of the Series A and Series B Convertible Preferred Stock of
MedPartners in February 1995 are assumed to be common share equivalents for all
periods presented.

Stock Option Plan

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (ABP 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock option equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.

2. CAPITALIZATION

The Company's Second Amended and Restated Certificate of Incorporation
provides that the Company may issue 9,500,000 shares of Preferred Stock, par
value $0.001 per share, 500,000 shares of Series C Junior Participating
Preferred Stock, par value $0.001 per share, and 200,000,000 shares of Common
Stock, par value $0.001 per share. As of December 31, 1995 and June 30, 1996 no
shares of the preferred stock were outstanding.

On March 13, 1996, the Company completed a secondary public offering of
6,632,800 shares of its Common Stock. The net proceeds of the offering were $194
million. Proceeds of the offering were used to pay all outstanding indebtedness
under the bank credit facility of $70 million. In April 1996, $69 million of the
proceeds were used to pay-off the Company's convertible subordinated debentures.
The remainder of the net proceeds will be used to fund acquisitions of certain
assets of physician practices, expansion of physician services, working capital
and other general corporate purposes.

F-25
<PAGE> 136

MEDPARTNERS/MULLIKIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1996 the number of shares covered under the 1995 Stock Option Plan
(the Plan) was increased on two occasions. At a special meeting of the
stockholders on February 22, 1996, the Plan was increased by 1,325,000 shares
and on April 25, 1996 at the Annual Meeting of Stockholders it was increased by
1,200,000 shares. As of April 25, 1996 a maximum of 7,099,150 shares of Common
Stock were covered by the Plan.

3. ACQUISITIONS

During the six months ended June 30, 1996, the Company, through its
wholly-owned subsidiaries, acquired certain operating assets of various medical
practices. Simultaneously with each medical practice acquisition, the Company
entered into practice management agreements which generally have 20 to 44 year
terms. Pursuant to the practice management agreements, the Company manages all
aspects of the affiliated practice other than the provision of medical services,
which is controlled by the physician groups. Generally, the practice management
agreements cannot be terminated by the physician group or Company without cause,
which includes material default or bankruptcy. Upon termination for cause or
expiration of the clinic services agreement, the physician group has the option
to purchase some or all of the assets owned by the Company, generally at current
book values. The acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the net
assets based on the estimated fair values at the date of acquisition. The
estimated fair value of assets acquired is $35,593,000. A total of $29,671,000
in cash and 316,000 shares of stock valued at $5,920,000 were given in exchange
for these assets during the six months ended June 30, 1996.

Effective February 22, 1996, the Company merged with PPSI in a transaction
that was accounted for as a pooling of interests. Accordingly, the Company's
historical statements for all periods prior to the effective date of the merger
have been restated to include the results of PPSI. The Company exchanged
10,983,346 shares of its common stock in exchange for all of the outstanding
common stock of PPSI.

Prior to its merger with the Company, PPSI reported on a fiscal year ending
on July 31. The restated financial statements for all periods prior to and
including December 31, 1995 are based on a combination of the Company's results
for its December 31 fiscal year and an October 31 fiscal year for PPSI.
Beginning January 1, 1996, PPSI adopted a December 31 fiscal year end;
accordingly, all consolidated financial statements for periods after December
31, 1995 are based on a consolidation of all of the Company's subsidiaries on a
December 31 year end. PPSI's historical results of operations for the two months
ended December 31, 1995 are not included in the Company's consolidated
statements of operations or cash flows. An adjustment has been made to
stockholders' equity as of January 1, 1996 to adjust for PPSI's results of

F-26
<PAGE> 137

MEDPARTNERS/MULLIKIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operations for the two months ended December 31, 1995. The following is a
summary of operations and cash flows for the two months ended December 31, 1995:

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Net revenue............................................................ $ 69,850
Operating expenses:
Cost of affiliated physician services................................ 32,600
Clinic salaries, wages and benefits.................................. 13,142
Outside hospitalization expenses..................................... 14,861
Clinic rent and lease expense........................................ 1,963
Clinic supplies...................................................... 3,556
Other clinic costs................................................... 7,373
General corporate expenses........................................... 5,235
Depreciation and amortization........................................ 2,371
Net interest expense................................................. 426
Loss on disposal of assets........................................... 41
--------------
Net operating expenses....................................... 81,568
--------------
Loss before taxes...................................................... (11,718)
Income tax benefit..................................................... (3,661)
--------------
Net loss..................................................... $ (8,057)
===========
STATEMENT OF CASH FLOW DATA:
Net cash and cash equivalents used in operating activities........... $ (3,569)
Net cash and cash equivalents provided by investing activities....... 4,455
Net cash and cash equivalents used in financing activities........... (81)
--------------
Net increase in cash and cash equivalents.................... $ 805
===========
</TABLE>

Included in pre-tax loss for the six months ended June 30, 1996 are merger
costs totaling $34.4 million. The components of this cost are as follows:

<TABLE>
<S> <C>
Investment banking fees................................................. $ 6,624,920
Professional fees....................................................... 2,616,356
Other transaction costs................................................. 1,098,444
Restructuring charges:
Abandonment of facilities............................................. 10,767,562
Severance costs for identified employees.............................. 5,865,295
Restructuring of benefits............................................. 2,392,431
Unamortized bond issue costs.......................................... 1,921,661
Noncompatible technology.............................................. 1,700,000
Impairment of assets.................................................. 1,361,004
Other restructuring charges........................................... 100,000
-----------
Total................................................................... $34,447,673
==========
</TABLE>

4. CONTINGENCIES

F-27
<PAGE> 138

MEDPARTNERS/MULLIKIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Employed physicians are also covered by a general liability and malpractice
insurance policy. The Company has not accrued a loss for reported or unreported
incidents, as the amount, if any, cannot be reasonably estimated and the
probability of an adverse outcome cannot be determined at this time. It is the
opinion of management that the ultimate resolution of any asserted or unasserted
claims will not have a material adverse effect on the financial position or
operating results of the Company.

5. SUBSEQUENT EVENTS

On March 11, 1996, the Company agreed to acquire CHS Management, Inc., a
health care management service organization that provides management services to
an IPA of 325 primary care and specialist physicians and a medical group of 43
primary care physicians. The consideration for this transaction is expected to
be approximately $47 million of the Company's Common Stock. The transaction is
expected to be accounted for as a pooling of interests and is expected to close
prior to September 30, 1996.

On May 14, 1996, the Company agreed to merge with Caremark International
Inc., a leading provider of healthcare services in the United States and
overseas. Caremark, through its large, multi-specialty group practices, is
affiliated with 1,604 physicians and provides care to more than one million
people, 663,000 of whom are in prepaid health plans. Caremark also provides
pharmaceutical services, disease management, and international services. The
consideration for this transaction is expected to be approximately $2.5 billion
of the Company's Common Stock. The transaction is expected to be accounted for
as a pooling of interests and is expected to close prior to September 30, 1996.

F-28
<PAGE> 139

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders
Caremark International Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, cash flows and stockholders'
equity, present fairly, in all material respects, the financial position of
Caremark International Inc. and its subsidiaries at December 31, 1994 and 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Chicago, Illinois
January 24, 1996, except as to
the third paragraph of Note 14,
which is as of March 19, 1996

F-29
<PAGE> 140

CAREMARK INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and equivalents.............................................. $ 32,100 $ 28,400
Accounts receivable, net.......................................... 311,600 365,400
Inventories....................................................... 92,700 112,500
Short-term deferred income taxes.................................. 33,300 41,100
Prepaid expenses and other current assets......................... 12,400 18,600
---------- ----------
Total current assets...................................... 482,100 566,000
---------- ----------
Property and equipment, net......................................... 168,300 299,200
Goodwill and other intangible assets................................ 105,300 259,300
Investments and other noncurrent assets............................. 38,600 69,700
Long-term deferred income tax asset................................. -- 33,700
Net assets of discontinued operations............................... 399,900 36,300
---------- ----------
Total assets.............................................. $1,194,200 $1,264,200
========= =========
Current liabilities:
Notes payable..................................................... $ 109,300 $ 81,900
Current maturities of long-term debt and lease obligations........ 2,600 3,900
Accounts payable, trade and other................................. 195,400 253,900
Accrued liabilities............................................... 92,600 135,000
---------- ----------
Total current liabilities................................. 399,900 474,700
---------- ----------
Long-term debt and lease obligations................................ 233,500 325,400
Long-term deferred income tax liability............................. 42,700 37,700
Other noncurrent liabilities........................................ 31,400 33,000
Commitments and contingent liabilities (Note 14)
Stockholders' equity:
Preferred stock, $.01 par value, authorized 20,000,000 shares,
none issued.................................................... -- --
Common stock, $1 par value, authorized 200,000,000 shares, issued
71,898,166 shares in 1994 and 81,497,489 shares in 1995........ 71,900 81,500
Additional contributed capital.................................... 18,400 188,200
Shares held in trust, 7,700,000 shares in 1995.................... -- (150,200)
Retained earnings................................................. 400,900 281,700
Common stock in treasury, at cost, 259,300 shares in 1994 and
406,136 shares in 1995......................................... (4,500) (7,800)
---------- ----------
Total stockholders' equity.......................................... 486,700 393,400
---------- ----------
Total liabilities and stockholders' equity.......................... $1,194,200 $1,264,200
========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-30
<PAGE> 141

CAREMARK INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net revenues............................................... $1,204,000 $1,775,200 $2,374,300
Cost of goods and services sold............................ 1,001,100 1,520,600 2,016,400
Marketing and administrative expenses...................... 107,600 138,000 207,100
Provision for doubtful accounts............................ 13,300 16,900 24,200
---------- ---------- ----------
Operating income from continuing operations................ 82,000 99,700 126,600
Non-operating expense (income):
Losses on investments.................................... -- -- 86,600
Interest expense, net.................................... 3,400 8,700 8,700
Other.................................................... (1,700) (200) (200)
---------- ---------- ----------
Income from continuing operations before income taxes...... 80,300 91,200 31,500
Income tax expense......................................... 33,400 36,700 11,300
---------- ---------- ----------
Income from continuing operations.......................... 46,900 54,500 20,200
Discontinued operations:
Income (loss) from discontinued operations, net of income
taxes of $20,700, $18,000 and $(72,100) in 1993, 1994
and 1995, respectively................................ 30,800 25,900 (168,300)
Net gains on sales of discontinued operations, net of
income taxes of $21,200............................... -- -- 31,800
---------- ---------- ----------
Income (loss) from discontinued operations............... 30,800 25,900 (136,500)
---------- ---------- ----------
Net income (loss).......................................... $ 77,700 80,400 $ (116,300)
========= ========= =========
Earnings (loss) per common and common equivalent share:
Primary
Income from continuing operations..................... $ 0.64 $ 0.73 $ 0.27
Operating income (loss) from discontinued
operations.......................................... $ 0.42 0.35 $ (2.24)
Net gains on sales of discontinued operations......... -- -- $ 0.42
Net income (loss)..................................... $ 1.06 $ 1.08 $ (1.55)
Fully Diluted
Income from continuing operations..................... $ 0.63 $ 0.73 $ 0.27
Operating income (loss) from discontinued
operations.......................................... $ 0.41 $ 0.35 $ (2.24)
Net gains on sales of discontinued operations......... -- -- $ 0.42
Net income (loss)..................................... $ 1.04 $ 1.08 $ (1.55)
Weighted average common and common equivalent shares
outstanding:
Primary.................................................. 73,300 74,800 75,100
Fully diluted............................................ 74,900 74,800 75,100
</TABLE>

See accompanying notes to consolidated financial statements.

F-31
<PAGE> 142

CAREMARK INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Common stock:
Balance, beginning of year................................ $ 71,100 $ 71,800 $ 71,900
Stock issued under employee benefit plans................. 700 100 100
Stock issued in connection with acquisitions.............. -- -- 1,800
Contribution to employee benefit trust.................... -- -- 7,700
--------- --------- ---------
Balance, end of year...................................... 71,800 71,900 81,500
--------- --------- ---------
Additional contributed capital:
Balance, beginning of year................................ 12,300 19,000 18,400
Stock issued under employee benefit plans................. 6,700 (600) (3,400)
Stock issued in connection with acquisitions.............. -- -- 30,700
Contribution to employee benefit trust.................... -- -- 142,500
--------- --------- ---------
Balance, end of year...................................... 19,000 18,400 188,200
--------- --------- ---------
Shares held in trust:
Balance, beginning of year................................ -- -- --
Contribution to employee benefit trust.................... -- -- (150,200)
--------- --------- ---------
Balance, end of year...................................... -- -- (150,200)
--------- --------- ---------
Retained earnings:
Balance, beginning of year................................ 248,800 323,500 400,900
Net income (loss)......................................... 77,700 80,400 (116,300)
Common stock dividends.................................... (3,000) (3,000) (2,900)
--------- --------- ---------
Balance, end of year...................................... 323,500 400,900 281,700
--------- --------- ---------
Common stock in treasury:
Balance, beginning of year................................ -- (4,700) (4,500)
Purchases................................................. (7,600) (14,600) (27,200)
Stock issued under employee benefit plans................. 2,900 14,800 20,800
Stock issued in connection with acquisitions.............. -- -- 3,100
--------- --------- ---------
Balance, end of year...................................... (4,700) (4,500) (7,800)
--------- --------- ---------
Total stockholders' equity................................ $ 409,600 $ 486,700 $ 393,400
========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-32
<PAGE> 143

CAREMARK INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
--------- --------- --------
(IN THOUSANDS)
(BRACKETS DENOTE CASH OUTFLOWS)
<S> <C> <C> <C>
Cash flows from continuing operations:
Income from continuing operations.......................... $ 46,900 $ 54,500 $ 20,200
Adjustments for non-cash items:
Losses on investments...................................... -- -- 86,600
Provision for doubtful accounts............................ 13,300 16,900 24,200
Depreciation and amortization.............................. 11,400 18,900 28,600
Deferred income taxes...................................... 25,100 9,800 (14,400)
Other...................................................... 1,600 3,700 1,000
Changes in balance sheet items:
Accounts receivable........................................ (61,800) (95,500) (79,300)
Inventories................................................ (8,700) (4,200) (17,600)
Payables and accrued liabilities........................... 21,300 23,300 84,000
Prepaids and other......................................... (9,600) (600) (21,800)
--------- --------- --------
Cash flows from continuing operations........................ 39,500 26,800 111,500
--------- --------- --------
Cash flows from investing activities:
Capital expenditures....................................... (50,300) (70,200) (83,400)
Acquisitions, net of cash received......................... (3,100) (69,100) (143,500)
--------- --------- --------
Cash flows from investing activities......................... (53,400) (139,300) (226,900)
--------- --------- --------
Cash flows from financing activities:
Net change in short-term debt and credit facility
borrowings.............................................. (26,100) 230,900 7,500
Issuances of other long-term debt and lease obligations.... 112,100 400 5,000
Redemptions of other long-term debt and lease
obligations............................................. (19,300) (6,700) (1,500)
Stock issued under employee benefit plans.................. 9,100 11,800 16,300
Purchases of treasury stock................................ (7,600) (14,600) (27,200)
Common stock cash dividends................................ (3,000) (3,000) (2,900)
--------- --------- --------
Cash flows from financing activities......................... 65,200 218,800 (2,800)
--------- --------- --------
Cash flows from discontinued operations, net of divestiture
proceeds................................................... 25,500 (180,000) 114,500
--------- --------- --------
Increase (decrease) in cash and equivalents.................. 76,800 (73,700) (3,700)
Cash and equivalents, beginning of year...................... 29,000 105,800 32,100
--------- --------- --------
Cash and equivalents, end of year............................ $ 105,800 $ 32,100 $ 28,400
========= ========= ========
</TABLE>

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash and equivalents include cash, cash investments and marketable
securities with original maturities of three months or less. Income taxes
paid, net of refunds, were $24.0, $22.4 and $6.7 million in 1993, 1994 and
1995, respectively. Interest payments, net of amounts capitalized,
approximated $1.8, $10.2 and $20.7 million in 1993, 1994 and 1995,
respectively.

Non-cash investing activities include notes and other obligations issued
for acquisitions of $5.8, $1.2 and $30.8 million in 1993, 1994 and 1995,
respectively, and $123.6 million in notes and other securities received from
divestitures in 1995. Non-cash financing activities include the issuance of
$35.6 million of stock for acquisitions in 1995 and capital lease
obligations of $0.7, $0.4 and $3.9 million in 1993, 1994 and 1995,
respectively.

See accompanying notes to consolidated financial statements.

F-33
<PAGE> 144

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

NOTE 1: NATURE OF OPERATIONS

Caremark International Inc. (the "company" or "Caremark") is a leading
provider of health care services in the United States and overseas, serving
millions of people through its Physician Practice Management, Pharmaceutical
Services, Disease Management and International businesses. The Physician
Practice Management business provides comprehensive management services to
physician groups, primarily multi-specialty physician practices located in major
metropolitan areas. The Pharmaceutical Services business manages outpatient
prescription drug benefit programs for corporations, insurance companies,
unions, government employee groups, and managed care organizations throughout
the United States. The Disease Management business provides therapies and
services to individuals suffering from hemophilia, immune system deficiencies
and other blood disorders characterized by protein deficiencies. In addition,
this business distributes recombinant growth hormone. In its International
business, the company offers selected health care services outside hospitals in
Canada, France, Germany, Japan, the Netherlands, the United Kingdom and Puerto
Rico.

INDUSTRY SEGMENTS

Caremark operates in four industry segments: Physician Practice Management,
Pharmaceutical Services, Disease Management and International.

NET REVENUES FROM CONTINUING OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Physician Practice Management.............................. $ 135,600 $ 190,100 $ 454,600
Pharmaceutical Services.................................... 631,200 1,097,300 1,432,300
Disease Management......................................... 389,800 422,300 408,000
International.............................................. 47,400 65,500 79,400
---------- ---------- ----------
Totals from continuing operations.......................... $1,204,000 $1,775,200 $2,374,300
========= ========= =========
</TABLE>

OPERATING INCOME FROM CONTINUING OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Physician Practice Management.............................. $ (1,400) $ 4,100 $ 16,100
% of segment revenues.................................... (1.0)% 2.2% 3.5%
Pharmaceutical Services.................................... $ 31,600 $ 46,200 $ 56,000
% of segment revenues.................................... 5.0% 4.2% 3.9%
Disease Management......................................... $ 76,000 $ 76,600 $ 69,500
% of segment revenues.................................... 19.5% 18.1% 17.0%
International.............................................. $ (2,400) $ (1,500) $ 1,300
% of segment revenues.................................... (5.1)% (2.3)% 1.6%
General Corporate.......................................... $(21,800) $(25,700) $(16,300)
-------- -------- --------
Totals from continuing operations.......................... $ 82,000 $ 99,700 $126,600
======== ======== ========
</TABLE>

F-34
<PAGE> 145

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

IDENTIFIABLE ASSETS FROM CONTINUING OPERATIONS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Physician Practice Management................................. $ 90,400 $183,900 $ 482,500
Pharmaceutical Services....................................... 212,300 300,300 371,300
Disease Management............................................ 124,900 142,400 144,400
International................................................. 29,600 38,600 49,900
General Corporate............................................. 179,000 129,100 179,800
-------- -------- ----------
Totals from continuing operations............................. $636,200 $794,300 $1,227,900
======== ======== =========
</TABLE>

CAPITAL EXPENDITURES FROM CONTINUING OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Physician Practice Management..................................... $ 8,400 $17,100 $42,500
Pharmaceutical Services........................................... 24,700 37,000 30,700
Disease Management................................................ 900 1,200 3,200
International..................................................... 6,100 4,500 4,800
General Corporate................................................. 10,200 10,400 2,200
------- ------- -------
Totals from continuing operations................................. $50,300 $70,200 $83,400
======= ======= =======
</TABLE>

DEPRECIATION AND AMORTIZATION FROM CONTINUING OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Physician Practice Management..................................... $ 4,200 $ 6,500 $14,300
Pharmaceutical Services........................................... 5,500 8,400 9,200
Disease Management................................................ 200 400 800
International..................................................... 900 1,700 2,300
General Corporate................................................. 600 1,900 2,000
------- ------- -------
Totals from continuing operations................................. $11,400 $18,900 $28,600
======= ======= =======
</TABLE>

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the company's Consolidated Financial
Statements. These policies are in conformity with generally accepted accounting
principles, and have been consistently applied in all material respects. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

BASIS OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of Caremark and
its majority-owned subsidiaries. All material intercompany accounts and
transactions are eliminated in consolidation.

The company has acquired certain assets of and operates clinics under 33-40
year management service agreements with affiliated physician groups that
maintain separate legal entities within which they practice medicine. These
groups have no other operations or rights to practice except to conduct such
practices exclusively in company clinics. Under these agreements, the physician
groups have responsibility for all medical-related decisions, enter into payor
contracts and provide Caremark input on the management of the

F-35
<PAGE> 146

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

practice. Caremark compensates the physicians for their services under these
affiliations using four general models: (a) approximately 28% of clinic revenues
and 5% of total revenues in 1995 were generated by clinics whose physicians were
compensated on a capitated, per-member, per-month arrangement; (b) approximately
10% of clinic revenues and 2% of total revenues in 1995 were generated by
clinics whose physicians received a salary plus a bonus; (c) approximately 56%
of clinic revenues and 11% of total revenues in 1995 were generated by clinics
whose physicians received a salary plus bonus and receive a profit sharing
payment of 50% of consolidated clinic earnings before taxes ("clinic earnings").
Clinic earnings in these arrangements include all expenses, management fees paid
to the company and physician compensation; (d) approximately 6% of clinic
revenues and 1% of total revenues in 1995 were generated by clinics whose
physicians received 85% of a defined amount (generally, revenues less management
expenses paid to the company) to cover all medical costs including physician
compensation, outside referral expenses, allied healthcare expenses and
professional liability insurance. Any amounts remaining after paying these
expenses represented additional incentive compensation to the physicians.

Caremark is responsible for providing all non-medical personnel, premises,
equipment, and supplies necessary to operate the clinics, providing financial,
accounting and administrative services, negotiating all payor and vendor
contracts on behalf of the clinics, billing and collecting fees, paying clinic
expenses, and performing marketing and public relations services. Caremark also
has the right to utilize the cash in the physician group bank accounts and is
required to fund future capital expenditures as well as working capital needs.
The fee paid to Caremark includes Caremark's direct management expenses of
operating the clinics, plus incentive payments which reflect a portion or all of
the residual equity interest in the clinics after payment of physician
compensation, other medical costs and management expenses. Under the four
general models discussed above, these incentive payments take the following
forms: (a) a variable percentage of the clinic's managed capital; (b) a variable
percentage of the clinic's managed capital plus 100% of clinic earnings; (c) a
variable percentage of the clinic's managed capital or net revenues plus 50% of
clinic earnings; and (d) 15% of the defined amount described above.

Based on the legal structures in place, the physician groups record all
revenues from the payor contracts and related medical expenses including
physician compensation, allied health professional costs, professional liability
insurance costs and Caremark's management fee. However, Caremark believes it has
essentially all of the risks and rewards of ownership and perpetual and
unilateral control over the assets and operations of the various physician
groups. Therefore, notwithstanding the lack of ownership of the stock of the
legal entities in which the physicians practice, consolidation of the revenues
and expenses of the various physician groups is necessary to present fairly the
financial position and results of operations of the company because there exists
a parent-subsidiary relationship by means other than record ownership of a
majority of voting stock. Under consolidation, the company reports all the
revenues and operating expenses of the clinics as its own, eliminating the
management fees paid by the physician groups to the company, recording all
revenue initially reflected as physician revenue as company revenue and
reflecting physician earnings as compensation expense.

The company believes that this control over the assets and operations is
perpetual rather than temporary because of (i) the length of the original terms
of the agreements, (ii) the likelihood of successive extension periods of the
agreements, (iii) the continuing investment of capital by the company, (iv) the
control by the company of the assets necessary to operate the clinics, (v) the
employment of all non-medical personnel, (vi) the nature of the services
provided by the company to and the delegation of authority to the company from
the physician groups to carry out all of the critical revenue generating
responsibilities of the business other than the actual treating of patients, and
(vii) the nominal capital investments of the physician groups.

REVENUES

The company records revenues net of estimated contractual allowances.
Revenue is deferred related to cash payments received for which the company is
obligated to perform future services.

F-36
<PAGE> 147

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories, which are primarily finished goods, consist of pharmaceutical
drugs, medical equipment and supplies and are valued at the lower of cost
(first-in, first-out method) or market.

MARKETABLE SECURITIES

Investments in marketable securities with readily determinable fair values
have been classified as available-for-sale. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of tax,
reported in a separate component of stockholders' equity unless a decline in
value is judged other than temporary. When this is the case, unrealized losses
are reflected in income. The company owns no investments that are considered to
be trading or held-to-maturity securities.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of accumulated depreciation.
Assets purchased in acquisitions are recorded at their respective fair values.
Expenditures that extend the useful life of property and equipment or that
increase productivity are capitalized, whereas maintenance and repairs are
charged to expense in the year incurred.

Interest costs associated with the construction of certain capital assets
are capitalized as part of the cost of those assets. Interest costs
approximating $5.1 million were capitalized in 1995. The company also
capitalizes purchased and internally developed software costs to the extent they
are expected to benefit future operations. Capitalized software costs included
in construction in progress approximated $67.8 million at December 31, 1995.

Depreciation and amortization are provided for financial reporting purposes
principally on the straight-line method over the estimated useful lives of the
assets or, for leasehold improvements, over the terms of related leases if
shorter. Both straight-line and accelerated methods of depreciation are used for
income tax purposes.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, which totaled $86.3 and $227.3 million at December 31, 1994 and
1995, respectively, represents the excess of consideration paid for companies
acquired in purchase transactions over the fair value of net assets acquired. It
is amortized on a straight-line basis over estimated useful lives not exceeding
40 years. Other intangible assets include management service agreements and
other identified rights that are amortized on a straight-line basis over the
lesser of their legal or estimated useful lives. As of December 31, 1994 and
1995, intangible assets, including goodwill, are stated net of accumulated
amortization of $8.9 and $14.2 million, respectively. The company reviews the
carrying value of intangibles and other long-lived assets for impairment when
events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable. This review is performed by comparing estimated
undiscounted future cash flows from use of the asset to the recorded value of
the asset.

INCOME TAXES

Income tax expense is based on pre-tax income for financial reporting
purposes, adjusted for the effects of permanent differences between such income
and that reported for tax return purposes. Deferred tax assets and liabilities
are recognized for expected future tax consequences of temporary differences
between the carrying amounts and tax bases of the underlying assets and
liabilities.

EARNINGS PER SHARE

Earnings per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares represent the potential dilutive impact of
stock options, employee stock purchase plan subscriptions and contingent stock
rights.

F-37
<PAGE> 148

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECLASSIFICATIONS

Certain prior-year balances have been reclassified to conform with the
current year's presentation.

NOTE 3: ACQUISITIONS

In May 1995, Caremark entered into a long-term affiliation agreement with
Friendly Hills HealthCare Network ("Friendly Hills"), an integrated health care
delivery system headquartered in La Habra, California. Friendly Hills operates
18 medical offices and an acute care hospital. Caremark acquired substantially
all of the assets of Friendly Hills for approximately $140 million and agreed to
provide various management and administrative services. The transaction has been
accounted for by the purchase method of accounting. The following summary,
prepared on a pro forma basis, combines the results of operations of Caremark
and Friendly Hills as if the Friendly Hills transaction had been consummated as
of the beginning of the periods presented after including the impact of certain
adjustments such as amortization of intangibles, interest expense on debt
assumed to have been incurred to complete the transaction and the related income
tax effects.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1994 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Net revenues.......................................................... $1,950,200 $2,437,400
Income before income taxes from continuing operations................. $ 90,500 $ 28,900
Income from continuing operations..................................... $ 54,100 $ 18,600
Earnings from continuing operations per common and common equivalent
share:
Primary............................................................. $ .72 $ .25
Fully diluted....................................................... $ .72 $ .25
</TABLE>

These pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for the entire periods
presented and are not intended to project future results.

The company invested approximately $68.2 million in cash, stock and notes
for other acquisitions in 1995 involving the Physician Practice Management
business. Consideration paid in connection with 1993 and 1994 acquisitions
approximated $9.4 and $69.1 million, respectively. Results of operations would
not have been materially different in 1993, 1994 and 1995 had these other
transactions occurred as of the beginning of the respective years.

In September 1995, Caremark entered into a definitive agreement with CIGNA
Healthcare of California, a managed health care subsidiary of CIGNA Corporation,
to acquire substantially all of the assets of CIGNA Medical Group, CIGNA
Healthcare's Los Angeles-area staff model delivery system. In 1994 net revenues
from these operations were in excess of $400 million. The transaction was
completed effective January 1, 1996 and will be accounted for using the purchase
method of accounting.

All of the aforementioned acquisitions have been (or will be) accounted for
by the purchase method of accounting. As such, operating results of acquired
businesses are included in Caremark's Consolidated Financial Statements as of
their respective dates of acquisition.

NOTE 4: DISCONTINUED OPERATIONS

During 1995, Caremark divested of several non-strategic businesses as part
of the company's transformation to four business lines -- Physician Practice
Management, Pharmaceutical Services, Disease Management and International. In
accordance with APB 30, which addresses the reporting for disposition of
business segments, the company's Consolidated Financial Statements present the
operating results and net assets of discontinued operations separately from
continuing operations. Prior periods have been restated to conform with this
presentation.

Effective March 31, 1995, the company sold its Clozaril(R) Patient
Management System to Health Management, Inc. for $23.3 million in cash and
notes. This business involved managing the care of schizophrenia patients
nationwide through the distribution of the Clozaril drug and related testing
services to

F-38
<PAGE> 149

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

monitor patients for potentially serious side effects. Net revenues of this
business for the three months ended March 31, 1995 were $12.3 million and were
$78.5 and $84.0 million for the years 1993 and 1994, respectively. The after-tax
gain on disposition of this business was $11.1 million.

Effective April 1, 1995, the company sold its Home Infusion business to
Coram Healthcare Corporation ("Coram") for $309 million in cash and securities,
subject to post-closing adjustments based on the net assets transferred. The
sale included Caremark's home intravenous infusion therapy, women's health
services and the Home Care Management System. Certain severance and legal
obligations remained with Caremark (see Note 14 -- Commitments and Contingent
Liabilities). Net revenues of this business for the period ended April 1, 1995
were $96.1 million and were $420.5 and $441.9 million for the years 1993 and
1994, respectively. The after-tax loss on disposition of this business was $4.0
million. In 1995 net losses from this business reflected in discontinued
operations include $154.8 million related to the legal settlement discussed in
Note 14.

Effective September 15, 1995, the company sold its Oncology Management
Services business to Preferred Oncology Networks of America, Inc. for securities
valued at $3.6 million. The business provides management services to
single-specialty oncology practices. Net revenues of this business for the 1995
period up to the date of sale were $8.9 million and were $30.6 and $29.4 million
for the years 1993 and 1994, respectively. There was no after-tax gain or loss
on the disposition.

Effective December 1, 1995 the company sold its Caremark Orthopedic
Services, Inc. subsidiary to HealthSouth Corporation for $127.0 million in cash,
subject to post-closing adjustments. This business provides outpatient physical
therapy and rehabilitation services. Net revenues of this business for the 1995
period up to the date of sale were $69.1 million and were $47.0 and $55.8
million for the years 1993 and 1994, respectively. The after-tax gain on
disposition of this business was $24.7 million.

In September 1995, the company adopted a formal plan to dispose of its
Nephrology Services division by sale to a third party. This business provides a
wide range of nephrology support services, including dialysis services and
supplies, transplant and laboratory services. Net revenues of this business were
$2.7, $39.7 and $46.6 million for the years 1993, 1994, and 1995, respectively.
Any gain or loss from this planned disposal is not expected to be material.

NOTE 5: FINANCIAL INSTRUMENTS

The company's financial instruments include cash and equivalents,
investments in marketable and non-marketable securities, and debt obligations.
The carrying value of marketable and non-marketable securities, which
approximated fair value, was $27.4 and $48.5 million at December 31, 1994 and
1995, respectively. The carrying value of debt obligations was $99.5 and $99.6
million at December 31, 1994 and 1995, respectively. The fair value of these
obligations approximated $83.8 and $98.6 million at December 31, 1994 and 1995,
respectively. The fair value of marketable securities is determined using market
quotes and rates. The fair value of nonmarketable securities, which are made up
primarily of investments in and notes from non-public companies, are estimated
based on information provided by these companies. The fair value of long-term
debt has been estimated using market quotes.

During 1995, the company recorded a pre-tax charge to income of $86.6
million ($52.0 million after tax) to reflect unrealized losses on investments
that were judged other than temporary.

Interest expense totaled $4.1, $11.8 and $16.7 million in 1993, 1994 and
1995, respectively. Interest income totaled $0.7, $3.1 and $8.0 million in 1993,
1994 and 1995, respectively.

NOTE 6: TRADE RECEIVABLES

The company provides credit, in the normal course of business, to
third-party payors (such as private insurers, Medicare and Medicaid), patients
and private enterprises. The company performs ongoing credit evaluations of its
customers and maintains an allowance for doubtful accounts based on the
collectibility of trade receivables. Credit losses have historically coincided
with management's expectations.

F-39
<PAGE> 150

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the activity in the allowance for doubtful accounts is
presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year............................. $ 14,700 $ 20,100 $ 28,700
Provision for doubtful accounts........................ 13,300 16,900 24,200
Write-offs, net of recoveries.......................... (9,200) (15,600) (24,200)
Other(1)............................................... 1,300 7,300 21,600
-------- -------- --------
Balance, end of year................................... $ 20,100 $ 28,700 $ 50,300
======== ======== ========
</TABLE>

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

(1) Represents valuation accounts of acquired or divested companies, account
transfers and foreign currency translation adjustments.

NOTE 7: OTHER BALANCE SHEET DATA

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Property and equipment, net:
Land................................................................. $ 15,800 $ 25,700
Buildings and leasehold improvements................................. 45,000 97,200
Machinery and other equipment........................................ 88,200 137,700
Software systems..................................................... 14,300 36,500
Construction in progress............................................. 60,000 78,800
-------- --------
Property and equipment, at cost...................................... 223,300 375,900
Accumulated depreciation and amortization............................ (55,000) (76,700)
-------- --------
Property and equipment, net.......................................... $168,300 $299,200
======== ========
</TABLE>

Accrued liabilities include employee compensation and related taxes of
$31.0 and $25.8 million at December 31, 1994 and 1995, respectively.

NOTE 8: CREDIT FACILITIES

During 1995, Caremark entered into revised credit facilities aggregating
$380 million as of December 31, 1995 ($135 million expiring September 1996, $225
million expiring September 1998 and a $20 million letter of credit agreement),
enabling the company to borrow funds on an unsecured basis at variable interest
rates, typically determined by reference to the corporate base rate announced by
First National Bank of Chicago or the Eurodollar interbank rate. The modified
credit facilities contain maximum EBITDA, minimum interest coverage and
debt-to-total-capital ratio requirements, as well as certain restrictions
regarding compliance with the company's integrity program and litigation. The
company was in compliance with the debt covenants at year-end. Borrowings under
these facilities were $200.0 million at December 31, 1995, all of which was
classified as long-term debt. As of December 31, 1994, $210.0 million was
borrowed, of which $125.0 million was classified as long-term.

The company also has a $25 million uncommitted line of credit that offers
more flexible overnight borrowing capabilities to accommodate daily cash flow
needs. $25.0 million was outstanding under this facility at December 31, 1995.
The average annual interest rate for the aforementioned credit facilities
approximated 6.6% in 1995. The company also maintains short-term credit
arrangements approximating $20.4 million in support of international operations.
Borrowings under these arrangements were $6.4 and $14.5 million at December 31,
1994 and 1995, respectively.

F-40
<PAGE> 151

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9: LONG-TERM DEBT AND LEASE OBLIGATIONS

Long-term debt and lease obligations consist of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Long-term credit facility borrowings........................... $125,000 $200,000
6 7/8% notes, due 2003, less unamortized discount of $0.4
million...................................................... 99,500 99,600
Long-term notes due 1996 through 2011, at various rates........ 9,200 24,400
Capitalized lease obligations due 1996 through 2000............ 2,400 5,300
-------- --------
Total long-term debt and lease obligations..................... 236,100 329,300
Current portion................................................ (2,600) (3,900)
-------- --------
Long-term portion.............................................. $233,500 $325,400
======== ========
</TABLE>

During 1993, the company issued $100 million of 67 7/8% senior notes
maturing in August 2003. The net proceeds, $98.8 million after discount and
underwriting fees, were used to repay credit facility borrowings and to fund
acquisitions, as well as for other general corporate purposes. Debt issuance
costs of $1.3 million were capitalized in connection with this offering and are
being amortized over the term of the debt. Other long-term notes relate
primarily to business acquisitions. The company has guaranteed secured loans
totaling $20.7 million on behalf of unconsolidated affiliates. The underlying
loans mature in 1996 through 1999. The affiliates have complied with related
debt service requirements.

The company leases certain facilities and equipment under operating and
capital leases expiring at various dates. Most of the operating leases contain
renewal options. Total rent expense under operating leases approximated $12.1,
$17.9 and $26.7 million in 1993, 1994 and 1995, respectively.

Future minimum lease payments (including interest) under capital and
noncancelable operating leases and aggregate long-term debt maturities are
summarized as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL DEBT
LEASES LEASES MATURITIES
--------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1996.................................................... $ 26,300 $ 2,500 $ 1,900
1997.................................................... 22,700 1,700 8,400
1998.................................................... 20,200 1,100 203,600
1999.................................................... 15,800 600 3,000
2000.................................................... 11,000 200 2,400
Thereafter.............................................. 55,700 -- 105,100
--------- ------- ----------
Total obligations and commitments....................... $ 151,700 $ 6,100 $ 324,400
========
Amounts representing interest and discounts............. (800) (400)
------- ----------
Carrying value of long-term debt and lease
obligations........................................... $ 5,300 $ 324,000
======= ========
</TABLE>

The net book value of capitalized lease property approximated $2.3 and $3.9
million at December 31, 1994 and 1995, respectively.

NOTE 10: PREFERRED STOCK AND PREFERRED SHARE PURCHASE RIGHTS

No shares of preferred stock are currently outstanding. The company's Board
of Directors is authorized to issue up to 20,000,000 shares of preferred stock
without further stockholder approval. The Board of Directors of the company is
also authorized to determine the voting powers, designations, preferences and
relative, participating, optional or other special rights, with respect to any
series of preferred stock.

Should the Board of Directors elect to exercise its authority to issue any
additional series of preferred stock, the rights, preferences and privileges of
holders of the company's common stock would be made subject to the rights,
preferences and privileges of such additional series.

F-41
<PAGE> 152

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the adoption of its Preferred Share Purchase Rights Plan
(the "Rights Plan"), the company has designated and reserved for issuance upon
exercise of such rights 2,000,000 shares of Series A Junior Participating
Preferred Stock.

The Board of Directors has authorized a Rights Plan in which common
stockholders received a dividend of one preferred share purchase right
(collectively, the "Rights") for each share of common stock held of record. Each
Right entitles the registered holder to purchase from the company one
one-hundredth of a share of Series A Junior Participating Preferred Stock for
$85, subject to adjustment. The Rights will become exercisable (and transferable
apart from the common stock) on the earlier of (1) 10 days following a public
announcement that a person or group has acquired 15% or more of the common stock
or (2) 10 business days following the commencement or announcement of an offer
to acquire 15% or more of the common stock.

If, after the Rights become exercisable, any person or group (the
"Acquirer") acquires 15% or more of the common stock (except pursuant to an
offer for all outstanding shares of common stock that the independent directors
determine to be fair and otherwise in the best interests of the company and its
stockholders), each Right may be exercised for common stock having a value of
$170. In specified circumstances, each Right may be exercised for common stock
of an acquiring entity having a value of $170. All Rights held by the Acquirer
will be null and void. The company may generally redeem the Rights at a price of
$.01 per Right at any time until 10 days following a public announcement that a
person or group has acquired 15% or more of the common stock. The Rights will
expire on November 30, 2002.

NOTE 11: COMMON STOCK

The company sponsors employee stock purchase plans that promote the sale of
its common stock to employees. The purchase price to employees is the lower of
85% of the closing market price on the date of subscription or 85% of the
closing market price on the date funds are actually used to purchase stock for
employees. Stock purchase plan transactions for the indicated years are
summarized below:

<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Shares subscribed:
Beginning of year........................................... 744,805 642,028
Subscriptions............................................... 664,035 414,662
Purchases................................................... (614,290) (481,101)
Cancellations............................................... (152,522) (239,207)
------------- -------------
End of year................................................. 642,028 336,382
============= =============
Subscription price per share at end of year................. $10.74-$22.10 $13.80-$22.10
</TABLE>

Expiration dates for outstanding subscriptions extend through 1997. The
weighted average subscription price was $15.90 at December 31, 1995.

The company offers participation in stock option plans to certain employees
and individuals. All of the outstanding options under these plans were granted
at 100% of market value of the stock on the dates of grant. The following table
summarizes stock option transactions for the indicated years:

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Options outstanding:
Beginning of year............................................. 9,754,915 9,561,416
Granted....................................................... 805,500 1,849,800
Exercised..................................................... (344,271) (811,981)
Cancelled/expired............................................. (654,728) (1,949,075)
------------ ------------
End of year................................................... 9,561,416 8,650,160
============ ============
Option price per share:
Exercised..................................................... $7.71-$17.25 $6.45-$18.88
Outstanding at end of year.................................... $6.45-$21.88 $6.45-$21.88
</TABLE>

Awarded options typically vest and become exercisable in incremental
installments over five years and expire no later than 10 years and one day from
the date of grant. There were 3,271,574 options exercisable at

F-42
<PAGE> 153

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1995. Expiration dates for outstanding options range from 1996 to
2005. The weighted average option price was $14.99 at December 31, 1995. The
company expects to adopt, in 1996, the disclosure requirements of Statement of
Financial Accounting Standards No. 123 -- Accounting for Stock-Based
Compensation.

Under various plans, Caremark has made grants of restricted common stock to
provide incentive compensation to key employees and to provide incentives
related to acquisitions. Restricted stock transactions for the indicated years
are summarized below:

<TABLE>
<CAPTION>
1994 1995
---------- --------
<S> <C> <C>
Restricted stock outstanding:
Beginning of year.................................................. 1,268,319 265,037
Granted............................................................ 14,800 280,784
Cancelled.......................................................... -- (22,167)
Vested (free of restrictions)...................................... (1,018,082) (293,644)
---------- --------
End of year........................................................ 265,037 230,010
========== =========
</TABLE>

The company issued contingent stock rights in connection with a 1992
acquisition that permit holders to receive, upon exercise, a number of shares of
company common stock determined by reference to appreciation in excess of $16.56
in the per share market value of the company common stock. The contingent stock
rights became exercisable on December 31, 1994. As of December 31, 1995, 789,303
rights were outstanding.

In June 1995, Caremark issued 7.7 million common shares (at $19.50 per
share) into a trust established to fund employee benefits over the next 10
years, including pension plan contributions, 401(k) matching contributions, and
stock issued under option and employee purchase plans. The value of the common
stock contributed has been reflected in the Balance Sheet in "common stock"
($7.7 million) and "additional contributed capital" ($142.5 million), with a
corresponding offset of these amounts in the "shares held in trust" component of
stockholders' equity. These shares will be issued from the trust over time as
necessary to meet the company's benefit obligations and will have no impact on
the weighted average common and common equivalent shares outstanding for
earnings per share purposes until they are issued from the trust.

The company's Board of Directors has authorized the purchase of common
stock to fund various stock-based compensation programs and for acquisitions.
The company purchased 1,496,666 shares of common stock for $27.2 million in 1995
and has been authorized to purchase up to an additional 1,400,000 shares through
July 31, 1996.

The company's common stock was reserved for issuance as follows at December
31:

<TABLE>
<CAPTION>
1995
----------
<S> <C>
Reserved common stock:
Acquisitions..................................................................... 4,091,505
Stock option plans............................................................... 11,416,270
Stock purchase plans............................................................. 200,474
----------
Total shares reserved..................................................... 15,708,249
==========
</TABLE>

Stockholders of record totaled 54,849 at December 31, 1994, versus 49,003
at the end of 1995.

On October 31, 1995, the company's Board of Directors declared a third
annual dividend of four cents per share on all outstanding common stock to
stockholders of record on November 30, 1995. The dividend was paid on December
15, 1995.

NOTE 12: RETIREMENT PROGRAMS

The company sponsors retirement plans for all qualifying domestic employees
and certain employees in other countries. Benefits are typically based on years
of service and the employee's compensation during five of the last 10 years of
employment as defined by the plans. The company's funding policy is to make
contributions that meet or exceed the minimum requirements of the Employee
Retirement Income Security Act of 1974, based on the projected unit credit
actuarial cost method, and to limit such contributions to amounts currently
deductible for tax reporting purposes.

F-43
<PAGE> 154

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the components of net pension expense and
related actuarial assumptions used at the January 1 valuation date for the
respective years:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Assumptions:
Discount rate................................................. 8.0% 7.25% 8.75%
Increase in compensation levels(1)............................ 6.5% 5.0% 5.0%
Expected long-term return on assets........................... 10.5% 10.5% 9.5%
Components (in thousands):
Service cost-benefits earned.................................. $ 3,800 $ 4,600 $ 2,100
Interest cost on projected obligation......................... 1,600 2,300 2,200
Actual return on assets....................................... (,900) (1,300) (1,700)
Net amortizations............................................. 500 700 100
------- ------- -------
Net pension expense........................................... $ 5,000 $ 6,300 $ 2,700
======== ======== ========
</TABLE>

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

(1) The assumed annual rate of increase in compensation levels for 1993 was 4.0%
for the Puerto Rico plans, which were merged into the U.S. plan as of
December 31, 1993.

As a result of the disposal of the Home Infusion business (see Note
4 -- Discontinued Operations), the company realized a curtailment gain of $0.9
million related to its pension plan. This gain has been included in the net
gains on sales of discontinued operations in the Consolidated Statements of
Operations.

The following table presents the funded status of the plans, the net
pension liability recognized in the consolidated balance sheets and related
actuarial assumptions as of December 31:

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Assumptions:
Discount rate.................................................... 8.75% 7.25%
Increase in compensation levels.................................. 5.0% 5.0%
Funded status and net pension liability (in thousands):
Actuarial present value of benefit obligations:
Vested benefits............................................... $15,000 $22,200
Accumulated benefits.......................................... 17,000 25,000
Effect of future salary increases............................. 6,600 7,200
------- -------
Projected benefits............................................ 23,600 32,200
Less: plan assets at fair value(1)................................. 15,000 20,900
------- -------
Projected benefit obligations in excess of plan assets............. 8,600 11,300
Less: unrecognized net loss........................................ 1,700 4,800
------- -------
Net pension liability.............................................. $ 6,900 $ 6,500
======= =======
</TABLE>

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

(1) Primarily equity and fixed income securities.

Pension expense under non-U.S. pension plans sponsored by the company for
the benefit of foreign employees has not been significant.

Most U.S. employees are eligible to participate in a qualified 401(k) plan.
Participants may contribute up to 12% of their annual compensation (limited in
1995 to $9,240 per individual) to the plan and the company matches the
participants' contributions up to 3% of compensation. Matching contributions
made by the company were $5.7, $6.0 and $2.8 million in 1993, 1994 and 1995,
respectively.

The company has provided post-retirement health benefits to qualified
employees and accrued for those costs over the service years of the employees in
accordance with Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The cost of this
plan and related liability have not been significant to Caremark. As a result of
the disposal of the Home Infusion business (see Note 4 -- Discontinued
Operations), the company realized a curtailment gain of $1.2 million.

F-44
<PAGE> 155

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

This gain has been included in the net gains on sales of discontinued operations
in the Consolidated Statements of Income. In addition, during 1995, Caremark
terminated this plan, resulting in a reduction of the related liability of $2.2
million.

In 1994, the company adopted Statement of Financial Accounting Standards
No. 112 ("FAS 112"), "Employers' Accounting for Postemployment Benefits," which
requires employers to accrue the cost of postemployment benefits (including
salary continuation, severance and disability benefits, job training and
counseling and continuation of benefits such as health care and life insurance
coverage) to former or inactive employees. The adoption and ongoing impact of
FAS 112 have not been material to the company's financial statements.

NOTE 13: INCOME TAXES

Income tax expense from continuing operations for the indicated years
consists of:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $15,800 $19,100 $ 39,100
State and local........................................ 5,200 5,600 7,500
------- ------- --------
Current income tax expense............................... 21,000 24,700 46,600
------- ------- --------
Deferred:
Federal................................................ 10,600 10,100 (29,800)
State and local........................................ 1,800 1,900 (5,500)
------- ------- --------
Deferred income tax expense (benefit).................... 12,400 12,000 (35,300)
------- ------- --------
Income tax expense from continuing operations............ $33,400 $36,700 $ 11,300
======= ======= ========
</TABLE>

Foreign income was not significant in 1993, 1994 and 1995.

Deferred tax assets (liabilities) under FAS 109 are composed of the
following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bad debt and sales allowances $ 11,800 $ 5,500
Legal settlement costs........................................... -- 26,800
Loss on investments.............................................. -- 33,700
Accrued compensation............................................. 10,100 6,300
Other accrued expenses........................................... 11,400 2,500
Net operating loss carryforwards................................. 2,900 3,300
Valuation allowances............................................. (2,900) (3,300)
-------- --------
Deferred tax assets, net of valuation allowances................. 33,300 74,800
-------- --------
Accelerated depreciation and amortization........................ (23,400) (33,100)
Goodwill......................................................... (16,900) --
Other timing..................................................... (2,400) (4,600)
-------- --------
Deferred tax liabilities......................................... (42,700) (37,700)
-------- --------
Net deferred tax assets (liabilities)............................ $ (9,400) $ 37,100
======== ========
</TABLE>

The company has established valuation allowances for foreign net operating
loss carryforwards. The $0.4 million net change in valuation allowances for 1995
is primarily attributable to the net change in these foreign net operating
losses in the current year.

F-45
<PAGE> 156

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income tax expense from continuing operations applicable to pre-tax income
for financial reporting purposes differs from that calculated using the U.S.
federal income tax rate for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax expense at statutory rate...................... $28,100 $31,900 $11,000
State and local taxes, net of federal tax benefit......... 4,200 4,600 $ 1,300
Tax rate changes.......................................... (1,000) -- --
Other..................................................... 2,100 200 (1,000)
------- ------- -------
Income tax expense from continuing operations $33,400 $36,700 $11,300
======= ======= =======
</TABLE>

In connection with its 1992 distribution from Baxter International Inc.
("Baxter"), Caremark entered into a tax-sharing agreement with Baxter under
which the company retained responsibility for its portion of federal income tax
returns filed by Baxter for the years after 1987.

Undistributed earnings of certain foreign subsidiaries that the company
expects to be permanently reinvested totaled $6.1 million as of December 31,
1995.

NOTE 14: COMMITMENTS AND CONTINGENT LIABILITIES

In June 1995, Caremark agreed to settle the investigation of the company
with the U.S. Department of Justice, the Office of the Inspector General of the
U.S. Department of Health and Human Services (the "OIG"), the Veterans
Administration, the Federal Employee Health Benefits Program, the Civilian
Health and Medical Program of the Uniformed Services and related state
investigative agencies in all 50 states and the District of Columbia. Under the
terms of the settlement, which covered allegations dating back to 1986, a
subsidiary of Caremark pled guilty to two counts of mail fraud -- one each in
Minnesota and Ohio. The settlement allows Caremark to continue participating in
Medicare, Medicaid and other government health care programs.

Under the settlement, Caremark agreed to make civil payments of $85.3
million to the federal government in installments, $20.0 million of which
remains payable in June 1996, and $44.6 million to the states. The plea
agreement imposed $29.0 million in federal criminal fines. In addition, Caremark
contributed $2.0 million to a grant program set up under the Ryan White
Comprehensive AIDS Resources Emergency (CARE) Act. The company took an after-tax
charge to discontinued operations of $154.8 million in 1995 for these settlement
payments, costs to defend ongoing derivative, security and related lawsuits, and
other associated costs. There can be no assurance that the ultimate costs
related to this settlement will not exceed these estimates.

In March 1996, the company agreed to settle all disputes with a number of
private payors. The settlements will result in an after-tax cost of
approximately $42.3 million. These disputes relate to businesses that were
covered by Caremark's settlement with federal and state agencies in June 1995.
In addition, Caremark will pay $23.3 million after-tax to cover the private
payors' pre-settlement and settlement-related expenses. An after-tax charge for
the above amounts will be recorded in first quarter 1996 discontinued
operations. Caremark may pay the settlement amounts in 1996 and 1997 or, under
certain circumstances, in semi-annual installments, including interest through
1999. No agreement, contract or other business relationship in existence at the
time of the settlements will be terminated or negatively affected by the
settlement agreements. The parties have also agreed to negotiate in good faith
to maintain or enhance ongoing business relationships. The company's lenders
have waived the impact of these settlements on the financial covenants under its
existing credit facility through September 15, 1996. The company currently
expects to enter into revised credit facilities prior to this date.

The company does not believe that the above-referenced settlements will
materially affect its ability to pursue its long-term business strategy. There
can be no assurances, however, that additional costs, claims and damages will
not occur.

F-46
<PAGE> 157

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In August and September 1994, stockholders, each purporting to represent a
class, filed complaints against Caremark and certain officers and employees of
Caremark in the United States District Court for the Northern District of
Illinois, alleging violations of the Securities Act of 1933 and the Securities
Exchange Act of 1934, and fraud and negligence in connection with public
disclosures by Caremark regarding Caremark's business practices and the status
of the investigation discussed above. The complaints seek unspecified damages,
declaratory and equitable relief, and attorneys' fees and expenses. The parties
continue to engage in discovery proceedings. The company intends to defend this
case vigorously. Management is unable at this time to estimate the impact, if
any, of the ultimate resolution of this matter.

In August 1994 and July 1995, stockholders filed derivative actions on
behalf of Caremark against the company, its directors and certain employees of
Caremark in the Court of Chancery of the State of Delaware, the United States
District Court for the Northern District of Illinois and the Circuit Court of
Cook County in Chicago, Illinois alleging breaches of fiduciary duty, negligence
in connection with Caremark's conduct of the business and lack of corporate
controls, and seeking unspecified damages, and attorneys' fees and expenses. In
June 1995, the parties to the Delaware derivative action entered into a
memorandum of understanding providing for the terms of settlement of all claims
asserted in that case. Although the proposed settlement does not contemplate the
payment of any damages by any defendant, plaintiffs are expected to seek an
award of attorneys' fees and expenses in conjunction with any approval of the
settlement. The proposed settlement of the Delaware derivative action is subject
to a number of conditions and the Delaware court is expected to consider the
proposed settlement in mid-1996. The Illinois and Cook County courts have
entered stays of all proceedings in those actions pending resolution of the
Delaware derivative action. In the event the proposed settlement of the Delaware
derivative action is approved by the Delaware court, Caremark anticipates that
the Illinois and Cook County derivative actions will be dismissed. If the
proposed settlement is not approved, Caremark intends to defend these cases
vigorously. Management is unable at this time to estimate the impact, if any, of
the ultimate resolutions of these matters.

In late August 1994, certain patients of a physician who prescribed human
growth hormone distributed by Caremark and the sponsor of health insurance plan
of one of those patients filed complaints against Caremark, employees of
Caremark and others in the United States District Court for the District of
Minnesota. Each complaint purported to be on behalf of a class and alleged
violations of the federal mail and wire fraud statutes, the federal conspiracy
statute and the state consumer fraud statute, as well as conspiracy to breach a
fiduciary duty, negligence and fraud. Each complaint sought unspecified treble
damages, and attorneys' fees and expenses. In July 1995, another patient of the
same physician filed a separate complaint in the District of South Dakota
against the physician, Caremark and another corporation alleging violations of
the federal laws prohibiting payment of remuneration to induce referral of
Medicare and Medicaid beneficiaries, and the federal mail fraud and conspiracy
statutes. The complaint also alleges the intentional infliction of emotional
distress and seeks trebling of at least $15.9 million in general damages,
attorneys' fees and costs, and an award of punitive damages. In August 1995, the
parties to the case filed in South Dakota agreed to a stay of all proceedings
until final judgment has been entered in a criminal case that is presently
pending against this physician. Caremark intends to defend these cases
vigorously. Management is unable at this time to estimate the impact, if any, of
the ultimate resolution of these matters.

In September 1995, Coram filed a complaint against Caremark International
Inc. and its subsidiary, Caremark Inc., and 50 unnamed individual defendants in
the Superior Court of California in San Francisco. The complaint, which arises
from Caremark's sale to Coram of Caremark's Home Infusion business (see Note
4 -- Discontinued Operations), alleges breach of the Asset Sale and Note
Purchase Agreement and related contracts for the transaction, fraud, negligent
misrepresentation and a right to contractual indemnity. Requested relief
includes specific performance, declaratory and injunctive relief, and damages of
$5.2 billion. In November 1995, Coram also stated that if they prevail in this
litigation, they will cancel any debt it owes the company with respect to the
securities issued for the sale. Although the company cannot predict with
certainty the outcome of these proceedings, based on information currently
available, management believes that the ultimate resolution of this matter is
not likely to have a material adverse effect on Caremark's results of
operations, cash flows or financial position.

F-47
<PAGE> 158

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The company intends to defend vigorously the Coram lawsuit. In October
1995, Caremark filed motions in California Superior Court in San Francisco
seeking dismissal of this lawsuit. The San Francisco court subsequently
dismissed the case against Caremark (but not against Caremark Inc.) on the basis
of lack of jurisdiction. Caremark also filed a lawsuit in the U.S. District
Court in Chicago claiming Coram committed securities fraud in its sale of
Caremark's Home Infusion business to Coram. This case, which has been dismissed,
is on appeal and Caremark has filed counterclaims to the suit pending in San
Francisco against Caremark Inc.

Beginning in September 1994, Caremark was named as a defendant in a series
of new lawsuits added to a pending group of actions brought in 1993 under the
antitrust laws by local and chain retail pharmacies against brand name
pharmaceutical manufacturers, wholesalers and prescription benefit managers
other than Caremark. The new lawsuits, filed in federal district courts in at
least 38 states (including the United States District Court for the Northern
District of Illinois), allege that at least 24 pharmaceutical manufacturers
provided unlawful price and service discounts to certain favored buyers and
conspired among themselves to deny similar discounts to the complaining retail
pharmacies (approximately 3,900 in number). The complaints charge that certain
defendant prescription benefit managers, including Caremark, were favored buyers
who knowingly induced or received discriminatory prices from the manufacturers,
in violation of the Robinson-Patman Act. Each complaint seeks unspecified treble
damages, declaratory and equitable relief, and attorneys' fees and expenses. On
April 21, 1995, the Court entered a stay of pretrial proceedings as to certain
Robinson-Patman Act claims in this litigation, including the Robinson-Patman Act
claims brought against Caremark, pending the conclusion of a first trial of
certain of such claims brought by a limited number of plaintiffs against five
defendants not including Caremark. The company intends to defend these cases
vigorously. Management is unable at this time to estimate the impact, if any, of
the ultimate resolution of this matter.

In December 1994, Caremark was notified by the Federal Trade Commission
(the "FTC") that it was conducting a civil investigation of the industry
concerning whether acquisitions, alliances, agreements or activities between
pharmacy benefit managers and pharmaceutical manufacturers, including Caremark's
alliance agreements with certain drug manufacturers, violate Sections 3 or 7 or
the Clayton Act or Section 5 of the Federal Trade Commission Act. The specific
nature, scope, timing and outcome of the investigation are not currently
determinable. Under the statutes, if violations are found, the FTC could seek
remedies in the form of injunctive relief to set aside or modify Caremark's
alliance agreements and an order to cease and desist from certain marketing
practices and from entering into or continuing with certain types of agreements.
Management is unable at this time to estimate the impact, if any, of the
ultimate resolution of this matter.

Caremark is party to various other commitments, claims and routine
litigation arising in the ordinary course of business. Based on the advice of
counsel, management does not believe that the result of such other commitments,
claims and litigation, individually or in the aggregate, will have a material
effect on the company's business or its results of operations, cash flows or
financial position.

F-48
<PAGE> 159

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15: QUARTERLY FINANCIAL RESULTS (UNAUDITED)

Presented below is a summary of the unaudited consolidated quarterly
financial information for the years ended December 31, 1994 and 1995.

<TABLE>
<CAPTION>
QUARTER
-------------------------------------------
FIRST SECOND(2) THIRD FOURTH(3)
-------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994
Net revenues........................................ $370,200 $ 457,500 $460,400 $ 487,100
Gross profit........................................ $ 59,300 $ 59,500 $ 62,500 $ 73,300
Operating income from continuing operations......... $ 21,300 $ 20,900 $ 24,400 $ 33,100
Income from continuing operations................... $ 11,300 $ 10,400 $ 13,800 $ 19,000
Net income.......................................... $ 4,300 $ 23,200 $ 25,700 $ 27,100
Earnings per share from continuing operations(1)
Primary........................................... $ 0.15 $ 0.14 $ 0.18 $ 0.25
Fully diluted..................................... $ 0.15 $ 0.14 $ 0.18 $ 0.25
Net earnings per share(1)
Primary........................................... $ 0.06 $ 0.32 $ 0.34 $ 0.36
Fully diluted..................................... $ 0.06 $ 0.32 $ 0.34 $ 0.36
Common stock prices:
High.............................................. $ 22.88 $ 20.25 $ 26.75 $ 25.00
Low............................................... $ 17.50 $ 15.75 $ 16.75 $ 16.63
1995
Net revenues........................................ $534,100 $ 586,000 $606,400 $ 647,800
Gross profit........................................ $ 70,700 $ 87,700 $ 97,600 $ 101,900
Operating income from continuing operations......... $ 25,700 $ 29,600 $ 35,300 $ 36,000
Income (loss) from continuing operations............ $ 13,100 $ 17,400 $19 ,400 $ (29,700)
Net income (loss)................................... $ 21,400 $(130,400) $ 13,600 $ (20,900)
Earnings (loss) per share from continuing
operations(1)
Primary........................................... $ 0.18 $ 0.23 $ 0.26 $ (0.39)
Fully diluted..................................... $ 0.18 $ 0.23 $ 0.26 $ (0.39)
Net earnings (loss) per share(1)
Primary........................................... $ 0.29 $ (1.75) $ 0.18 $ (0.28)
Fully diluted..................................... $ 0.29 $ (1.75) $ 0.18 $ (0.28)
Common stock prices:
High.............................................. $ 19.88 $ 21.88 $ 22.75 $ 21.13
Low............................................... $ 16.25 $ 16.88 $ 19.00 $ 17.88
</TABLE>

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

(1) The sum of quarterly earnings per share amounts may not equal full-year
amounts due to differences in average common and common equivalent shares
outstanding for the respective periods.
(2) Second quarter 1995 net loss reflects a $145.0 million ($1.94 per share)
after-tax charge related to the settlement of the government investigation
described in Note 14.
(3) Fourth quarter 1995 loss from continuing operations includes a special
after-tax charge of $52.0 million ($0.69 per share) to reflect a decline in
value of investments.

F-49
<PAGE> 160

CAREMARK INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30,
1996
--------------
(IN THOUSANDS)
<S> <C>
Current assets:
Cash and equivalents....................................................... $ 49,000
Restricted cash............................................................ 14,000
Accounts receivable, net................................................... 376,300
Inventories................................................................ 99,600
Short-term deferred income taxes........................................... 64,200
Prepaid expenses and other current assets.................................. 23,800
----------
Total current assets............................................... 626,900
----------
Property and equipment, net.................................................. 366,700
Goodwill and other intangible assets......................................... 320,500
Other noncurrent assets...................................................... 89,500
Long-term deferred income tax asset.......................................... --
----------
Total assets....................................................... $1,403,600
==========
Current liabilities:
Short-term debt............................................................ $ 289,600
Accounts payable, trade and other.......................................... 377,200
Accrued liabilities........................................................ 146,700
----------
Total current liabilities.......................................... 813,500
----------
Long-term debt and lease obligations......................................... 130,200
Long-term deferred income tax liability...................................... 42,200
Other noncurrent liabilities................................................. 29,700
Contingent liabilities (Note 5)
Stockholders' equity:
Preferred stock, $.01 par value, authorized 20,000,000 shares, none
issued.................................................................. --
Common stock, $1 par value, authorized 200,000,000 shares, issued
82,269,462 shares in 1996............................................... 82,200
Additional contributed capital............................................. 199,600
Shares held in trust, 7,700,000 shares..................................... (150,200)
Retained earnings.......................................................... 256,400
----------
Total stockholders' equity................................................... 388,000
----------
Total liabilities and stockholders' equity................................... $1,403,600
==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-50
<PAGE> 161

CAREMARK INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-----------------------
1995 1996
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net revenues.......................................................... $1,120,100 $1,569,600
Cost of goods and services sold....................................... 961,800 1,349,600
Marketing and administrative expenses................................. 93,000 132,100
Provision for doubtful accounts....................................... 10,000 14,600
---------- ----------
Operating income from continuing operations........................... 55,300 73,300
Non-operating expense (income):
Interest expense, net............................................... 4,900 9,300
Other............................................................... (400) (400)
---------- ----------
Income from continuing operations before income taxes................. 50,800 64,400
Income tax expense.................................................... 20,300 22,900
---------- ----------
Income from continuing operations..................................... 30,500 41,500
Discontinued operations:
Operating loss from discontinued operations, net of income taxes of
$(57,500) and $(39,500) in 1995 and 1996, respectively........... (146,600) (68,900)
Gain on sale of discontinued operations, net of income taxes of
$4,700 and $1,400 in 1995 and 1996, respectively................. 7,100 2,100
---------- ----------
Income (loss) from discontinued operations.......................... (139,500) (66,800)
---------- ----------
Net income (loss)..................................................... $ (109,000) $ (25,300)
========= =========
Earnings (loss) per common and common equivalent share:
Primary
Income from continuing operations................................ $ 0.41 $ 0.54
Operating income (loss) from discontinued operations............. $ (1.98) $ (0.89)
Gain on sale of discontinued operations.......................... $ 0.10 $ 0.03
Net income (loss)................................................ $ (1.47) $ (0.33)
Fully Diluted
Income from continuing operations................................ $ 0.41 $ 0.54
Operating income (loss) from discontinued operations............. $ (1.98) $ (0.89)
Gain on sale of discontinued operations.......................... $ 0.09 $ 0.03
Net income (loss)................................................ $ (1.47) $ (0.33)
Weighted average common and common equivalent shares outstanding:
Primary............................................................. 74,200 77,400
Fully diluted....................................................... 74,800 77,400
</TABLE>

See accompanying notes to consolidated financial statements.

F-51
<PAGE> 162

CAREMARK INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1995 1996
--------- ---------
(IN THOUSANDS)
BRACKETS DENOTES CASH
OUTFLOWS
<S> <C> <C>
Cash flows from continuing operations:
Income from continuing operations.................................... $ 30,500 $ 41,500
Adjustments for non-cash items:
Provision for doubtful accounts...................................... 10,000 14,600
Depreciation and amortization........................................ 14,400 25,000
Deferred income taxes................................................ 6,500 38,000
Changes in balance sheet items:
Accounts receivable.................................................. (54,500) (26,100)
Inventories.......................................................... 500 14,800
Payables and accrued liabilities..................................... 56,500 (16,100)
Prepaids and other................................................... 1,900 (6,500)
--------- ---------
Cash flows from continuing operations.................................. 65,800 85,200
--------- ---------
Cash flows from investing activities:
Capital expenditures................................................. (33,000) (48,400)
Acquisitions, net of cash received................................... (141,000) (71,600)
--------- ---------
Cash flows from investing activities................................... (174,000) (120,000)
--------- ---------
Cash flows from financing activities:
Net issuances of debt and lease obligations.......................... (52,200) 27,500
Stock issued under employee benefit plans............................ 11,700 19,800
Purchases of treasury stock.......................................... (19,900) --
--------- ---------
Cash flows from financing activities................................... (60,400) 47,300
--------- ---------
Cash flows from discontinued operations, net of divestiture proceeds... 158,000 22,100
--------- ---------
Increase (decrease) in cash and equivalents............................ (10,600) 34,600
Cash and equivalents, beginning of period.............................. 32,100 28,400
--------- ---------
Cash and equivalents, end of period.................................... $ 21,500 $ 63,000
========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-52
<PAGE> 163

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996

NOTE 1: FINANCIAL INFORMATION

The unaudited interim consolidated financial statements of Caremark
International Inc. and its subsidiaries (the "company" or "Caremark") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These unaudited interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes included in the company's 1995
Annual Report to Stockholders.

In the opinion of management, the unaudited interim consolidated financial
statements reflect all normal and recurring adjustments necessary for a fair
presentation of the interim periods. The results of operations for the interim
periods are not necessarily indicative of the results of operations for the full
year.

NOTE 2: INVENTORIES

Inventories of $99.6 million at June 30, 1996 consist primarily of finished
goods.

NOTE 3: DISCONTINUED OPERATIONS

During 1995 Caremark divested its Clozaril Patient Management System, Home
Infusion business, Oncology Management Services business and Caremark Orthopedic
Services, Inc. subsidiary. Effective February 29, 1996, the company sold its
Nephrology Services business to Total Renal Care, Inc. for $49.0 million in
cash, subject to certain post-closing adjustments. The after-tax gain on
disposition of this business, net of disposal costs, was $2.1 million.

In accordance with APB 30, which addresses the reporting for disposition of
business segments, the company's consolidated financial statements present the
operating income and net assets of these discontinued operations separately from
continuing operations. Prior periods have been restated to conform with this
presentation.

First quarter 1996 discontinued operations also reflects a $65.6 million
after-tax charge related to the settlements with private payors discussed in
Note 5 and a $3.3 million charge for a reduction in the amount expected to be
realized for deferred state income tax net operating loss benefits related to
discontinued operations.

NOTE 4: ACQUISITIONS

In January 1996, Caremark completed its agreement with CIGNA Healthcare of
California, a managed health care subsidiary of CIGNA Corporation, to acquire
substantially all of the assets of CIGNA Medical Group, CIGNA Healthcare's Los
Angeles area staff model delivery system ("CIGNA"). The transaction has been
accounted for by the purchase method of accounting. The accounting related to
this transaction remains subject to purchase accounting adjustments pending
completion of valuations and analysis to determine the respective fair values of
assets received and liabilities assumed. These valuations are expected to be
completed no later than the fourth quarter of 1996.

NOTE 5: CONTINGENT LIABILITIES

In May 1996, two stockholders, each purporting to represent a class, filed
(but have not yet served) complaints against Caremark and each of its directors
in the Court of Chancery of the State of Delaware alleging breached of the
directors' fiduciary duty in connection with Caremark's proposed merger with
Medpartners/Mullikin, Inc. The complaints seek unspecified damages, injunctive
relief, and attorneys' fees

F-53
<PAGE> 164

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

and expenses. The Company intends, if served, to defend these cases vigorously.
Management is unable at this time to estimate the impact, if any, of the
ultimate resolution of these matters.

On September 11, 1995, Coram Healthcare Company ("Coram") filed a complaint
in the San Francisco Superior Court against Caremark International Inc. and its
subsidiary, Caremark Inc., and 50 unnamed individual defendants. The complaint,
which arises from Caremark's sale to Coram of Caremark's Home Infusion business
in April 1995 for approximately $209.0 million in cash and $100.0 million in
securities, alleges breach of the Asset Sale and Note Purchase Agreement dated
January 29, 1995 as amended on April 1, 1995 between Coram and the company,
breach of related contracts, fraud, negligent misrepresentation and a right to
contractual indemnity. Requested relief in Coram's amended complaint includes
specific performance, declaratory relief, injunctive relief, and damages of $5.2
billion. The company filed motions in October 1995 in the Superior Court of
California seeking (i) to strike certain causes of action due to the speculative
nature of the claims and damages asserted and (ii) dismissal of Coram's lawsuit
on grounds of lack of jurisdiction over Illinois-based Caremark. The Superior
Court of California subsequently dismissed the case against the company (but not
against Caremark Inc.) on the basis of lack of jurisdiction. Caremark also filed
a lawsuit in the U.S. District Court in Chicago claiming that Coram committed
securities fraud in its sale to the company of its securities in connection with
the sale of the company's Home Infusion business to Coram. This case, which has
been dismissed, is on appeal and the company has filed counterclaims to the
lawsuit pending in San Francisco. Coram's lawsuit is currently in the discovery
phase.

Although the company cannot predict with certainty the outcome of these
proceedings, based on information currently available, management believes that
the ultimate resolution of this matter is not likely to have a material adverse
effect on Caremark's results of operations, cash flows or financial position.
The company intends to defend these cases vigorously.

In May 1996, three pharmacies, purporting to represent a class consisting
of all of Caremark's competitors in the alternate site infusion therapy
industry, filed a complaint against Caremark, a subsidiary of Caremark, and two
other corporations in the United States District Court for the District of
Hawaii alleging violations of the federal conspiracy statute, the antitrust laws
and of California's unfair business practice statute. The complaint seeks
unspecified treble damages, and attorneys' fees and expenses. Caremark intends
to defend this case vigorously. Management is unable at this time to estimate
the impact, if any, of the ultimate resolution of this matter.

In August and September 1994, stockholders, each purporting to represent a
class, filed complaints against Caremark and certain officers and employees of
Caremark in the United States District Court for the Northern District of
Illinois, alleging violations of the Securities Act of 1933 and the Securities
Exchange Act of 1934, and fraud and negligence in connection with public
disclosures by Caremark regarding Caremark's business practices and the status
of the OIG investigation discussed below. The complaints seek unspecified
damages, declaratory and equitable relief, and attorneys' fees and expenses. In
June 1996, the complaint filed by one group of stockholders alleging violations
of the Securities Exchange Act of 1934 only, was certified as a class. The
parties to all of the complaints continue to engage in discovery proceedings.
The company intends to defend these cases vigorously. Management is unable at
this time to estimate the impact, if any, of the ultimate resolution of these
matters.

In August 1994 and July 1995, stockholders filed derivative actions on
behalf of Caremark in the Court of Chancery of the State of Delaware, the United
States District Court for the Northern District of Illinois and the Circuit
Court of Cook County in Chicago, Illinois alleging breaches of fiduciary duty,
negligence in connection with Caremark's conduct of the business and lack of
corporate controls, and seeking unspecified damages, attorneys' fees and
expenses. In June 1996, the parties entered into a Stipulation and Agreement of
Compromise and Settlement which established proposed terms for the settlement of
the case. The Delaware court will conduct a hearing on August 16, 1996 to
consider the proposed settlement. Although the proposed settlement does not
contemplate the payment of any damages by any defendant, plaintiffs are expected
to seek

F-54
<PAGE> 165

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

an award of attorneys' fees and expenses not in excess of $1.025 million in
conjunction with any approval of the settlement. The Illinois and Cook County
Courts have entered stays of all proceedings in those actions pending resolution
of the Delaware derivative action. In the event the proposed settlement of the
Delaware derivative action is approved by the Delaware court, Caremark
anticipates that the Illinois and Cook County derivative actions will be
dismissed. If the proposed settlement is not approved, Caremark intends to
defend these cases vigorously. Management is unable at this time to estimate the
impact, if any, of the ultimate resolution of these matters.

In late August 1994, certain patients of a physician who prescribed human
growth hormone distributed by Caremark and the sponsor of a health insurance
plan of one of those patients filed complaints against Caremark, employees of
Caremark and others in the United States District Court for the District of
Minnesota. Each complaint purported to be on behalf of a class and alleged
violations of the federal mail and wire fraud statutes, the federal conspiracy
statute and the state consumer fraud statute, as well as conspiracy to breach a
fiduciary duty, negligence and fraud. Each complaint sought unspecified treble
damages, and attorneys' fees and expenses. In July 1996, these plaintiffs also
served (but have not yet filed) a separate lawsuit in the Minnesota State Court
in the County of Hennepin against a subsidiary of Caremark purporting to be on
behalf of a class and alleging all of the claims contained in the complaint
filed with the Minnesota federal court other than the federal claims contained
therein. The complaint seeks unspecified damages, attorneys' fees and expenses
and an award of punitive damages. In July 1995, another patient of the same
physician filed a separate complaint in the District of South Dakota against the
physician, Caremark and another corporation alleging violations of the federal
laws prohibiting payment of remuneration to induce referral of Medicare and
Medicaid beneficiaries, and the federal mail fraud and conspiracy statutes. The
complaint also alleges the intentional infliction of emotional distress and
seeks trebling of at least $15.9 million in general damages, attorneys' fees and
costs, and an award of punitive damages. In August 1995, the parties to the case
filed in South Dakota agreed to a stay of all proceedings until final judgment
has been entered in a criminal case that is presently pending against this
physician. Caremark intends to defend these cases vigorously. Management is
unable at this time to estimate the impact, if any, of the ultimate resolution
of these matters.

Beginning in September 1994, Caremark was named as a defendant in a series
of new lawsuits added to a pending group of actions brought in 1993 under the
antitrust laws by local and chain retail pharmacies against brand name
pharmaceutical manufacturers, wholesalers and prescription benefit managers
other than Caremark. The new lawsuits, filed in federal district courts in at
least 38 states (including the United States District Court for the Northern
District of Illinois), allege that at least 24 pharmaceutical manufacturers
provided unlawful price and service discounts to certain favored buyers and
conspired among themselves to deny similar discounts to the complaining retail
pharmacies (approximately 3,900 in number). The complaints charge that certain
defendant prescription benefit managers, including Caremark, were favored buyers
who knowingly induced or received discriminatory prices from the manufacturers,
in violation of the Robinson-Patman Act. Each complaint seeks unspecified treble
damages, declaratory and equitable relief, and attorneys' fees and expenses. On
April 21, 1995, the Court entered a stay of pre-trial proceedings as to certain
Robinson-Patman Act claims in this litigation, including the Robinson-Patman Act
claims brought against Caremark, pending the conclusion of a first trial of
certain of such claims brought by a limited number of plaintiffs against five
defendants not including Caremark. The company intends to defend these cases
vigorously. Management is unable to estimate at this time the impact, if any, of
the ultimate resolution of this matter.

F-55
<PAGE> 166

CAREMARK INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

form of injunctive relief to set aside or modify Caremark's alliance agreements
and an order to cease and desist from certain marketing practices and from
entering into or continuing with certain types of agreements. Management is
unable at this time to estimate the impact, if any, of the ultimate resolution
of this matter.

In March 1996, the company agreed to settle all disputes with a number of
private payors. The settlements resulted in an after-tax charge of $42.3
million. These disputes relate to businesses that were covered by Caremark's
settlement with federal and state agencies in June 1995 discussed below. In
addition, Caremark will pay $23.3 million after-tax to cover the private payors'
pre-settlement and settlement-related expenses. An after-tax charge for the
above amounts has been recorded in first quarter 1996 discontinued operations.
Caremark may pay the settlement amounts in 1996 and 1997 or, under certain
circumstances, in semi-annual installments, including interest, through 1999. No
agreement, contract or other business relationship in existence at the time of
the settlements will be terminated or negatively affected by the settlement
agreements. The parties have also agreed to negotiate in good faith to maintain
or enhance ongoing business relationships. The company's lenders have waived the
impact of these settlements on the financial covenants under its existing credit
facility through September 15, 1996. The company currently expects to enter into
revised credit facilities prior to this date.

In June 1995, Caremark agreed to settle an investigation of the company
with the U.S. Department of Justice, the Office of the Inspector General of the
U.S. Department of Health and Human Services, the Veterans Administration, the
Federal Employees Health Benefits Program, the Civilian Health and Medical
Program of the Uniformed Services and related state investigative agencies in
all 50 states and the District of Columbia (the "OIG investigation"). The
company took an after-tax charge to discontinued operations of $154.8 million in
1995 for these settlement payments, costs to defend ongoing derivative, security
and related lawsuits, and other associated costs.

Caremark is party to various other commitments, claims and routine
litigation arising in the ordinary course of business. Management does not
believe that the result of such commitments, claims and litigation, individually
or in the aggregate, will have a material effect on the company's business or
its income, cash flows or financial condition.

NOTE 6: MERGER

On May 13, 1996, Caremark and MedPartners/Mullikin, Inc. ("MedPartners")
signed a definitive agreement to merge. Under the terms of the agreement, which
has been approved by the Boards of Directors of both companies, each Caremark
share will be converted into MedPartners common stock at a fixed ratio of 1.21
shares of MedPartners per Caremark share. The merger is expected to close in the
third quarter of 1996 and is subject to stockholder and regulatory approval.

F-56
<PAGE> 167

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Cardinal Healthcare, P.A.

We have audited the accompanying balance sheet of Cardinal Healthcare, P.A.
as of December 31, 1995, and the related statements of operations, changes in
stockholders' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cardinal Healthcare, P.A. at
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Birmingham, Alabama
June 19, 1996

F-57
<PAGE> 168

CARDINAL HEALTHCARE, P.A.

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 1,055,873
Accounts receivable, less allowance for bad debts of $641,018................. 1,998,669
Other current assets.......................................................... 170,496
------------
Total current assets.................................................. 3,225,038
Property and equipment:
Equipment and furniture....................................................... 2,932,567
Leasehold improvements........................................................ 1,180,529
------------
4,113,096
Less accumulated depreciation and amortization................................ (1,819,402)
------------
Net property and equipment...................................................... 2,293,694
Other assets.................................................................... 877,310
------------
Total assets.......................................................... $ 6,396,042
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............................................................. $ 966,067
Salaries payable and other accrued expenses................................... 2,322,924
Lines of credit............................................................... 1,305,000
Current portion of long-term debt and capital lease........................... 1,578,903
------------
Total current liabilities............................................. 6,172,894
Long-term debt and capital lease, net of current portion........................ 1,799,545
Stockholders' deficit:
Common stock, no par value; 50,000 shares authorized, 46 shares issued
and outstanding............................................................ --
Additional paid-in capital.................................................... 361,167
Accumulated deficit........................................................... (1,937,564)
------------
Total stockholders' deficit........................................... (1,576,397)
------------
Total liabilities and stockholders' deficit........................... $ 6,396,042
==========
</TABLE>

See accompanying notes.

F-58
<PAGE> 169

CARDINAL HEALTHCARE, P.A.

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Net revenue................................................................... $20,880,751
Operating expenses:
Cost of affiliated physician services....................................... 10,366,446
Clinic salaries, wages and benefits......................................... 6,161,276
Clinic rent and lease expense............................................... 994,987
Clinic supplies............................................................. 1,491,098
Other clinic costs.......................................................... 2,723,231
General corporate expenses.................................................. 1,067,745
Depreciation and amortization............................................... 297,030
Net interest expense........................................................ 144,400
------------
Net operating expenses................................................... 23,246,213
------------
Loss before income taxes...................................................... (2,365,462 )
Deferred income tax benefit................................................... (26,721 )
------------
Net loss...................................................................... $(2,338,741 )
============
</TABLE>

See accompanying notes.

F-59
<PAGE> 170

CARDINAL HEALTHCARE, P.A.

STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT DEFICIT
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balances at December 31, 1994..................... $ -- $ 54,241 $ 401,177 $ 455,418
Sale of stock................................... -- 306,926 -- 306,926
Net loss........................................ -- -- (2,338,741) (2,338,741)
------ ---------- ----------- -------------
Balances at December 31, 1995..................... $ -- $ 361,167 $(1,937,564) $ (1,576,397)
====== ======== ========== ==========
</TABLE>

See accompanying notes.

F-60
<PAGE> 171

CARDINAL HEALTHCARE, P.A.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
OPERATING ACTIVITIES:
Net loss........................................................................ $ (2,338,741)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................. 297,030
Deferred income taxes......................................................... (26,721)
Changes in operating assets and liabilities:
Accounts receivable, net................................................... (193,504)
Other assets............................................................... (500,400)
Accounts payable........................................................... 174,809
Salaries payable and other accrued expenses................................ 1,068,414
------------
Net cash used in operating activities.................................... (1,519,113)
INVESTING ACTIVITIES:
Purchase of property and equipment.............................................. (1,629,981)
------------
Net cash used in investing activities.................................... (1,629,981)
FINANCING ACTIVITIES:
Proceeds from long-term debt.................................................... 3,712,261
Payments on long-term debt...................................................... (417,829)
Net proceeds from the issuance of common stock.................................. 14,506
------------
Net cash provided by financing activities................................ 3,308,938
------------
Net increase in cash............................................................ 159,844
Cash at beginning of year....................................................... 896,029
------------
Cash at end of year............................................................. $ 1,055,873
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest.......................................... $ 144,400
==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING ACTIVITIES:
Accounts receivable contributed for common stock................................ $ 292,420
==========
</TABLE>

See accompanying notes.

F-61
<PAGE> 172

CARDINAL HEALTHCARE, P.A.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. ACCOUNTING POLICIES

Description of Business

Cardinal Healthcare, P.A. (Cardinal) is a seventy-five member
multi-specialty physician group which services the Raleigh-Durham area of North
Carolina.

Basis of Presentation

The financial statements have been prepared on the accrual basis of
accounting.

Management Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements. Actual results could differ from these estimates.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized over the life of the
related leases. Routine maintenance and repairs are expensed as incurred, while
costs of betterments and renewals are capitalized.

Income Taxes

Cardinal is a corporation taxable under the provisions of the Internal
Revenue Code. Deferred income taxes are provided for temporary differences
between financial and income tax reporting.

Net Revenue

Net revenue is reported at the estimated realizable amounts from patients,
third-party payors and others for services rendered. Revenue under certain
third-party payor agreements is subject to audit and retroactive adjustments.
Provisions for estimated third-party payor settlements and adjustments are
estimated in the period the related services are rendered and adjusted in future
periods as final settlements are determined. The Medicare and Medicaid programs
pay physician services based on fee schedules which are determined by the
related government agency. Cardinal has negotiated agreements with managed care
organizations to provide physician services through a combination of discounted
fee for service and capitated arrangements. No individual managed care
organization is material to Cardinal.

Cost of Affiliated Physician Services

Cost of affiliated physician services represents salaries, bonuses and
benefits paid to the affiliated physicians. Physician compensation is generally
determined based on the excess of collections over expenses prior to physician
compensation.

Impairment of Long-Lived Assets

F-62
<PAGE> 173

CARDINAL HEALTHCARE, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

expected to be disposed of. Management has determined that long-lived assets are
fairly stated in the accompanying balance sheet, and that no indicators of
impairment are present. In accordance with the new rules, the Company's prior
year financial statements have not been restated to reflect the change in
accounting principle.

2. LINES OF CREDIT, LONG-TERM DEBT AND CAPITAL LEASE

Cardinal has lines of credit with First Union National Bank of North
Carolina totaling $1,305,000. Interest is at the prime rate (8% at December 31,
1995) payable monthly with principal balances due on April 30, 1996.

Long-term debt and capital lease consisted of the following as of December
31, 1995:

<TABLE>
<S> <C>
Note payable to First Union National Bank of North Carolina, interest
only payable monthly through December 1995, thereafter monthly
installments of $13,803, interest rate at 8.5% through June 1998...... $ 825,000
Note payable to First Union National Bank of North Carolina, due in
installments of $22,270 with a final payment of $20,000, interest rate
at 8.25% through June 1998............................................ 601,299
Note payable to related party, Raleigh Internal Medicine Associates,
interest only payable monthly through August 1996 at prime rate (8% at
December 31, 1995) plus 2%, thereafter monthly installments of $10,000
with a final payment due December 31, 1996............................ 1,068,000
Various notes payable to Raleigh Community Hospital, monthly
installments ranging from $3,705 to $3,788, interest rates ranging
from 7% to 9% through October 1998.................................... 455,266
Note payable to Wake Medical Center, interest rate at 7.75% through
October 2000.......................................................... 134,326
Capital lease obligations............................................... 257,814
Other................................................................... 36,743
------------
3,378,448
Less amounts due within one year........................................ (1,578,903)
------------
$1,799,545
==========
</TABLE>

The amounts recorded above approximate the fair value of the obligations.

At December 31, 1995, substantially all of the assets of Cardinal,
including accounts receivable and property and equipment, were provided as
collateral under the various notes, lines of credit and capital lease
agreements.

The following is a schedule of principal maturities of long-term debt,
excluding the capital lease, as of December 31, 1995:

Cardinal is the lessee of certain equipment under a capital lease which
expires in 2001. The related equipment is being amortized over five years and
the related amortization expense is included within depreciation and
amortization expense in the statement of operations.

F-63
<PAGE> 174

CARDINAL HEALTHCARE, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following is a schedule of future minimum lease payments under the
capital lease together with the present value of the net minimum lease payments
as of December 31, 1995:

<TABLE>
<S> <C>
1996...................................................................... $ 43,333
1997...................................................................... 65,000
1998...................................................................... 65,000
1999...................................................................... 65,000
2000...................................................................... 65,000
Thereafter................................................................ 21,667
--------
Total minimum lease payments.............................................. 325,000
Less amount representing interest......................................... (67,186)
--------
Obligation under capital lease............................................ 257,814
Less current portion of capital lease obligation.......................... (14,734)
--------
Long-term obligation under capital lease.................................. $243,080
========
</TABLE>

Capitalized equipment leases included in equipment and accumulated
amortization was $257,813 and $25,781, respectively, at December 31, 1995. The
imputed interest rate on the capital lease was 7.1% at December 31, 1995.

3. OPERATING LEASES

Leases that do not meet the criteria for capitalization are classified as
operating leases with related rentals charged to operations as incurred. Total
rental expense in 1995 was $1,215,484. The following is a schedule of future
minimum lease payments under operating leases as of December 31, 1995:

<TABLE>
<S> <C>
1996........................................................ $ 1,566,174
1997........................................................ 1,524,936
1998........................................................ 1,404,808
1999........................................................ 1,317,562
2000........................................................ 1,088,178
Thereafter.................................................. 5,294,176
-----------
$12,195,834
==========
</TABLE>

4. RELATED PARTIES

Cardinal rents various office space and equipment from Raleigh Internal
Medicine Associates (RIMA), a partnership owned by stockholders of Cardinal.
Total rental expense paid in 1995 was $574,812. Lease commitments over the next
five years with related parties are included in Note 3. On December 29, 1995,
Cardinal obtained a note payable from RIMA of $1,068,000, due on December 31,
1996, which is included in Note 2.

As of December 31, 1995, a note receivable of approximately $314,000
existed between Cardinal and Cardinal IPA, an independent physician association
of which several partners of Cardinal are members. This amount is included in
other assets.

5. EMPLOYEE BENEFIT PLAN

Cardinal provides a 401(k) plan and a profit sharing plan to all employees
who have completed one year of service and attained age 21. Contributions are
made at the discretion of management. Total cost of contributions was $225,777
for the year ending December 31, 1995.

F-64
<PAGE> 175

CARDINAL HEALTHCARE, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. CONTINGENCIES

In addition to the general liability and malpractice insurance carried by
the individual physicians, Cardinal maintains general liability and malpractice
insurance providing coverage of $3,000,000 per incident and $5,000,000 in the
aggregate. As of December 31, 1995, there were no asserted malpractice claims
against Cardinal, accordingly, no amounts for potential losses have been accrued
in the accompanying financial statements. In addition, Cardinal has not accrued
a loss for unreported incidents or for losses in excess of insurance coverage as
the amount, if any, cannot be reasonably estimated and the probability of an
adverse outcome cannot be determined at this time. It is the opinion of
management that the ultimate resolution of any unasserted claims will not have a
material adverse effect on the financial position or operating results of
Cardinal.

7. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Cardinal's deferred tax assets and liabilities as of December 31, 1995 were as
follows:

<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards....................................... $ 344,737
Cash to accrual adjustments............................................ 1,185,014
----------
Gross deferred tax assets................................................ 1,529,751
Valuation allowance for deferred tax assets.............................. (592,243)
----------
Net deferred tax assets........................................ 937,508
Deferred tax liabilities:
Depreciable and amortizable assets..................................... 138,040
Cash to accrual adjustments............................................ 799,468
----------
Gross deferred tax liabilities........................................... 937,508
----------
Net deferred tax liabilities................................... $ --
=========
</TABLE>

Income tax benefit for the year ended December 31, 1995 was as follows:

<TABLE>
<S> <C>
Current:
Federal...................................................... $ --
State........................................................ --
--------
--
Deferred:
Federal...................................................... (23,381)
State........................................................ (3,340)
--------
(26,721)
--------
$(26,721)
========
</TABLE>

F-65
<PAGE> 176

CARDINAL HEALTHCARE, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The difference between the benefit for income taxes and the amount computed
by applying the statutory federal income tax rate to income before taxes was as
follows:

<TABLE>
<S> <C>
Federal taxes at statutory rate.......................................... $(804,256)
Add (deduct):
State income taxes, net of federal tax benefit......................... (2,171)
Valuation allowance.................................................... 904,969
Other.................................................................. (125,263)
---------
$ (26,721)
=========
</TABLE>

At December 31, 1995, Cardinal had cumulative net operating loss
carryforward for income tax purposes of approximately $862,000 available to
reduce future amounts of taxable income. If not utilized to offset future
taxable income, the net operating loss carryforwards will expire at various
dates through 2010. A valuation allowance has been established for the deferred
tax asset until it is more likely than not that some portion, or all of the
deferred tax asset will be realized.

8. PLAN AND AGREEMENT OF MERGER (UNAUDITED)

In July 1996, Cardinal entered into a letter of intent to be acquired by
MedPartners/Mullikin, Inc. in exchange for shares of MedPartners/Mullikin, Inc.
common stock.

F-66
<PAGE> 177

CARDINAL HEALTHCARE, P.A.

BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 896,029
Accounts receivable, less allowance for bad debts of $480,561................. 1,651,485
Other current assets.......................................................... 51,689
------------
Total current assets.................................................. 2,599,203
Property and equipment:
Equipment and furniture....................................................... 2,121,263
Leasehold improvements........................................................ 369,196
------------
2,490,459
Less accumulated depreciation................................................. 1,522,372
------------
Net property and equipment...................................................... 968,087
Other assets.................................................................... 349,633
------------
Total assets.......................................................... $3,916,923
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 791,258
Salaries payable and other accrued expenses................................... 928,054
Line of credit................................................................ 250,000
Current portion of long-term debt............................................. 302,130
Deferred income taxes......................................................... 353,177
------------
Total current liabilities............................................. 2,624,619
Long-term debt, net of current portion.......................................... 836,886
Stockholders' equity:
Common stock, no par value; 50,000 shares authorized, 29 shares issued and
outstanding................................................................ --
Additional paid-in capital.................................................... 54,241
Retained earnings............................................................. 401,177
------------
Total stockholders' equity............................................ 455,418
------------
Total liabilities and stockholders' equity............................ $3,916,923
==========
</TABLE>

See accompanying notes.

F-67
<PAGE> 178

CARDINAL HEALTHCARE, P.A.

STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1994
----------- -----------
<S> <C> <C>
Net revenue....................................................... $13,529,687 $15,786,906
Operating expenses:
Cost of affiliated physician services........................... 6,424,392 7,152,379
Clinic salaries, wages and benefits............................. 3,722,204 4,232,935
Clinic rent and lease expense................................... 487,789 640,005
Clinic supplies................................................. 731,006 959,119
Other clinic costs.............................................. 1,335,053 1,751,663
General corporate expenses...................................... 523,459 686,805
Depreciation.................................................... 145,618 191,059
Net interest expense............................................ 70,792 92,882
----------- -----------
Net operating expenses....................................... 13,440,313 15,706,847
----------- -----------
Income before income taxes........................................ 89,374 80,059
Deferred income tax (benefit) expense............................. (191,612) 26,148
----------- -----------
Net income........................................................ $ 280,986 $ 53,911
========== ==========
</TABLE>

See accompanying notes.

F-68
<PAGE> 179

CARDINAL HEALTHCARE, P.A.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992.......................... $ -- $ 37,921 $ 66,280 $ 104,201
Sale of stock....................................... -- 5,440 -- 5,440
Net income.......................................... -- -- 280,986 280,986
------ ---------- -------- -------------
Balance at December 31, 1993.......................... $ -- $ 43,361 $347,266 $ 390,627
Sale of stock....................................... -- 10,880 -- 10,880
Net income.......................................... -- -- 53,911 53,911
------ ---------- -------- -------------
Balances at December 31, 1994......................... $ -- $ 54,241 $401,177 $ 455,418
====== ======= ======== ==========
</TABLE>

See accompanying notes.

F-69
<PAGE> 180

CARDINAL HEALTHCARE, P.A.

STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1993 1994
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................ $ 280,986 $ 53,911
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation........................................................ 145,618 191,059
Gain on disposal of assets.......................................... (33,050) --
Deferred income taxes............................................... (191,612) 26,148
Changes in operating assets and liabilities:
Accounts receivable, net......................................... (2,669) (182,108)
Other assets..................................................... 10,987 (230,077)
Accounts payable................................................. 33,695 72,538
Salaries payable and other accrued expenses...................... 462,984 (407,071)
--------- ----------
Net cash provided (used) by operating activities............... 706,939 (475,600)
INVESTING ACTIVITIES:
Purchase of property and equipment.................................... (258,157) (273,318)
Proceeds from disposal of assets...................................... 62,700 --
--------- ----------
Net cash used by investing activities.......................... (195,457) (273,318)
FINANCING ACTIVITIES:
Proceeds from long-term debt.......................................... 383,952 1,070,726
Payments on long-term debt............................................ (518,503) (190,343)
Net proceeds from the issuance of common stock........................ 5,440 10,880
--------- ----------
Net cash (used) provided by financing activities............... (129,111) 891,263
--------- ----------
Increase in cash...................................................... 382,371 142,345
Cash at beginning of year............................................. 371,313 753,684
--------- ----------
Cash at end of year................................................... $ 753,684 $ 896,029
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest................................ $ 70,792 $ 92,882
========= =========
</TABLE>

See accompanying notes.

F-70
<PAGE> 181

CARDINAL HEALTHCARE, P.A.

NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1994

1. ACCOUNTING POLICIES

Description of Business

Cardinal Healthcare, P.A. (Cardinal) is a thirty-five member
multi-specialty physician group which services the Raleigh-Durham area of North
Carolina.

Basis of Presentation

The financial statements have been prepared on the accrual basis of
accounting.

Management Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates and
assumptions. Actual results could differ from these estimates.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets. Routine maintenance and repairs are charged to expenses as
incurred, while costs of betterments and renewals are capitalized.

Income Taxes

Cardinal is a corporation taxable under the provisions of the Internal
Revenue Code. Deferred income taxes are provided for temporary differences
between financial and income tax reporting.

Net Revenue

Cost of Affiliated Physician Services

Cost of affiliated physician services represents salaries, bonuses and
benefits paid to the affiliated physicians. Physician compensation generally is
determined based on the excess of collections over expenses prior to physician
compensation.

F-71
<PAGE> 182

CARDINAL HEALTHCARE, P.A.

NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)

2. LINE OF CREDIT AND LONG-TERM DEBT

Cardinal has a line of credit with First Union National Bank of North
Carolina totaling $250,000. Interest is at the prime rate payable monthly with
the principal balance due on April 30, 1995.

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Note payable to First Union National Bank of North Carolina, due in
installments of $22,270 with a final payment of $20,000, interest rate
at 8.25% through June 1998............................................ $ 729,016
Various notes payable to Raleigh Community Hospital, monthly
installments ranging from $3,705 to $3,788, interest rates ranging
from 7% to 9% through December 1998................................... 410,000
------------
1,139,016
Less amounts due within one year........................................ (302,130)
------------
$ 836,886
==========
</TABLE>

The amounts recorded above approximate the fair value of the obligations.

The following is a schedule of principal maturities of long-term debt as of
December 31, 1994:

3. OPERATING LEASES

Leases that do not meet the criteria for capitalization are classified as
operating leases with related rentals charged to operations as incurred. Total
rental expense in 1994 and 1993 was approximately $737,505 and $653,184,
respectively. The following is a schedule of future minimum lease payments under
operating leases as of December 31, 1994:

<TABLE>
<S> <C>
1995........................................................ $ 1,215,484
1996........................................................ 1,566,174
1997........................................................ 1,524,936
1998........................................................ 1,404,808
1999........................................................ 1,317,562
Thereafter.................................................. 6,382,354
-----------
$13,411,318
==========
</TABLE>

4. RELATED PARTIES

Cardinal rents various office space and equipment from related parties
owned by stockholders of Cardinal. Total rental expense paid in 1993 and 1994
was approximately $281,942 and $369,923, respectively. Lease commitments over
the next five years with related parties are included in Note 3.

F-72
<PAGE> 183

CARDINAL HEALTHCARE, P.A.

NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)

5. EMPLOYEE BENEFIT PLAN

Cardinal had qualified defined contribution plans covering substantially
all employees. Contributions were made at the discretion of management. Total
cost of contributions in 1993 and 1994 was $917,369 and $580,177, respectively.

6. CONTINGENCIES

In addition to the general liability and malpractice insurance carried by
the individual physicians, Cardinal maintains general liability and malpractice
insurance providing Cardinal with coverage of $3,000,000 per incident and
$5,000,000 in the aggregate. As of December 31, 1994, there were no asserted
malpractice claims against Cardinal, accordingly, no amounts for potential
losses have been accrued in the accompanying financial statements. In addition,
Cardinal has not accrued a loss for unreported incidents or for losses in excess
of insurance coverage as the amount, if any, cannot be reasonably estimated and
the probability of an adverse outcome cannot be determined at this time. It is
the opinion of management that the ultimate resolution of any unasserted claims
will not have a material adverse effect on the financial position or operating
results of Cardinal.

7. INCOME TAXES

<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards...................................... $ 13,730
Cash to accrual adjustments........................................... 354,253
------------
Gross deferred tax assets............................................... 367,983
Valuation allowance..................................................... (13,730)
------------
Net deferred tax assets................................................. 354,253
Deferred tax liabilities:
Depreciable assets.................................................... 41,440
Cash to accrual adjustments........................................... 665,990
------------
Gross deferred tax liabilities.......................................... 707,430
------------
Net deferred tax liabilities............................................ $353,177
==========
</TABLE>

F-73
<PAGE> 184

CARDINAL HEALTHCARE, P.A.

NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)

Income tax (benefit) expense was as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1993 1994
--------- -------
<S> <C> <C>
Current:
Federal...................................................... $ -- $ --
State........................................................ -- --
--------- -------
-- --
Deferred:
Federal...................................................... (167,660) 22,879
State........................................................ (23,952) 3,269
--------- -------
(191,612) 26,148
--------- -------
$(191,612) $26,148
========= =======
</TABLE>

The differences between the (benefit) provision for income taxes and the
amount computed by applying the statutory federal income tax rate to income
before taxes were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1993 1994
--------- --------
<S> <C> <C>
Federal taxes at statutory rate............................... $ 30,573 $ 27,494
Add (deduct):
State income taxes, net of federal tax benefit.............. 6,969 6,267
Other....................................................... (229,154) (59,909)
--------- --------
$(191,612) $ 26,148
========= ========
</TABLE>

At December 31, 1993 and 1994, Cardinal had net operating loss
carryforwards for income tax purposes of approximately $30,000 and $20,000,
respectively, available to reduce future amounts of taxable income. If not
utilized to offset future taxable income, the net operating loss carryforwards
will expire at various dates through 2009. A valuation allowance has been
established for the net operating loss until it is more likely than not that
some portion, or all of the deferred tax assets will be utilized.

F-74
<PAGE> 185

CARDINAL HEALTHCARE, P.A.

BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
<S> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 205,820
Accounts receivable, less allowance for bad debts of $749,934................. 3,254,031
Other current assets.......................................................... 21,251
-----------
Total current assets.................................................. 3,481,102
Property and equipment:
Equipment and furniture....................................................... 3,134,338
Leasehold improvements........................................................ 1,334,746
-----------
4,469,084
Less accumulated depreciation and amortization................................ (2,294,085)
-----------
Net property and equipment...................................................... 2,174,999
Other assets.................................................................... 1,067,161
-----------
Total assets.......................................................... $ 6,723,262
==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable.............................................................. $ 732,918
Salaries payable and other accrued expenses................................... 2,247,117
Line of credit................................................................ 1,367,000
Current portion of long-term debt and capital lease........................... 1,694,429
-----------
Total current liabilities............................................. 6,041,464
Long-term debt and capital lease, net of current portion........................ 1,635,885
Stockholders' deficit:
Common stock, no par value; 50,000 shares authorized, 54 shares issued and
outstanding................................................................ --
Additional paid-in capital.................................................... 566,369
Accumulated deficit........................................................... (1,520,456)
-----------
Total stockholders' deficit........................................... (954,087)
-----------
Total liabilities and stockholders' deficit........................... $ 6,723,262
==========
</TABLE>

See accompanying note.

F-75
<PAGE> 186

CARDINAL HEALTHCARE, P.A.

STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Net revenue......................................................... $ 9,868,779 $17,085,237
Operating expenses:
Cost of affiliated physician services............................. 4,165,301 6,993,744
Clinic salaries, wages and benefits............................... 2,969,246 4,861,274
Clinic rent and lease expense..................................... 471,393 682,416
Clinic supplies................................................... 706,435 1,022,676
Other clinic costs................................................ 1,290,180 1,867,741
General corporate expenses........................................ 493,530 708,358
Depreciation and amortization..................................... 140,723 216,610
Net interest expense.............................................. 68,412 99,037
----------- -----------
Net operating expenses.................................... 10,305,220 16,451,856
----------- -----------
Income before income taxes.......................................... (436,441) 633,381
Deferred income tax expense......................................... 12,335 11,071
----------- -----------
Net income (loss)................................................... $ (448,776) $ 622,310
========== ==========
</TABLE>

See accompanying note.

F-76
<PAGE> 187

CARDINAL HEALTHCARE, P.A.

STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1995 1996
--------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income.................................................... $(448,776) $ 622,310
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization...................................... 140,723 216,610
Deferred income taxes.............................................. 12,335 11,071
Changes in operating assets and liabilities:
Accounts receivable, net........................................ (814,366) (1,255,362)
Other assets.................................................... (13,869) (40,606)
Accounts payable................................................ 489,721 (570,676)
Salaries payable and other accrued expenses..................... 382,183 250,649
--------- -----------
Net cash used by operating activities...................... (252,049) (766,004)
INVESTING ACTIVITIES:
Purchase of property and equipment................................... (833,823) (97,915)
--------- -----------
Net cash used by investing activities...................... (833,823) (97,915)
FINANCING ACTIVITIES:
Proceeds from long-term debt......................................... 910,000 62,000
Payments on long-term debt........................................... (392,438) (48,134)
--------- -----------
Net cash provided by financing activities.................. 517,562 13,866
--------- -----------
Decrease in cash..................................................... (568,310) (850,053)
Cash at beginning of period.......................................... 896,029 1,055,873
--------- -----------
Cash at end of period................................................ $ 327,719 $ 205,820
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest............................. $ 45,727 $ 97,737
========= ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Accounts receivable contributed for common stock..................... $ -- $ 205,202
========= ==========
</TABLE>

See accompanying note.

F-77
<PAGE> 188

CARDINAL HEALTHCARE, P.A.

NOTE TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1996

1. BASIS OF PRESENTATION

The balance sheet as of June 30, 1996, the statements of income and the
statements of cash flows for the six months ended June 30, 1995 and 1996, have
been prepared by Cardinal Healthcare, P.A. (the Company) without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position as of June 30,
1996, and the results of operations and cash flows for the six months ended June
30, 1995 and 1996 have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's December 31, 1995 audited financial statements. The results of
operations for the periods ended June 30, 1995 and 1996 are not necessarily
indicative of the operation results for those years.

F-78
<PAGE> 189

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
CHS Management, Inc.

We have audited the accompanying balance sheet of CHS Management, Inc. as
of December 31, 1995 and the related statements of income, stockholders' equity
and cash flows for the period from September 1, 1995 (inception) through
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CHS Management, Inc. as of
December 31, 1995 and the results of its operations and its cash flows for the
period from September 1, 1995 (inception) through December 31, 1995 in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Birmingham, Alabama
July 26, 1996

F-79
<PAGE> 190

CHS MANAGEMENT, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Current assets:
Cash.......................................................................... $ 719,303
Accounts receivable........................................................... 134,465
Due from affiliates........................................................... 752,362
Prepaid expenses.............................................................. 57,664
Deferred tax asset............................................................ 87,210
------------
Total current assets.................................................. 1,751,004
Property and equipment, net..................................................... 82,367
Deferred tax asset.............................................................. 204,950
Other assets.................................................................... 67,668
------------
Total assets.......................................................... $2,105,989
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 85,601
Accrued expenses.............................................................. 250,859
Accrued compensation and payroll taxes........................................ 398,403
Income taxes payable.......................................................... 76,700
Due to affiliates............................................................. 49,453
Funds held on behalf of others................................................ 493,600
------------
Total current liabilities............................................. 1,354,616
Excess of fair value of assets acquired over liabilities assumed................ 332,588
Stockholders' equity:
Common stock, $.01 par value; 180,000 shares authorized, 48,844 shares issued
and outstanding............................................................ 488
Additional paid-in capital.................................................... 250,162
Retained earnings............................................................. 168,135
------------
Total stockholders' equity............................................ 418,785
------------
Total liabilities and stockholders' equity............................ $2,105,989
==========
</TABLE>

See accompanying notes.

F-80
<PAGE> 191

CHS MANAGEMENT, INC.

STATEMENT OF INCOME

<TABLE>
<CAPTION>
SEPTEMBER 1, 1995
(INCEPTION)
THROUGH
DECEMBER 31,
1995
-----------------
<S> <C>
Revenue:
Management fees -- affiliates.............................................. $ 2,446,541
Management fees -- nonaffiliates........................................... 211,782
-----------------
Total revenue...................................................... 2,658,323
Operating expenses:
Salaries and employee benefits............................................. 1,349,979
Outside professional services.............................................. 170,507
Building and occupancy..................................................... 334,912
Depreciation............................................................... 9,514
Other administrative expenses.............................................. 522,464
-----------------
Total operating expenses........................................... 2,387,376
-----------------
Operating income............................................................. 270,947
Interest income.............................................................. 3,656
-----------------
Income before income taxes................................................... 274,603
Provision for income taxes................................................... 106,468
-----------------
Net income................................................................... $ 168,135
=============
</TABLE>

See accompanying notes.

F-81
<PAGE> 192

CHS MANAGEMENT, INC.

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at September 1, 1995 (inception)........ -- $ -- $ -- $ -- $ --
Common stock exchanged for net assets......... 48,844 488 250,162 -- 250,650
Net income.................................... -- -- -- 168,135 168,135
------ ------ ---------- -------- --------
Balance at December 31, 1995.................... 48,844 $488 $ 250,162 $168,135 $418,785
====== ===== ======== ======== ========
</TABLE>

See accompanying notes.

F-82
<PAGE> 193

CHS MANAGEMENT, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
SEPTEMBER 1, 1995
(INCEPTION) THROUGH
DECEMBER 31, 1995
-------------------
<S> <C>
OPERATING ACTIVITIES:
Net income................................................................ $ 168,135
Adjustment to reconcile net income to net cash used in operating
activities:
Depreciation........................................................... 9,514
Amortization of negative goodwill...................................... (5,686)
Increase in accounts receivable........................................ (28,031)
Increase in due from affiliate......................................... (165,567)
Decrease in prepaid expenses........................................... 2,503
Decrease in deferred tax asset......................................... 29,769
Increase in other assets............................................... (10)
Decrease in accounts payable and other accrued liabilities............. (310,991)
Increase in due to affiliates.......................................... 49,453
-------------------
Net cash used in operating activities............................. (250,911)
-------------------
INVESTING ACTIVITIES:
Purchase of property and equipment........................................ (31,033)
Acquisition costs......................................................... (20,231)
-------------------
Net cash used in investing activities............................. (51,264)
-------------------
FINANCING ACTIVITIES:
Stockholders' contributions............................................... 527,878
Cash received on behalf of affiliate...................................... 800,000
Cash disbursed on behalf of affiliate..................................... (306,400)
-------------------
Net cash provided by financing activities......................... 1,021,478
-------------------
Net increase in cash.............................................. 719,303
Cash at beginning of period................................................. --
-------------------
Cash at end of period....................................................... $ 719,303
==============
NONCASH TRANSACTIONS -- assets and liabilities transferred from affiliates
see Note 4
</TABLE>

See accompanying notes.

F-83
<PAGE> 194

CHS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

CHS Management, Inc. (CHS) was incorporated in August 1995, and commenced
operations in September 1995. The corporation was formed by Community Medical
Group of the West Valley (CMG) through the contribution of the management
services component of CMG to the new company. Thereafter, CHS acquired certain
assets and liabilities and the operations of Health Source Management Group. CHS
provides administrative management services to CMG and Health Source Medical
Group (HSMG). In addition, CHS provides management services to New Management
(NM), an affiliate of CMG, and other health care organizations. CHS also
negotiates contracts on behalf of health care providers with health maintenance
organizations and other prepaid health insurance plans to provide physician and
related health care services to enrolled members who select physicians in CHS
managed physician groups.

Management Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method over the shorter of the estimated useful lives of the
assets or the terms of the underlying leases. Estimated useful lives are three
to seven years for furniture, fixtures and equipment and five to ten years for
leasehold improvements. In accordance with the requirements of APB No. 16,
Business Combinations, the property and equipment acquired from Health Source
Management Group has been reduced to zero carrying value (note 5).

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

Fair Value of Financial Instruments

The Company values financial instruments as required by Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," and Statement of Financial Accounting Standards No. 119,
"Disclosures about Derivative Instruments and Fair Value of Financial
Instruments." The carrying amounts of cash, accounts receivable, accounts
payable, accrued expenses (including accrued compensation and payroll), income
taxes and due from affiliate approximate fair value due to their liquidity.

Impairment of Long-Lived Assets

During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of, which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. Management has determined that-lived assets are fairly stated in the
accompanying balance sheet, and that no indicators of impairment are present. In
accordance with the new rules, the Company's prior year financial statements
have not been restated to reflect the change in accounting principle.

F-84
<PAGE> 195

CHS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. MANAGEMENT SERVICES AGREEMENTS

In 1995, CHS entered into management services agreements with CMG and HSMG
(the Medical Groups) under which CHS provides administrative and operational
services such as contract management, financial reporting, utilization review,
case management, claims processing and payment, and quality assurance.

Pursuant to these agreements, the Medical Groups remit to CHS 12% of
capitation and other Payer revenues except for CMG fee for service revenue which
is based on a lesser percentage.

Pursuant to the NM agreement, NM remits to CHS a management fee based on
12% per dollar per enrolled life under the capitation agreement between CMG, NM
and West Hills Hospital.

CHS' management services agreement with CMG and HSMG expires on September
1, 2015. Thereafter, the agreement renews for two successive ten-year periods
unless notice of intent to terminate the agreement is provided by either party
(note 9).

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 consists of the following:

<TABLE>
<S> <C>
Computer equipment......................................................... $19,289
Furniture and fixtures..................................................... 61,005
Office equipment........................................................... 10,829
Leasehold improvements..................................................... 758
-------
91,881
Less accumulated depreciation and amortization............................. 9,514
-------
$82,367
=======
</TABLE>

4. RELATED PARTY TRANSACTIONS

Due from Affiliate

During 1995, CHS entered into management agreements with CMG, HSMG, and NM,
all affiliated companies, under which CHS provides certain management and
administrative services in exchange for management fee based upon a percentage
of CMG and HSMG revenue and based on enrollment for NM. The total amount of
management fee income received by CHS from CMG, HSMG and NM was $1,038,489,
$1,392,475, and $15,577, respectively, for the period from inception through
December 31, 1995. Amounts due from HSMG and NM amounted to $736,785 and
$15,577, respectively, at December 31, 1995. Amounts due CMG from CHS amounted
to $49,453 at December 31, 1995.

Transfers from CMG and Health Source Management Group

As part of the merger agreement between CHS, CMG and Health Source
Management Group (HSMgmtG), CMG and HSMgmtG were each to contribute certain
assets and liabilities to CHS in exchange for 24,422 shares of common stock.
Assets and liabilities transferred to CHS on September 1, 1995 were as follows:

<TABLE>
<CAPTION>
CMG HSMGMTG TOTAL
--------- ---------- ----------
<S> <C> <C> <C>
Cash............................................... $ -- 1,327,878 1,327,878
Accounts receivable................................ 38,334 68,100 106,434
Due from affiliate................................. 150,000 436,795 586,795
Prepaid expenses................................... -- 60,167 60,167
Property and equipment............................. 60,848 402,845 463,693
Acquisition costs.................................. 239,524 -- 239,524
Other assets....................................... 9,330 58,328 67,658
Accounts payable................................... (372,711) (749,843) (1,122,554)
Funds held on behalf of others..................... -- (800,000) (800,000)
</TABLE>

F-85
<PAGE> 196

CHS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The assets and liabilities transferred from CMG to CHS were recorded at the
predecessor cost basis since they are related parties.

Lease

During 1995, CHS entered into a long-term lease agreement with CMG to lease
certain CMG computer equipment and software. The agreement provided that the
lease agreement would terminate upon settlement of the lawsuit between HSMG and
a medical center. Due to the settlement of the lawsuit on October 31, 1995, the
lease reverted to a month-to-month lease. Rent expense for the computer
operating lease amounted to $129,444.

Funds Held on Behalf of Others

Upon the acquisition of certain assets and liabilities of HSMgmtG by and in
conjunction with the termination of the existing long-term management agreement
between HSMgmtG and HSMG, HSMgmtG agreed to transfer $650,000 into an
irrevocable trust account (designated funds) to be used to pay outstanding
medical claims of HSMG. As part of CHS' acquisition of assets of HSMgmtG, the
designated funds were transferred to CHS on September 1, 1995. As of December
31, 1995, the designated funds had not been transferred to a trust pending final
documentation of the trusts. During the period from September 1, 1995
(inception) through December 31, 1995, the HSMG Board of Directors approved
payments of $156,400 to pay certain outstanding medical claim liabilities of
HSMG from the designated funds. The remaining balance of $493,600 is included in
cash and funds held on behalf of others in the accompanying balance sheet and
were subsequently delivered to the trustee, net of approved payments.
Additionally, HSMgmtG agreed to transfer $150,000 into a revocable trust account
to be used to pay certain legal fees related to a lawsuit with a medical center.
The amounts were fully disbursed during 1995 with the consent of the parties
thereto.

5. FAIR VALUE OF ASSETS ACQUIRED IN EXCESS OF LIABILITIES ASSUMED

In September 1995, HSMgmtG, as part of a tax-free liquidation, transferred
certain assets and liabilities to CHS in exchange for shares of common stock.
The excess value of assets received, over liabilities assumed by CHS after
reducing all noncurrent nonliquid assets acquired to zero value has been
reflected in the accompanying balance sheet as fair value of assets acquired in
excess of liabilities assumed (negative goodwill). A reconciliation of the
excess value of the assets acquired over liabilities assumed follows:

<TABLE>
<S> <C>
Assets acquired:
Cash................................................................... $1,327,878
Accounts receivable.................................................... 68,100
Due to HSMG............................................................ 436,795
Prepaid expenses....................................................... 60,167
Plant and equipment.................................................... 402,845
Other assets........................................................... 58,328
Liabilities assumed
Accounts payable and accrued liabilities............................... (749,843)
Funds held on behalf of others......................................... (800,000)
CHS stock issued to HSMgmtG, at par value.............................. (244)
Additional paid-in capital............................................. (125,081)
----------
Excess of value of assets received over liabilities assumed and
common stock issued and additional paid-in capital
recognized.................................................... $ 678,945
=========
</TABLE>

F-86
<PAGE> 197

CHS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CHS applied the excess value against nonmonetary intangible assets and
noncurrent assets (negative goodwill) as follows:

<TABLE>
<S> <C>
Excess value of assets received over liabilities assumed.................. $678,945
Applied to deferred acquisition costs incurred by CHS..................... 259,755
Applied to plant and equipment............................................ 402,845
--------
Unallocated excess value of assets received over liabilities assumed at
date of merger....................................................... 16,345
Deferred tax asset recognized on future tax deductions transferred
from HSMgmtG............................................................ 321,929
--------
Negative goodwill recorded at date of merger............................ 338,274
Less amount amortized in 1995............................................. 5,686
--------
Excess fair value of assets received over liabilities assumed as
of December 31, 1995........................................... $332,588
========
</TABLE>

The amortization of the excess value of assets received over liabilities
assumed has been reflected in the statement of operations as other revenue.

6. COMMITMENTS

Leases

CHS leases certain office space under noncancelable operating leases
expiring through April 2000. Future minimum rental commitments at December 31,
1995 are as follows:

Rent expense for operating leases amounted to $200,196 for the period from
September 1, 1995 (inception) through December 31, 1995.

CHS subleases certain office space under a noncancelable sublease which
expires in 1996. The future minimum sublease rental income for 1996 is $19,000.
Sublease rental income received in 1995 was $10,980.

7. INCOME TAXES

Income tax expense for the period from September 1, 1995 (inception)
through December 31, 1995 consisted of the following:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- ------- --------
<S> <C> <C> <C>
Federal............................................................ $58,700 $24,100 $ 82,800
State.............................................................. 18,000 5,668 23,668
------- ------- --------
Total..................................................... $76,700 $29,768 $106,468
======== ======== =========
</TABLE>

F-87
<PAGE> 198

CHS MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of the corporate Federal tax rate with the financial
statement effective rates for the period from September 1, 1995 (inception)
through December 31, 1995:

<TABLE>
<S> <C>
Statutory corporate Federal tax expense............................................. $ 93,365
Nondeductible expenses.............................................................. 19,590
Amortization of negative goodwill................................................... (1,933)
State taxes......................................................................... 18,000
Benefit recognized on transfer of future deductible amount from CMG to CHS.......... (25,382)
Other, net.......................................................................... 2,828
--------
$106,468
=========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1995 are presented below:

<TABLE>
<S> <C>
Current deferred tax assets:
Accrued vacation.................................................................. $ 47,827
Accrued severance................................................................. 39,383
--------
Total current deferred tax assets.......................................... 87,210
Noncurrent deferred tax asset -- depreciation....................................... 204,950
--------
Net deferred tax assets.................................................... $292,160
=========
</TABLE>

Management is of the opinion that it is more likely than not that such
deferred tax assets will be realized in the future.

8. EMPLOYEE BENEFIT PLAN

CHS has a noncontributory profit-sharing plan and a contributory 401(k)
Plan (the Plan) for substantially all employees who have completed one year of
service and attained age 21. Employer contributions are at the discretion of
management. Plan expenses for the profit sharing portion for the period from
September 1, 1995 (inception) through December 31, 1995 was $22,618.

9. BUSINESS AND CREDIT CONCENTRATION

CHS had funds on deposit with a bank amounting to $609,959. The funds are
insured up to $100,000 by the Federal Deposit Insurance Corporation.

CMG and HSMG represented individually more than 10% of CHS' 1995 revenue.
CMG and HSMG provided 39% and 52% of CHS' total revenue, respectively. HSMG has
had recurring losses from continuing operations and has negative shareholders
equity. If HSMG failed to pay amounts owed to CHS when they become due or failed
to continue operations, such failures could have a substantial negative impact
on the financial results of CHS. The financial statements of CHS do not reflect
any adjustments that might result from the outcome of this uncertainty.

10. SUBSEQUENT EVENTS

Management Agreement

Effective January 1, 1996, CHS entered into amended management agreements
with CMG and HSMG. The revised terms of the agreements include: assignment of
all capitation revenue generated by the Medical Groups to CHS; the term of the
agreement was revised to twenty years with an automatic renewal for two
successive ten-year periods; and revision of the management fee calculation to
be computed as the sum of (1) all operating and nonoperating expenses and other
costs incurred by CHS; and (2) a percentage of the net revenues of the Medical
Groups subject to certain limitations as defined in the management agreement.

Merger

On March 11, 1996, CHS entered into a letter of intent to be acquired by
MedPartners/Mullikin, Inc., a publicly held physicians practice management
company, in exchange for shares of MedPartners/Mullikin, Inc. common stock.

F-88
<PAGE> 199

CHS MANAGEMENT, INC.

CONDENSED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30,
1996
----------
<S> <C>
ASSETS
Current assets:
Cash........................................................................... $2,126,821
Accounts receivable............................................................ 211,345
Due from affiliates............................................................ 728,823
Prepaid expenses............................................................... 181,619
Deferred tax asset............................................................. 96,620
----------
Total current assets................................................... 3,345,228
Property and equipment, net.................................................... 132,829
Deferred tax asset............................................................. 227,071
Other assets................................................................... 67,164
----------
Total assets........................................................... $3,772,292
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable............................................................... $ 74,803
Accrued expenses............................................................... 812,607
Income taxes payable........................................................... --
Due to affiliates.............................................................. 259,377
Notes payable -- current portion............................................... 2,550,228
----------
Total current liabilities.............................................. 3,697,015
Notes payable -- long term..................................................... 41,039
Excess of fair value of assets acquired over liabilities assumed............... 309,569
Stockholders' equity:
Common stock, $0.01 par value; 180,000 shares authorized, 48,844 shares issued
and outstanding............................................................. 488
Additional paid-in capital..................................................... 250,162
Accumulated deficit............................................................ (525,981)
----------
Total stockholders' deficit............................................ (275,331)
----------
Total liabilities and stockholders' deficit............................ $3,772,292
=========
</TABLE>

See accompanying notes.

F-89
<PAGE> 200

CHS MANAGEMENT, INC.

CONDENSED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
30, 1996
-----------
<S> <C>
Revenues:
Capitation revenue............................................................ $27,778,958
Other revenues................................................................ 1,717,502
-----------
Total operating revenues.............................................. 29,496,460
Operating expenses:
Transfers to affiliated medical groups........................................ 24,575,480
Salaries and employee benefits................................................ 2,646,914
Legal and accounting.......................................................... 186,448
Rent.......................................................................... 959,365
Merger costs.................................................................. 783,792
Depreciation and amortization................................................. 8,500
Other administrative expenses................................................. 1,067,203
-----------
Total operating expenses.............................................. 30,227,702
-----------
Operating loss.................................................................. (731,242)
Gain on sale of assets.......................................................... 5,506
Interest income................................................................. 1,688
-----------
Loss before income taxes........................................................ (724,048)
Deferred income tax benefit..................................................... 29,932
-----------
Net loss........................................................................ (694,116)
Retained earnings -- beginning of period........................................ 168,135
-----------
Accumulated deficit -- end of period............................................ $ (525,981)
==========
</TABLE>

See accompanying notes.

F-90
<PAGE> 201

CHS MANAGEMENT, INC.

CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1996
------------
<S> <C>
OPERATING ACTIVITIES:
Net loss...................................................................... $ (694,116)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation............................................................... 16,674
Amortization of negative goodwill.......................................... (8,174)
Gain on sale of property and equipment..................................... (5,506)
Increase in accounts receivable............................................ (76,880)
Increase in prepaid expenses............................................... (123,955)
Decrease in due from affiliates............................................ 23,539
Increase in deferred tax asset............................................. (31,531)
Decrease in other assets................................................... 504
Decrease in accounts payable............................................... (10,799)
Increase in accrued expenses............................................... 148,501
Decrease in taxes payable.................................................. (76,700)
Increase in due to affiliate............................................... 209,924
-----------
Net cash used in operating activities................................. (628,519)
INVESTING ACTIVITIES
Purchases of property and equipment........................................... (13,691)
Proceeds from sale of property and equipment.................................. 5,506
-----------
Net cash used in investing activities......................................... (8,185)
FINANCING ACTIVITIES
Proceeds from notes payable................................................... 2,539,250
Payments on notes payable..................................................... (1,428)
Cash disbursed on behalf of affiliate......................................... (493,600)
-----------
Net cash provided by financing activities....................................... 2,044,222
-----------
Net increase in cash............................................................ 1,407,518
Cash at beginning of period..................................................... 719,303
-----------
Cash at end of period........................................................... $ 2,126,821
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid............................................................. $ 124,800
===========
Accrued vacation donated by affiliates........................................ $ 42,699
===========
Accrued legal fees forgiven................................................... $ 22,381
===========
Purchases of equipment with note payable...................................... $ 53,445
===========
</TABLE>

See accompanying notes.

F-91
<PAGE> 202

CHS MANAGEMENT, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. CONDENSED FINANCIAL STATEMENTS

The Condensed Balance Sheet as of June 30, 1996, the Condensed Statement of
Operations and Accumulated Deficit and the Condensed Statement of Cash Flows for
the six months ended June 30, 1996 have been prepared by CHS Management, Inc.
(the Company) without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at June 30, 1996
have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's December 31, 1995 audited financial statements. The results of
operations for the period ended June 30, 1996 are not necessarily indicative of
the operation results for the year.

2. SUBSEQUENT EVENT

In June, 1996, the Company entered into a loan agreement with
MedPartners/Mullikin, Inc. Pursuant to that agreement, the Company has borrowed
approximately $2 million. Amounts borrowed under the agreement, which may
increase to $2,539,250, together with interest at prime, are due December 31,
1996. At the option of CHS, the unpaid principal and interest may be offset
against a portion of the fee payable to the Company by MedPartners/Mullikin,
Inc. pursuant to the terms of the Amended and Restated Plan of Agreement of
Merger dated March 11, 1996 as amended by Amendment No. 1 dated June 28, 1996.
The obligations of the Company under the loan have been guaranteed by Community
Medical Group of the West Valley and Health Source Management Group, Inc.

F-92
<PAGE> 203

REPORT OF INDEPENDENT AUDITORS

The Partners
New Management

We have audited the accompanying balance sheets of New Management (a
California general partnership) (the Partnership) as of December 31, 1994 and
1995, and the related statements of income, partners' deficiency and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of New Management at December
31, 1994 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Birmingham, Alabama
July 26, 1996

F-93
<PAGE> 204

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................ $ 55,197 $ 13,445
Administrative capitation fee receivable........................ 267,277 --
Other receivables............................................... 162 162
Due from related parties........................................ 56,827 58,976
----------- -----------
Total assets............................................ $ 379,463 $ 72,583
========== ==========
LIABILITIES AND PARTNERS' DEFICIENCY
Current liabilities:
Current portion of long term debt............................... $ 114,590 $ 123,793
Accounts payable................................................ 4,900 1,113
Due to affiliate................................................ -- 15,577
Deferred income................................................. -- 1,593
Accrued interest payable........................................ 19,023 18,283
----------- -----------
Total current liabilities............................... 138,513 160,359
Long-term debt, net of current portion............................ 2,831,001 2,707,208
Partners' deficiency.............................................. (2,590,051) (2,794,984)
----------- -----------
Total liabilities and partners' deficiency.............. $ 379,463 $ 72,583
========== ==========
</TABLE>

See accompanying notes.

F-94
<PAGE> 205

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
Net revenue......................................................... $3,084,648 $2,947,577
---------- ----------
Expenses:
Administrative and executive fees................................. 163,808 189,300
Management fee.................................................... -- 15,577
Accounting and legal.............................................. 55,655 109,042
Interest.......................................................... 232,170 223,590
---------- ----------
Total expenses............................................ 451,633 537,509
---------- ----------
Net income.......................................................... $2,633,015 $2,410,068
========= =========
</TABLE>

See accompanying notes.

F-95
<PAGE> 206

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

STATEMENTS OF PARTNERS' DEFICIENCY

<TABLE>
<S> <C>
Balance at December 31, 1993.................................................... $(2,902,752)
Net income.................................................................... 2,633,015
Contributions................................................................. 87
Distributions................................................................. (2,320,401)
-----------
Balance at December 31, 1994.................................................... (2,590,051)
Net income.................................................................... 2,410,068
Distributions................................................................. (2,615,001)
-----------
Balance at December 31, 1995.................................................... $(2,794,984)
==========
</TABLE>

See accompanying notes.

F-96
<PAGE> 207

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................................ $ 2,633,015 $ 2,410,068
Adjustments to reconcile net income to net cash provided by
operating activities:
Changes in assets and liabilities:
(Increase) decrease in capitation fee receivable............. (150,510) 267,277
(Increase) decrease in due from related parties.............. 439,999 (2,149)
Increase in other receivables................................ (77) --
Increase (decrease) in accounts payable...................... 4,900 (3,787)
Increase in due to affiliate................................. -- 15,577
Increase in deferred income.................................. -- 1,593
Decrease in accrued interest payable......................... (686) (740)
----------- -----------
Net cash provided by operating activities................. 2,926,641 2,687,839
----------- -----------
FINANCING ACTIVITIES:
Principal payments on long-term debt.............................. (106,070) (114,590)
Additional partner contributions.................................. 87 --
Distributions to partners......................................... (2,320,401) (2,615,001)
Decrease in distributions payable................................. (500,000) --
----------- -----------
Net cash used in financing activities..................... (2,926,384) (2,729,591)
----------- -----------
Net increase (decrease) in cash........................... 257 (41,752)
Cash at beginning of year........................................... 54,940 55,197
----------- -----------
Cash at end of year................................................. $ 55,197 $ 13,445
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on borrowings....................................... $ 232,855 $ 224,330
========== ==========
</TABLE>

See accompanying notes.

F-97
<PAGE> 208

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

New Management (NM), a California general partnership, was formed and
commenced operations on July 31, 1992. The partnership was formed for the
purpose of providing management services in connection with the delivery of
health care services to patients who are enrollees of certain health maintenance
organizations which have contracted with West Hills Hospital (Hospital) located
in West Hills, California. Approximately 100% of the organization's revenue was
provided under contract with the hospital.

Partnership income and losses are allocated to the respective partners
based on percentage ownership subject to certain provisions as defined in the
partnership agreement.

Basis of Presentation

The financial statements have been prepared on the accrual basis of
accounting.

Management Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements and notes. Actual results could differ from those estimates.

Administrative Capitation Fee

NM contracts with West Hills Hospital under a Managed Care Agreement. Under
the terms of the agreement, NM provides certain administrative services to
enrollees in various health plans that have contracted with West Hills Hospital
in exchange for an administrative fee based upon various components including a
percentage of capitation revenue and utilization results. The contract which
commenced August 10, 1992 has a term of ten years with an automatic five year
renewal. Premiums are due monthly and are recognized as revenue by NM during the
period in which Community Medical Group (CMG), under a management agreement with
NM, and NM are obligated to provide services to the enrollees.

Income Taxes

As a partnership, the income and expenses of the partnership are allocated
to the respective partners; as such, the partnership does not pay federal or
state income taxes. Accordingly, no provision for income taxes has been included
in the accompanying financial statements.

2. ADMINISTRATIVE CAPITATION FEE RECEIVABLE

The capitation fee receivable represents amounts owed to NM from the
Hospital under the terms of the management agreement. The amount, which relates
to the period January 1, 1994 through August 31, 1994, was received in February
1995.

3. LONG-TERM DEBT

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Note payable to Hospital, monthly payments of principal and
interest (7.75%) of $28,238 due through July 1, 1999,
balloon payment of $2,354,530 due on August 1, 1999....... $2,945,591 $2,831,001
Less current portion...................................... 114,590 123,793
---------- ----------
Long-term debt, net of current portion............ $2,831,001 $2,707,208
========= =========
</TABLE>

The amounts recorded above approximate the fair value of the obligation.

On July 7, 1992, NM entered into a managed care agreement with the Hospital
that included the issuance of a $3,000,000 loan to New Management from the
Hospital. The loan is secured by payments owed to NM by the Hospital for
capitation revenue received directly by the Hospital. The individual partners
have

F-98
<PAGE> 209

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

guaranteed the loan pro rata to the extent of two times each partner's
percentage ownership interest in NM at the date of the loan.

As of December 31, 1995, aggregate principal maturities of long-term debt
are as follows:

4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

Advances

NM advanced amounts to CMG to cover working capital requirements and tenant
improvements. The balance of these advances is $56,827 as of December 31, 1994
and 1995. The advances are due on demand and do not bear interest.

NM advanced $2,149 to a physician who is also a partner in NM. The advance
is due upon demand and does not bear interest.

General and Administrative Services

NM, in performing its responsibilities under the managed care agreement
with the Hospital, receives certain employee services and facilities usage
without cost from CMG.

CMG's partners are substantially identical to the partners of NM as
required under the terms of both partnership agreements. CMG provides medical
services for enrollees of certain health maintenance organizations.

Management Services

Under an agreement effective September 1, 1995, CHS Management, Inc. (CHS),
an affiliate incorporated in 1995 to perform management services for CMG and
Health Source Medical Group (HSMG), performed certain management services on
behalf of NM. The agreement provides that CHS will receive a monthly management
fee based upon 12% per dollar per enrolled life under the capitation agreement
between NM, CMG and West Hills Hospital. The amount of the management fee
totaled $15,577 for the period from September 1 through December 31, 1995 and
has been accrued on the balance sheet as due to affiliate.

Professional Services

Accounting services are performed for NM by a partnership of which one
partner acts as a financial advisor to the Executive Committee of CMG and also
serves as a board member of CHS Management, Inc. Charges for services rendered
to NM by the partnership amounted to $35,655 and $94,025 for the years ended
December 31, 1994 and 1995, respectively.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

All current assets and current liabilities, are carried at cost, which
approximates fair value due to the short maturity of those instruments.

6. SUBSEQUENT EVENT

On March 11, 1996, NM entered into a letter of intent to be acquired by
MedPartners/Mullikin, Inc., a publicly held physicians practice management
company, in exchange for shares of MedPartners/Mullikin, Inc. common stock.

F-99
<PAGE> 210

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31,
1993
------------
<S> <C>
ASSETS
Cash............................................................................ $ 54,940
Administrative capitation fee receivable........................................ 116,767
Due from affiliates............................................................. 496,826
Capital contributions receivable from partners.................................. 85
------------
Total assets.......................................................... $ 668,618
==========
LIABILITIES AND PARTNERS' DEFICIENCY
Current liabilities
Distribution payable.......................................................... $ 500,000
Accrued interest payable...................................................... 19,709
Current portion of long-term debt............................................. 106,070
------------
Total current liabilities............................................. 625,779
Long-term debt, net of current portion........................................ 2,945,591
------------
Partners' deficiency............................................................ (2,902,752)
------------
Total liabilities and partners' deficiency............................ $ 668,618
==========
</TABLE>

See accompanying notes.

F-100
<PAGE> 211

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

STATEMENT OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
------------
<S> <C>
Net revenue..................................................................... $3,109,869
Expenses
Accounting.................................................................... 18,663
Interest expense.............................................................. 238,711
Administrative fee............................................................ 42,000
Executive committee fees...................................................... 24,000
------------
Total expenses........................................................ 323,374
------------
Net income...................................................................... $2,786,495
==========
</TABLE>

See accompanying notes.

F-101
<PAGE> 212

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

STATEMENT OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
------------
<S> <C>
OPERATING ACTIVITIES:
Net Income.................................................................... $ 2,786,495
Adjustments to reconcile net income to net cash provided by operating
activities:
Changes in assets and liabilities:
(Increase) decrease in capitation fee receivable......................... (116,767)
(Increase) decrease in due from related parties.......................... (496,827)
(Increase) decrease in other receivables................................. (85)
(Increase (decrease) in accrued interest payable......................... (74,041)
------------
Net cash provided by operating activities............................. 2,098,775
------------
FINANCING ACTIVITIES:
Increase in long-term debt.................................................... 51,661
Additional partner contributions.............................................. 85
Distributions to partners..................................................... (2,600,037)
Increase in distributions payable............................................. 500,000
------------
Net cash used in financing activities................................. (2,048,291)
------------
Net increase in cash.................................................. 50,484
Cash at beginning of year....................................................... 4,456
------------
Cash at end of year............................................................. $ 54,940
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on borrowing...................................................... $ 238,711
==========
</TABLE>

See accompanying notes.

F-102
<PAGE> 213

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

NOTES TO UNAUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1993

1. ORGANIZATION

New Management, a California general partnership (the Partnership), was
formed and commenced operations on July 31, 1992. The Partnership was formed for
the purpose of providing management services in connection with the delivery of
hospital health care services to patients who are enrollees of certain health
maintenance organizations which have contracted with West Hills Hospital and the
Partnership.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Policy

The financial statements have been prepared using the accrual method of
accounting.

Income Taxes

Income and expenses represent only the operations of the Partnership and do
not include other activity to be reflected on the individual partners' federal
and state income tax returns. As such, no provision has been made for income
taxes.

3. MANAGED CARE AGREEMENT

The Partnership receives an administrative capitation fee under the terms
of a Managed Care Agreement with West Hills Hospital. Under the terms of the
agreement, New Management has capitated West Hills to provide hospital care
under five contracts with health maintenance organizations. The Partnership
receives income based upon the spread between the average per member per month
capitation received from the HMO's and the contracted sub-capitation rate paid
to West Hills Hospital for providing the hospital services. Under the terms of
the Managed Care Agreement the Partnership is obligated to provide certain
administrative and management services to administer the HMO contracts. The
Managed Care Agreement was entered into in July, 1992 and is effective through
July, 2002.

4. ADMINISTRATIVE CAPITATION FEE RECEIVABLE

The Partnership is owed additional revenue under the terms of the Managed
Care Agreement for 1993 based on a calculation adjustment which has been agreed
on with West Hills Hospital.

5. ADVANCES TO COMMUNITY MEDICAL GROUP (CMG)

The Partnership advanced $455,026 to Community Medical Group of the West
Valley (CMG) (a related party) to be used for working capital. The advance does
not bear interest and is due on demand. The Partnership advanced $41,800 for
tenant improvements at CMG's Simi Valley facility. The advance does not bear
interest and is due on demand.

F-103
<PAGE> 214

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)

6. LOAN PAYABLE

The Partnership received a $3,000,000 loan from West Hills Hospital on
August 7, 1992. The loan is payable in monthly installments bearing interest at
7.75% as follows:

<TABLE>
<CAPTION>
TIME PERIOD PAYMENTS
---------------------------------------- ----------------------------------------
<S> <C>
September 1, 1992 -- January 31, 1993 Interest Accrued -- No Payments
February 1, 1993 -- July 1, 1993 Interest Only Payments of $19,973
August 1, 1993 -- July 1, 1999 Monthly Payments of $28,238 consisting
of principal and interest, based on a
fifteen year amortization.
</TABLE>

There is a balloon payment of $2,354,529 due on July 1, 1999.

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
----------------------------------------------------------------------- ----------
<S> <C>
1994............................................................ $ 100,071
1995............................................................ 114,590
1996............................................................ 123.792
1997............................................................ 139,735
1998............................................................ 144,475
1999............................................................ 2,428,998
----------
$3,051,661
=========
</TABLE>

7. RELATED PARTY TRANSACTIONS

The Partnership is receiving employee services and facilities in order to
perform their obligations under the Managed Care Agreement (Note 3) without cost
from Community Medical Group of the West Valley, a California general
partnership (CMG). CMG's partners are substantially identical to the partners of
New Management as required under the terms of both partnership agreements. CMG
provides medical services to enrollees of prepaid health plans.

F-104
<PAGE> 215

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

CONDENSED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
<S> <C>
ASSETS
Current assets
Cash.......................................................................... $ 175,331
Other receivables............................................................. --
Due from related parties...................................................... 58,976
-----------
Total current assets.................................................. 234,307
Other assets.......................................................... 543,467
-----------
Total assets.......................................................... $ 777,774
===========
LIABILITIES AND PARTNERS' DEFICIENCY
Current liabilities
Current portion of long-term debt............................................. $ 128,668
Accounts payable.............................................................. 4,849
Deferred income............................................................... 439
Accrued interest payable...................................................... 17,891
-----------
Total current liabilities............................................. 151,847
Long-term debt, net of current portion.......................................... 2,641,633
Partners' deficiency............................................................ (2,015,706)
-----------
Total liabilities and partners' deficiency............................ $ 777,774
===========
</TABLE>

See accompanying note.

F-105
<PAGE> 216

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

CONDENSED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
Net revenue......................................................... $1,524,490 $1,313,931
Expenses
Administrative and executive fees................................. 95,000 87,260
Management fee.................................................... -- 22,625
Accounting and legal.............................................. 53,495 96,872
Interest.......................................................... 112,908 108,362
---------- ----------
Total expenses............................................ 261,403 315,119
---------- ----------
Net income.......................................................... $1,263,087 $ 998,812
========== ==========
</TABLE>

See accompanying note.

F-106
<PAGE> 217

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-----------------------
1995 1996
----------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 1,263,087 $ 998,812
Adjustments to reconcile net income to net cash provided by
operating activities:
Decrease in administrative capitation fee receivable............ 267,277 --
Decrease in other receivables................................... -- 162
Increase in other assets........................................ -- (543,467)
Increase in accounts payable.................................... -- 3,736
Decrease in due to affiliate.................................... -- (15,577)
Decrease in deferred income..................................... -- (1,154)
Decrease in accrued interest payable............................ (362) (392)
----------- ---------
Net cash provided by operating activities.................. 1,530,002 442,120
----------- ---------
FINANCING ACTIVITIES:
Principal payments on long-term debt............................... (56,189) (60,700)
Increase in distributions payable.................................. 17,580 --
Distributions to partners.......................................... (1,500,001) (219,534)
----------- ---------
Net cash used in financing activities...................... (1,538,610) (280,234)
----------- ---------
Net increase (decrease) in cash............................ (8,608) 161,886
Cash at beginning of period.......................................... 55,197 13,445
----------- ---------
Cash at end of period................................................ $ 46,589 $ 175,331
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on borrowings.......................................... $ 112,417 $ 109,112
========== =========
</TABLE>

See accompanying note.

F-107
<PAGE> 218

NEW MANAGEMENT
(A CALIFORNIA GENERAL PARTNERSHIP)

NOTE TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. CONDENSED FINANCIAL STATEMENTS

The Condensed Balance Sheet as of June 30, 1996, the Condensed Statements
of Income and the Condensed Statements of Cash Flows for the six months ended
June 30, 1996 and 1995 have been prepared by New Management (the Partnership)
without audits. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at June 30, 1996 and 1995 have
been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's December 31, 1995 audited financial statements. The results of
operations for the period ended June 30, 1996 are not necessarily indicative of
the operation results for the year.

F-108
<PAGE> 219

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Emergency Professional Services, Inc.

We have audited the accompanying balance sheets of Emergency Professional
Services, Inc. as of January 31, 1995 and 1996, and the related statements of
operations, changes in stockholders' equity and cash flows for each of the three
years in the period ended January 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Emergency Professional
Services, Inc. at January 31, 1995 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended January 31,
1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Birmingham, Alabama
July 12, 1996

F-109
<PAGE> 220

EMERGENCY PROFESSIONAL SERVICES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
JANUARY 31,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $1,481,507 $1,367,330
Accounts receivable, net of allowance for bad debts of $1,370,476
and $1,384,740 in 1995 and 1996, respectively.................... 5,464,122 5,845,157
Prepaid expenses.................................................... 130,098 206,357
---------- ----------
Total current assets........................................ 7,075,727 7,418,844
Property and equipment, net........................................... 76,537 71,625
Deferred income taxes................................................. 1,340,000 1,570,000
Other assets.......................................................... 3,315 6,520
---------- ----------
Total assets................................................ $8,495,579 $9,066,989
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 383,027 $ 408,204
Accrued salaries and other accrued expenses......................... 3,074,620 3,608,245
Deferred income taxes............................................... 1,660,000 1,580,000
Revenue received in advance......................................... 135,000 135,000
---------- ----------
Total current liabilities................................... 5,252,647 5,731,449
Accrued malpractice liability......................................... 650,000 750,000
Deferred compensation payable......................................... 1,855,423 2,260,363
Stockholders' equity:
Common stock, $.01 par value; 500 shares authorized, 248 and 273
shares issued and outstanding in 1995 and 1996, respectively..... 2 3
Additional paid-in capital.......................................... 230,748 260,747
Retained earnings................................................... 506,759 64,427
---------- ----------
Total stockholders' equity.................................. 737,509 325,177
---------- ----------
Total liabilities and stockholders' equity.................. $8,495,579 $9,066,989
========= =========
</TABLE>

See accompanying notes.

F-110
<PAGE> 221

EMERGENCY PROFESSIONAL SERVICES, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net revenue............................................. $30,258,523 $33,339,865 $35,031,003
Operating expenses:
Cost of affiliated physician services................. 22,634,623 24,852,396 25,961,763
Clinic salaries, wages and benefits................... 1,234,315 1,357,253 1,480,764
Clinic rent and lease expense......................... 109,883 111,083 118,995
Clinic supplies....................................... 35,562 33,737 39,184
Other clinic costs.................................... 5,980,317 6,781,253 6,986,269
General corporate expenses............................ 912,898 955,884 1,124,495
Depreciation.......................................... 42,749 31,020 25,140
----------- ----------- -----------
Net operating expenses........................ 30,950,347 34,122,626 35,736,610
----------- ----------- -----------
Loss before income taxes................................ (691,824) (782,761) (705,607)
Net income tax benefit.................................. 273,000 305,000 270,000
----------- ----------- -----------
Net loss................................................ $ (418,824) $ (477,761) $ (435,607)
========== ========== ==========
</TABLE>

See accompanying notes.

F-111
<PAGE> 222

EMERGENCY PROFESSIONAL SERVICES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at January 31, 1993.................... $ 1 $ 152,749 $1,414,169 $ 1,566,919
Net loss..................................... -- -- (418,824) (418,824)
Issuance of common stock..................... 1 31,200 -- 31,201
Dividends paid............................... -- -- (5,200) (5,200)
--- ---------- ---------- -------------
Balance at January 31, 1994.................... 2 183,949 990,145 1,174,096
Net loss..................................... -- -- (477,761) (477,761)
Issuance of common stock..................... -- 58,799 -- 58,799
Purchase of capital stock.................... -- (12,000) -- (12,000)
Dividends paid............................... -- -- (5,625) (5,625)
--- ---------- ---------- -------------
Balance at January 31, 1995.................... 2 230,748 506,759 737,509
Net loss..................................... -- -- (435,607) (435,607)
Issuance of common stock..................... 1 35,999 -- 36,000
Purchase of common stock..................... -- (6,000) -- (6,000)
Dividends paid............................... -- -- (6,725) (6,725)
--- ---------- ---------- -------------
Balance at January 31, 1996.................... $ 3 $ 260,747 $ 64,427 $ 325,177
=========== ======== ========= ==========
</TABLE>

See accompanying notes.

F-112
<PAGE> 223

EMERGENCY PROFESSIONAL SERVICES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss................................................... $ (418,824) $ (477,761) $ (435,607)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation............................................. 42,749 31,020 25,140
Deferred tax expense..................................... (285,000) (320,000) (310,000)
Changes in operating assets and liabilities:
Accounts receivable, net.............................. 347,580 (90,287) (381,035)
Prepaid expenses and other assets..................... (71,535) 133,107 (79,464)
Accounts payable...................................... (71,618) 219,867 25,177
Accrued salaries and other accrued expenses........... 267,654 (97,440) 533,625
Deferred compensation payable......................... 322,714 422,285 404,940
Accrued malpractice liability......................... 50,000 100,000 100,000
Revenue received in advance........................... -- 135,000 --
---------- ---------- ----------
Net cash provided by (used in) operating
activities..................................... 183,720 55,791 (117,224)
INVESTING ACTIVITIES:
Purchases of property and equipment........................ (22,904) (13,208) (20,228)
---------- ---------- ----------
Net cash used in investing activities............ (22,904) (13,208) (20,228)
FINANCING ACTIVITIES:
Purchase of common stock................................... -- (12,000) (6,000)
Issuance of common stock................................... 31,201 58,799 36,000
Payment of dividends....................................... (5,200) (5,625) (6,725)
---------- ---------- ----------
Net cash provided by financing activities........ 26,001 41,174 23,275
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents....... 186,817 83,757 (114,177)
Cash and cash equivalents at beginning of year............. 1,210,933 1,397,750 1,481,507
---------- ---------- ----------
Cash and cash equivalents at end of year................... $1,397,750 $1,481,507 $1,367,330
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest..................... $ -- $ -- $ --
========= ========= =========
Cash paid during the year for income taxes................. $ 15,000 $ 3,000 $ 25,000
========= ========= =========
</TABLE>

See accompanying notes.

F-113
<PAGE> 224

EMERGENCY PROFESSIONAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Emergency Professional Services, Inc. (the Company) is a professional
corporation formed in 1978 that consists of a group of physicians who contract
to staff emergency rooms, urgent care centers and physician offices. EPS
currently operates in Ohio and Pennsylvania. In addition, EPS staffs a billing
office which processes claims for the hospitals served.

A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements is as
follows:

Basis of Presentation

The Company's financial statements have been prepared on the accrual basis
of accounting.

Management Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying financial
statements and notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

The carrying amounts of all cash equivalents approximate fair value.

Property and Equipment

Property and equipment is stated at cost. Depreciation of property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets. Routine maintenance and repairs are expensed as incurred,
while costs of betterments and renewals are capitalized.

Income Taxes

The Company is taxable under the provisions of the Internal Revenue Code.
Deferred income taxes are provided for temporary differences between financial
and income tax reporting. The Company files its taxes on the modified cash
basis.

Net Revenue

Net revenue is reported at the established realizable amounts from
patients, third-party payors and others for services rendered. Revenue under
certain third-party payor agreements is subject to audit and retroactive
adjustments. Provisions for estimated third-party payor settlements and
adjustments are established in the periods the related services are rendered and
are adjusted in future periods as final settlements are determined.

Cost of Affiliated Physician Services

Cost of affiliated physician services represents salaries, bonuses and
benefits paid to the affiliated physician. Physician compensation is generally
determined based on the excess of collections over expenses prior to physician
compensation.

2. PROPERTY AND EQUIPMENT

The following is a summary of the Company's property and equipment as of
January 31, 1995 and 1996:

<TABLE>
<CAPTION>
JANUARY 31,
---------------------
1995 1996
--------- ---------
<S> <C> <C>
Furniture and fixtures......................................... $ 274,364 $ 281,126
Equipment...................................................... 74,142 79,742
Leasehold improvements......................................... 5,177 5,177
--------- ---------
353,683 366,045
Less: accumulated depreciation................................. (277,146) (294,420)
--------- ---------
$ 76,537 $ 71,625
========= =========
</TABLE>

F-114
<PAGE> 225

EMERGENCY PROFESSIONAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROFIT-SHARING AND 401K PLAN

The Company has a noncontributory profit-sharing plan and a contributory
401(k) plan (the Plan) for substantially all employees with more than one year
of service and 1,000 hours worked who have attained the age of twenty-one. The
Company, at the discretion of its Board of Directors, will make contributions to
the profit-sharing plan for its eligible employees employed at the last day of
the Plan year. Plan expenses for the years ended January 31, 1994, 1995 and 1996
were $372,031, $518,049 and $556,623, respectively. The Company does not match
employee contributions to the 401(k) plan.

4. PENSION PLAN

The Company has a defined contribution pension plan covering substantially
all employees with more than one year of service who have attained the age of
twenty-one. The Company contributes 10% of each participant's compensation for
the year, as defined, to the plan and makes payments based on the same formula
directly to the full-time physicians. The total contributions to the pension
plan for the years ended January 31, 1994, 1995 and 1996 were $1,162,425,
$910,462 and $975,221, respectively.

5. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Corporation's deferred tax assets and liabilities were as follows:

<TABLE>
<CAPTION>
JANUARY 31,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Cash to accrual adjustments................................. $1,340,000 $1,570,000
---------- ----------
Gross deferred tax assets..................................... 1,340,000 1,570,000
Deferred tax liabilities:
Cash to accrual adjustments................................. 1,660,000 1,580,000
---------- ----------
Gross deferred tax liabilities................................ 1,660,000 1,580,000
---------- ----------
Net deferred tax liabilities.................................. $ 320,000 $ 10,000
========= =========
</TABLE>

Income tax benefit was as follows:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal........................................... $ 10,500 $ 13,125 $ 35,000
State............................................. 1,500 1,875 5,000
--------- --------- ---------
12,000 15,000 40,000
Deferred:
Federal........................................... (249,375) (280,000) (271,250)
State............................................. (35,625) (40,000) (38,750)
--------- --------- ---------
(285,000) (320,000) (310,000)
--------- --------- ---------
$(273,000) $(305,000) $(270,000)
========= ========= =========
</TABLE>

F-115
<PAGE> 226

EMERGENCY PROFESSIONAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The difference between the benefit for income taxes and the amount computed
by applying the statutory federal income tax rate to income before taxes was as
follows:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax benefit statutory rate at
statutory rate................................. $(235,220) $(266,139) $(239,906)
Add:
State income taxes, net of federal tax benefit.... (22,523) (25,163) (22,275)
Other............................................. (15,257) (13,698) (7,819)
--------- --------- ---------
$(273,000) $(305,000) $(270,000)
========= ========= =========
</TABLE>

6. OPERATING LEASES

The Company leases its current office facility under an operating lease
agreement which extends through May 31, 1997. The Company also rents storage
space on a month-to-month renewal basis.

Future minimum lease payments for the next two years and in the aggregate
are as follows:

Total rent expense under all operating leases for the years ended January
31, 1994, 1995 and 1996 was $109,883, $111,083 and $118,995, respectively.

7. DEFERRED COMPENSATION PLAN AND STOCK BONUS PLAN

Under a deferred compensation plan, the Company is obligated to certain key
employees who have completed five years of service. The units of participation
are based 90% on compensation and length of service, with the remaining 10%
determined at the discretion of the Company. The plan provides a vesting
schedule of 10% at six years and 100% after fifteen years of service. The
overall deferred compensation is limited to 80% of the Company's net realizable
accounts receivable. As of January 31, 1995 and 1996, the aggregate deferred
compensation payable was $1,855,423 and $2,260,363, respectively. Payments
charged to earnings amounted to $322,717, $422,285 and $404,940 for the years
ended January 31, 1994, 1995 and 1996, respectively.

The Company also adopted a stock bonus plan for certain key employees. The
total number of shares awarded as of any anniversary date cannot exceed 25% of
the Company's issued and outstanding shares determined as of the date
immediately preceding the anniversary date at which the shares are awarded. Any
shares which have been awarded under this plan shall be considered issued and
outstanding. During the years ended January 31, 1995, 18 shares of common stock
were issued under the stock bonus plan at a value of $1,200 per share. During
the years ended January 31, 1994 and 1996, no shares of common stock were issued
under the stock bonus plan.

8. PROFESSIONAL LIABILITY INSURANCE

The Company maintains professional liability insurance coverage at each
location of $11 million per claim and $11 million in the aggregate. The Company
is insured against malpractice losses under a claims-made insurance policy. The
Company is currently named as the defendant in various malpractice legal
actions. While the outcome of these lawsuits is not presently determinable, it
is the opinion of management that the ultimate resolution of these claims will
not have a material adverse effect on the financial position or results of
operations of the Company.

9. SUBSEQUENT EVENT

In July 1996, the Company entered into a letter of intent to be acquired by
MedPartners/Mullikin, Inc. in exchange for shares of MedPartners/Mullikin, Inc.
common stock.

F-116
<PAGE> 227

EMERGENCY PROFESSIONAL SERVICES, INC.

BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
APRIL 30,
1996
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 2,410,960
Accounts receivable, net of allowance for doubtful accounts of $1,303,354..... 5,801,218
Prepaid expenses.............................................................. 181,712
-----------
Total current assets.................................................. 8,393,890
Property and equipment, net..................................................... 65,691
Deferred income taxes........................................................... 1,760,000
Other assets.................................................................... 9,931
-----------
Total assets.......................................................... $10,229,512
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 180,080
Accrued salaries and other accrued expenses................................... 4,550,689
Deferred income taxes......................................................... 1,680,000
Revenue received in advance................................................... 135,000
-----------
Total current liabilities............................................. 6,545,769
Accrued malpractice liability................................................... 750,000
Deferred compensation payable................................................... 2,350,363
Stockholders' equity:
Common stock, $.01 par value, 500 shares authorized, 262 shares
issued and outstanding..................................................... 3
Additional paid-in capital.................................................... 263,547
Retained earnings............................................................. 319,830
-----------
Total stockholders' equity............................................ 583,380
-----------
Total liabilities and stockholders' equity............................ $10,229,512
==========
</TABLE>

See accompanying note.

F-117
<PAGE> 228

EMERGENCY PROFESSIONAL SERVICES, INC.

STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
Net revenue........................................................... $8,181,737 $7,796,192
Operating expenses:
Cost of affiliated physician services............................... 5,912,707 5,987,394
Clinic salaries, wages and benefits................................. 329,918 316,781
Clinic rent and lease expense....................................... 36,829 22,587
Clinic supplies..................................................... 9,091 8,576
Other clinic costs.................................................. 1,588,302 915,744
General corporate expenses.......................................... 252,622 362,809
Depreciation........................................................ 6,694 6,898
---------- ----------
Net operating expenses........................................... 8,136,163 7,620,789
---------- ----------
Income before income taxes............................................ 45,574 175,403
Income tax benefit.................................................... 20,000 70,000
---------- ----------
Net income............................................................ $ 25,574 $ 105,403
========= =========
</TABLE>

See accompanying note.

F-118
<PAGE> 229

EMERGENCY PROFESSIONAL SERVICES, INC.

STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................ $ 25,574 $ 105,403
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation........................................................ 6,694 6,898
Deferred tax expense................................................ 10,000 60,000
Changes in operating assets and liabilities:
Accounts receivable, net......................................... (84,830) 43,939
Prepaid expenses and other current assets........................ (54,124) 21,234
Accounts payable................................................. (276,717) (228,124)
Accrued salaries and other accrued expenses...................... 1,876,630 942,444
Deferred compensation............................................ 75,000 90,000
Malpractice liability............................................ 25,000 --
---------- ----------
Net cash provided by operating activities................... 1,603,227 1,041,794
INVESTING ACTIVITIES:
Purchases of property and equipment................................... (5,580) (964)
---------- ----------
Net cash used in investing activities....................... (5,580) (964)
FINANCING ACTIVITIES:
Purchase of common stock.............................................. -- (10,400)
Issuance of common stock.............................................. 1,200 13,200
---------- ----------
Net cash provided by financing activities................... 1,200 2,800
---------- ----------
Net increase in cash and cash equivalents............................. 1,598,847 1,043,630
Cash and cash equivalents at beginning of period...................... 1,481,507 1,367,330
---------- ----------
Cash and cash equivalents at end of period............................ $3,080,354 $2,410,960
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.............................. $ -- $ --
========= =========
Cash paid during the period for income taxes.......................... $ -- $ --
========= =========
</TABLE>

See accompanying note.

F-119
<PAGE> 230

EMERGENCY PROFESSIONAL SERVICES, INC.

NOTE TO UNAUDITED FINANCIAL STATEMENTS
APRIL 30, 1996

1. BASIS OF PRESENTATION

The balance sheet as of April 30, 1996, the statements of income and
statements of cash flows for the three months ended April 30, 1995 and 1996,
have been prepared by Emergency Professional Services, Inc. (the Company)
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
as of April 30, 1996, and the results of operations and cash flows for the three
months ended April 30, 1995 and 1996 have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's January 31, 1996 audited financial statements. The results of
operations for the periods ended April 30, 1995 and 1996 are not necessarily
indicative of the operation results for those years.

F-120
<PAGE> 231

PLAN AND AGREEMENT OF MERGER

PLAN AND AGREEMENT OF MERGER ("Plan of Merger"), made and entered into as
of the day of July, 1996, by and among MEDPARTNERS/MULLIKIN, INC., a
Delaware corporation ("MedPartners/Mullikin"), EPS MERGER CORPORATION, a
Delaware corporation (the "Subsidiary"), and EMERGENCY PROFESSIONAL SERVICES,
INC., an Ohio corporation ("EPS") (the Subsidiary and EPS being sometimes
collectively referred to herein as the "Constituent Corporations").

WITNESSETH:

WHEREAS, the respective Boards of Directors of MedPartners/Mullikin, the
Subsidiary and EPS have approved the merger of the Subsidiary with and into EPS
(the "Merger"), upon the terms and conditions set forth in this Plan of Merger,
whereby each issued and outstanding share of Common Stock, par value $.01 per
share, of EPS (the "EPS Common Shares"), not owned directly or indirectly by
EPS, will be converted into the right to receive the Merger Consideration (as
herein defined) (the issued and outstanding EPS Common Shares may be sometimes
hereinafter referred to as the "EPS Shares");

WHEREAS, each of MedPartners/Mullikin, the Subsidiary and EPS desire to
make certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;

WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and

WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests."

NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements contained herein, the parties hereto do hereby agree as follows:

SECTION 1. THE MERGER.

1.1 The Merger. Upon the terms and conditions set forth in this Plan of
Merger, and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL") and the General Corporation Law of the State of Ohio (the
"OGCL"), the Subsidiary shall be merged with and into EPS at the Effective Time
(as defined in Section 1.3). Following the Effective Time, the separate
corporate existence of the Subsidiary shall cease and EPS shall continue as the
surviving corporation (the "Surviving Corporation") as a business corporation
incorporated under the laws of the State of Ohio under the name Emergency
Professional Services, Inc. and shall succeed to and assume all the rights and
obligations of EPS and the Subsidiary in accordance with the DGCL and the OGCL.
It is understood by each of the parties hereto that EPS and or its shareholders
shall convert EPS to a business corporation ("EPS BC") organized under Section
17.01 of the OGCL immediately prior to the Effective Time, and accordingly, for
all purposes under this Plan of Merger, notwithstanding any other provision
hereof, EPS BC (and not EPS) shall be the party participating in the Merger with
MedPartners/Mullikin and shall be the Surviving Corporation.

1.2 The Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. Eastern Time on a date to be specified by the parties (the
"Closing Date"), which (subject to satisfaction or waiver of the conditions set
forth in Sections 9.2 and 9.3) shall be no later than the second business day
after satisfaction of the conditions set forth in Section 9.1 (other than
Section 9.1(a)), but in no event later than September 30, 1996, at the offices
of Calfee, Halter & Griswold, Cleveland, Ohio, unless another date or place is
agreed to in writing by the parties hereto.

1.3 Effective Time. Subject to the provisions of this Plan of Merger, EPS
shall file a Certificate of Merger (the "Delaware Certificate of Merger")
executed by EPS in accordance with the relevant provisions of the DGCL and EPS
and the Subsidiary shall execute and file Articles of Merger (the "Ohio Articles
of Merger") in accordance with the relevant provisions of the OGCL and shall
make all other filings or

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recordings required under the DGCL and the OGCL and as soon as practicable on or
after the Closing Date. The Merger shall become effective at such time as the
Delaware Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware and the Ohio Articles of Merger are duly filed with the
Secretary of State of Ohio, or at such other time as the Subsidiary and EPS
shall agree should be specified in the Delaware Certificate of Merger and the
Ohio Articles of Merger(the "Effective Time").

1.4 Effect of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL and Section 1701.82 of the OGCL.

SECTION 2. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.

2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of EPS Shares or any
shares of capital stock of the Subsidiary:

(a) Subsidiary Common Stock. Each share of capital stock of the
Subsidiary issued and outstanding immediately prior to the Effective Time
of the Merger shall be converted into one fully paid and nonassessable
share of common stock of the Surviving Corporation.

(b) Cancellation of Treasury Stock. Each EPS Share that is owned by
EPS or by any subsidiary of EPS shall automatically be canceled and retired
and shall cease to exist, and none of the Common Stock, par value $.001 per
share, of MedPartners/Mullikin ("MedPartners/Mullikin Common Stock"), cash
or other consideration shall be delivered in exchange therefor.

(c) Conversion of EPS Shares. In the Merger, all of the remaining EPS
Shares (other than Dissenting Shares, if any) shall be converted into the
right to receive that number of shares of MedPartners/Mullikin Common Stock
equal to the Merger Consideration (as defined herein). All such shares of
MedPartners/Mullikin Common Stock shall be fully paid and nonassessable and
are hereinafter sometimes referred to as the "MedPartners/Mullikin Shares".
Upon such conversion, all such EPS Shares shall be canceled and cease to
exist, and each holder thereof shall cease to have any rights with respect
thereto other than the right to receive MedPartners/Mullikin Shares issued
in exchange therefor on the terms provided herein.

"Merger Consideration" means that number of MedPartners/Mullikin
Shares (rounded to the nearest whole share) equal to, subject to the last
sentence of Section 7.31, $44,000,000 divided by the "Base Period Trading
Price"). "Base Period Trading Price" shall mean the average of the last
reported sale prices per share of the MedPartners/Mullikin Common Stock for
the 15 consecutive trading days on which such shares are actually traded on
The New York Stock Exchange, Inc. (the "NYSE") ending at the close of
trading on the second trading day immediately preceding the date on which
the shareholders of EPS meet to consider the Merger.

(d) Dissenting Shares. Notwithstanding anything in this Plan of
Merger to the contrary, EPS Shares outstanding at the time of the vote of
shareholders of EPS to approve the Plan of Merger held by a holder (if any)
who shall not have voted in favor of the Plan of Merger and who files with
EPS within ten days after such vote a written demand to be paid the fair
cash value for such shares in accordance with Sections 1701.85 and 1701.95
of the OGCL ("Dissenting Shares") shall not be converted into a right to
receive the Merger Consideration and any cash in lieu of fractional shares
of MedPartners/Mullikin Common Stock unless such holder fails to demand
payment properly or otherwise loses such holder's dissenters' rights, if
any. If, after the Effective Time, such holder fails to perfect or loses
any such dissenters' rights, such shares shall be treated as if they had
been converted as of the Effective Time into the right to receive the
Merger Consideration pursuant to Section 2.1(c) and the cash in lieu of
fractional shares of MedPartners/Mullikin Common stock specified in Section
2.2. It is understood and agreed that in no event shall the Merger be
consummated if (i) the holders of more than 10% of the issued and
outstanding EPS Shares vote against the approval of the Merger at the EPS
Shareholders' Meeting if such meeting occurs less than ten (10) days prior
to the Closing Date, or (ii) prior to the Closing Date, there are
Dissenting Shares constituting more than 10% of the issued and outstanding
EPS Shares.

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(e) Anti-Dilution Provisions. If after the date hereof and prior to
the Effective Time, MedPartners/Mullikin shall have declared a stock split
(including a reverse split) of MedPartners/ Mullikin Common Stock or a
dividend payable in MedPartners/Mullikin Common Stock, or any other
distribution of securities or dividend (in cash or otherwise) to holders of
MedPartners/Mullikin Common Stock with respect to their
MedPartners/Mullikin Common Stock (including without limitation such a
distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar
transaction) then the Merger Consideration shall be appropriately adjusted
to reflect such stock split, dividend or other distribution of securities.

2.2 Exchange of Certificates. (a) Exchange Agent. In the event that the
outstanding EPS Shares are not exchanged at the Closing, prior to the Effective
Time, MedPartners/Mullikin shall enter into an agreement with Chemical Mellon
Shareholder Services, L.L.C., New York, New York (the "Exchange Agent"), which
will provide that MedPartners/Mullikin shall deposit with the Exchange Agent as
of the Effective Time, for the benefit of the holders of EPS Shares, for
exchange in accordance with this Section 2, through the Exchange Agent,
certificates representing the shares of MedPartners/Mullikin Common Stock (such
shares of MedPartners/Mullikin Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding EPS Shares.

(b) Exchange Procedures. As soon as reasonably practicable, but no later
than ten business days, after the Effective Time, the Exchange Agent shall mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding EPS Shares (the
"Certificates") whose EPS Shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as
MedPartners/Mullikin may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of MedPartners/ Mullikin Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of MedPartners/Mullikin Common Stock which such holder has the right to
receive pursuant to the provisions of this Section 2, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of EPS Shares which is not registered in the transfer records of EPS, a
certificate representing the proper number of shares of MedPartners/Mullikin
Common Stock may be issued to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
issuance of shares of MedPartners/Mullikin Common Stock to a person other than
the registered holder of such Certificate or establish to the satisfaction of
MedPartners/Mullikin that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of
MedPartners/Mullikin Common Stock and cash in lieu of any fractional shares of
MedPartners/Mullikin Common Stock as contemplated by Section 2.2(e). No interest
will be paid or will accrue on any cash payable in lieu of any fractional shares
of MedPartners/Mullikin Common Stock. To the extent permitted by law, former
shareholders of record of EPS shall be entitled to vote after the Effective Time
at any meeting of MedPartners/Mullikin stockholders the number of whole shares
of MedPartners/ Mullikin Common Stock into which their respective EPS Shares are
converted, regardless of whether such holders have exchanged their Certificates
for certificates representing MedPartners/Mullikin Common Stock in accordance
with this Section 2.2.

(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to MedPartners/Mullikin Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of MedPartners/Mullikin
Common Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder

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pursuant to Section 2.2(e) until the surrender of such Certificate in accordance
with this Section 2. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificate representing whole shares of MedPartners/Mullikin Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
MedPartners/Mullikin Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of MedPartners/Mullikin Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of MedPartners/Mullikin
Common Stock.

(d) No Further Ownership Rights in EPS Shares. All shares of
MedPartners/Mullikin Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Section 2 (including any cash
paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the EPS Shares
theretofore represented by such Certificates. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Section
2, except as otherwise provided by law.

(e) No Fractional Shares. No certificates or scrip representing fractional
shares of MedPartners/ Mullikin Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
MedPartners/ Mullikin. Notwithstanding any other provision of this Plan of
Merger, each holder of EPS Shares exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of
MedPartners/Mullikin Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of
MedPartners/Mullikin Common Stock multiplied by the Base Period Trading Price.

(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to MedPartners/ Mullikin, upon demand, and
any holders of the Certificates who have not theretofore complied with this
Section 2 shall thereafter look only to MedPartners/Mullikin for payment of
MedPartners/Mullikin Common Stock, any cash in lieu of fractional shares of
MedPartners/Mullikin Common Stock and any dividends or distributions with
respect to MedPartners/Mullikin Common Stock.

(g) No Liability. None of MedPartners/Mullikin, the Subsidiary, EPS or the
Exchange Agent shall be liable to any person in respect of any shares of
MedPartners/Mullikin Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to the end of the applicable
period after the Effective Time under escheat laws (or immediately prior to such
earlier date on which any shares of MedPartners/Mullikin Common Stock, any cash
in lieu of fractional shares of MedPartners/Mullikin Common Stock or any
dividends or distributions with respect to MedPartners/Mullikin Common Stock in
respect of such Certificates would otherwise escheat to or become the property
of any governmental entity), any such shares, cash, dividends or distributions
in respect of such Certificates shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.

(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by MedPartners/Mullikin, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to MedPartners/Mullikin.

2.3 Articles of Incorporation of Surviving Corporation. The Articles of
Incorporation of EPS, effective immediately following the Effective Time, shall
be the Articles of Incorporation of the Surviving Corporation, as reasonably
satisfactory to MedPartners/Mullikin, from and after the Effective Time, until
thereafter amended as provided by law.

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2.4 Code of Regulations of the Surviving Corporation. The Code of
Regulations of EPS, shall be the Code of Regulations of the Surviving
Corporation, as reasonably satisfactory to MedPartners/Mullikin, from and after
the Effective Time and until thereafter altered, amended or repealed in
accordance with the OGCL, the Articles of Incorporation of the Surviving
Corporation and the said Code of Regulations.

2.5 Directors and Officers of the Surviving Corporation. The Directors and
officers of the Subsidiary immediately prior to the Effective Time shall be the
Directors and officers of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Code of Regulations of the
Surviving Corporation.

2.6 Assets, Liabilities, Reserves and Accounts. At the Effective Time, the
assets, liabilities, reserves and accounts of each of the Subsidiary and EPS
shall be taken up on the books of the Surviving Corporation at the amounts at
which they respectively shall be carried on the books of said corporations
immediately prior to the Effective Time, except as otherwise set forth in this
Plan of Merger and subject to such adjustments, or elimination of intercompany
items, as may be appropriate in giving effect to the Merger in accordance with
generally accepted accounting principles.

2.7 Corporate Acts of EPS. All corporate acts, plans, policies, approvals
and authorizations of EPS, its shareholders, its Board of Directors, committees
elected or appointed by the Board of Directors, and all officers and agents,
valid immediately prior to the Effective Time, shall be those of the Surviving
Corporation and shall be as effective and binding thereon as they were with
respect to EPS to the extent not inconsistent with the terms of this Plan of
Merger.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF EPS.

EPS hereby represents and warrants to MedPartners/Mullikin and the
Subsidiary as follows:

3.1 Organization, Existence and Good Standing. EPS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. EPS has all necessary corporate power to own its properties and assets and
to carry on its business as presently conducted. EPS is not, and has not been
within the two years immediately preceding the date of this Plan of Merger, a
subsidiary or division of another corporation, nor has EPS within such time
owned, directly or indirectly, any shares of MedPartners/Mullikin Common Stock
or Common Stock of the Subsidiary.

3.2 EPS Capital Stock. EPS's authorized capital consists of 500 shares of
Common Stock, par value $.01 per share, of which 262 shares are issued and
outstanding as of the date of this Plan of Merger, and no shares are held in
treasury. All of the issued and outstanding EPS Shares are duly and validly
issued, fully paid and nonassessable. Except as disclosed in the Disclosure
Schedule delivered to MedPartners/Mullikin and the Subsidiary at the time of the
execution and delivery of this Plan of Merger, (the "EPS Disclosure Schedule"),
there are no options, warrants, or similar rights granted by EPS or any other
agreements to which EPS is a party providing for the issuance or sale by it of
any additional securities which would remain in effect after the Effective Time.
Except as set forth on Exhibit 3.2 to the EPS Disclosure Schedule, there is no
liability for dividends declared or accumulated but unpaid with respect to any
of the EPS Shares. EPS has not made any distributions to any holders of EPS
Shares or participated in or effected any issuance, exchange or retirement of
EPS Shares, or otherwise changed the equity interests of holders of EPS Shares
in contemplation of effecting the Merger within the two years immediately
preceding the date of this Plan of Merger. Set forth on Exhibit 3.2 to the EPS
Disclosure Schedule is a description of all issuances and redemptions of EPS
Shares within the two years immediately preceding the date of this Plan of
Merger, all of which issuances and redemptions were effected consistent with
past practices. Any EPS Shares that EPS has re-acquired during the two years
immediately preceding the date of this Plan of Merger have been so re-acquired
only for purposes other than "business combinations", as such term is defined in
Accounting Principles Board Opinion No. 16, as amended ("Business
Combinations").

3.3 Subsidiaries. (a) Attached as Exhibit 3.3 to the EPS Disclosure
Schedule is a list of all subsidiaries of EPS (individually, a "EPS Subsidiary",
and collectively, the "EPS Subsidiaries") and their states of

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incorporation. Except as set forth on Exhibit 3.3, EPS does not own stock in and
does not control, directly or indirectly, any other corporation, association or
business organization.

(b) Except as set forth on Exhibit 3.3, neither EPS nor any EPS Subsidiary
owns an equity interest in, nor does such entity control, directly or
indirectly, any other joint venture or partnership.

3.4 Organization, Existence and Good Standing of EPS Subsidiaries. Each
EPS Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation. Each EPS
Subsidiary has all necessary corporate power to own its properties and assets
and to carry on its business as presently conducted.

3.5 Foreign Qualifications. EPS and each EPS Subsidiary is qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the nature or character of the property owned, leased or operated by it or
the nature of the business transacted by it makes such qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on EPS or such EPS Subsidiary.

3.6 Power and Authority. Subject to the satisfaction of the conditions
precedent set forth herein, EPS has the corporate power to execute, deliver and
perform this Plan of Merger and all agreements and other documents executed and
delivered or to be executed and delivered by it pursuant to this Plan of Merger,
and, subject to the satisfaction of the conditions precedent set forth herein,
has taken all action required by its Articles of Incorporation, Code of
Regulations or otherwise, to authorize the execution, delivery and performance
of this Plan of Merger and such related documents. Except as set forth on
Exhibit 3.6 to the EPS Disclosure Schedule, the execution and delivery of this
Plan of Merger does not and, subject to the receipt of required shareholder and
regulatory approvals and any other required third-party consents or approvals,
the consummation of the Merger will not, violate any provisions of the Articles
of Incorporation, or Code of Regulations of EPS or the Articles or Certificate
of Incorporation or By-Laws or Regulations of any EPS Subsidiary, or any
provisions of, or result in the acceleration of any obligation under, any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree, to which EPS or any EPS Subsidiary is a party, or by which it is
bound, or violate any restrictions of any kind to which it is subject which, if
violated or accelerated would have a material adverse effect on EPS and the EPS
Subsidiaries, taken as a whole. The execution and delivery of this Plan of
Merger has been approved by the Board of Directors of EPS.

3.7 EPS Financial Information. EPS has heretofore furnished
MedPartners/Mullikin with a true and complete copy of its audited financial
statements for the years ending January 31, 1994, 1995 and 1996. The financial
statements, which are set forth on Exhibit 3.7 to the EPS Disclosure Schedule,
together with the notes thereto reflect all known liabilities of EPS, fixed or
contingent, required to be stated therein, and present fairly the financial
condition of EPS at said dates and the results of operations and cash flows of
EPS for the periods then ended. The balance sheet of EPS at January 31, 1996, is
herein sometimes referred to as the "EPS Balance Sheet".

3.8 Contracts, etc. (a) All material contracts, leases, agreements and
arrangements to which EPS or any of the EPS Subsidiaries is a party are legally
valid and binding in accordance with their terms and in full force and effect,
and EPS has provided MedPartners/Mullikin with copies of all such documents,
except that EPS has provided copies of each general form of employment
agreement, independent contractor agreement and stock redemption agreement to
which EPS is a party. All such agreements currently in effect do not materially
differ from the general forms of agreement provided. All parties to such
contracts, leases, agreements and arrangements have complied with the provisions
of such contracts, leases, agreements and arrangements, and, to the knowledge of
EPS, no party is in default thereunder, and no event has occurred which, but for
the passage of time or the giving of notice or both, would constitute a default
thereunder, except, in each case, where the invalidity of the lease, contract,
agreement or arrangement or the default or breach thereunder or thereof would
not, individually or in the aggregate, have a material adverse effect on EPS and
the EPS Subsidiaries, taken as a whole. Furthermore, EPS has not received any
notice of termination or

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cancellation, or a request to renegotiate, any material contracts, leases or
agreements, except as set forth on Exhibit 3.8 to the EPS Disclosure Schedule.

(b) Except as set forth on Exhibit 3.8 to the EPS Disclosure Schedule, no
contract or agreement to which EPS or any EPS Subsidiary is a party will, by its
terms, terminate as a result of the transactions contemplated hereby or require
any consent from any obligor thereto in order to remain in full force and effect
immediately after the Effective Time, except for contracts or agreements which,
if terminated, would not have a material adverse effect on EPS and the EPS
Subsidiaries, taken as a whole.

(c) Except as set forth on Exhibit 3.8 to the EPS Disclosure Schedule, none
of EPS or any EPS Subsidiary has granted any right of first refusal or similar
right in favor of any third party with respect to any material portion of its
properties or assets (excluding liens described in Section 3.9) or entered into
any non-competition agreement or similar agreement restricting its ability to
engage in any business in any location.

3.9 Properties and Assets. EPS (including, as applicable, the EPS
Subsidiaries) owns all of the real and personal property included in the EPS
Balance Sheet (except assets recorded under capital lease obligations and such
property as has been disposed of during the ordinary course of EPS's business
since the date of the EPS Balance Sheet), free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those (i) if any, which in the
aggregate are not material and which do not materially affect continued use of
such property, or (ii) which are set forth in Exhibit 3.9 to the EPS Disclosure
Schedule.

3.10 Legal Proceedings. Except as listed on Exhibit 3.10 to the EPS
Disclosure Schedule, there are no actions, suits or proceedings pending or, to
the knowledge of EPS, threatened against or relating to or affecting EPS or any
EPS Subsidiary, or the transactions contemplated by this Plan of Merger and, to
the knowledge of EPS, no basis for any such action, suit or proceeding exists.

3.11 Subsequent Events. Except as set forth on Exhibit 3.11 to the EPS
Disclosure Schedule, none of EPS nor any EPS Subsidiary has, since the date of
the EPS Balance Sheet:

(a) Incurred any material adverse change.

(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on
the EPS Balance Sheet or (ii) liabilities incurred since the date of the
EPS Balance Sheet in the ordinary course of business, which discharge or
satisfaction would have a material adverse effect on EPS.

(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor which would have a
material adverse effect on EPS, except as may have been required due to
income or operations of EPS since the date of the EPS Balance Sheet.

(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are
material to the consolidated business or financial condition of EPS.

(e) Sold or transferred any of the assets material to the consolidated
business of EPS, canceled any material debts or claims or waived any
material rights, except in the ordinary course of business.

(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable
by EPS or any EPS Subsidiary to any officer or employee, consultant or
agent (other than normal merit increases), or by means of any bonus or
pension plan, contract or other commitment, increased in a material respect
the compensation of any officer, employee, consultant or agent.

(g) Except for this Plan of Merger and any other agreement executed
and delivered pursuant to this Plan of Merger, entered into any material
transaction other than in the ordinary course of business or permitted
under other Sections of this Plan of Merger.

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(h) Issued any stock, bonds or other securities or any options or
rights to purchase any of its securities.

3.12 Accounts Receivable. (a) Since the date of the EPS Balance Sheet, EPS
has not changed any principle or practice with respect to the recordation of
accounts receivable or the calculation of reserves therefor, or any material
collection, discount or write-off policy or procedure. To the knowledge of EPS,
EPS (including the EPS Subsidiaries) is in compliance with the terms and
conditions of all third-party payor arrangements relating to its accounts
receivable, except to the extent that such noncompliance would not have a
material adverse effect on EPS and the EPS Subsidiaries, taken as a whole.

(b) Without limiting the generality of the foregoing, to the knowledge of
EPS, EPS and each EPS Subsidiary is in compliance with all Medicare and Medicaid
provider agreements to which it is a party, except to the extent that such
noncompliance would not have a material adverse effect on EPS.

3.13 Tax Returns. EPS and each EPS Subsidiary has filed all tax returns
required to be filed by it or requests for extensions to file such returns or
reports have been timely filed and granted and have not expired, except to the
extent that such failures to file, taken together, do not have a material
adverse effect on EPS and the EPS Subsidiaries, taken as a whole. EPS and each
EPS Subsidiary has made all payments shown as due on such returns. None of EPS
nor any EPS Subsidiary has been notified that any tax returns of EPS are
currently under audit by the Internal Revenue Service or any state or local tax
agency. No agreements have been made by EPS or any EPS Subsidiary for the
extension of time or the waiver of the statute of limitations for the assessment
or payment of any federal, state or local taxes.

3.14 Employee Benefit Plans; Employment Matters. (a) Except as set forth
on Exhibit 3.14(a) to the EPS Disclosure Schedule, EPS has neither established
nor maintains nor is obligated to make contributions to or under or otherwise
participate in (i) any bonus or other type of incentive compensation plan,
program, agreement, policy, commitment, contract or arrangement (whether or not
set forth in a written document), (ii) any pension, profit-sharing, retirement
or other plan, program or arrangement, or (iii) any other employee benefit plan,
fund or program, including, but not limited to, those described in Section 3(3)
of ERISA. All such plans listed on Exhibit 3.14(a) (individually, an "EPS Plan"
and collectively, the "EPS Plans") have been operated and administered in all
material respects in accordance with, as applicable, ERISA, the Code, Title VII
of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as
amended, the Age Discrimination in Employment Act of 1967, as amended, and the
related rules and regulations adopted by those federal agencies responsible for
the administration of such laws. No act or failure to act by EPS has resulted in
a "prohibited transaction" (as defined in ERISA) with respect to the EPS Plans
that is not subject to a statutory or regulatory exception. No "reportable
event" (as defined in ERISA) has occurred with respect to any of the EPS Plans
which is subject to Title IV of ERISA. EPS has not previously made, is not
currently making, and is not obligated in any way to make, any contributions to
any multi-employer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980.

(b) Except as disclosed in the EPS Documents or as set forth on Exhibit
3.14(b) to the EPS Disclosure Schedule, EPS is not a party to any oral or
written (i) union, guild or collective bargaining agreement which agreement
covers employees in the United States (nor is it aware of any union organizing
activity currently being conducted in respect to any of its employees), (ii)
agreement with any executive officer or other key employee the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction of the nature contemplated by this Plan of Merger
and which provides for the payment of in excess of $25,000, or (iii) agreement
or plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Plan of Merger or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Plan of Merger.

3.15 Compliance with Laws in General. Except as set forth on Exhibit 3.15
to the EPS Disclosure Schedule, none of EPS or any EPS Subsidiary has received
any notices of, nor to the best of their knowledge have there been any, material
violations of any contracts, agreements, federal, state and local laws,
regulations and ordinances relating to its business and operations, including,
without limitation, the Occupational Safety

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and Health Act, the Americans with Disabilities Act, the Medicare or applicable
Medicaid statutes and regulations and any Environmental Laws (as such term is
defined in Section 10.10), and no notice of any pending inspection or violation
of any such law, regulation or ordinance has been received by EPS or any EPS
Subsidiary, which, if it were determined that a violation had occurred, would
have a material adverse effect on EPS and the EPS Subsidiaries, taken as a
whole, since June 30, 1991.

3.16 Regulatory Approvals. EPS and each EPS Subsidiary, as applicable,
holds all licenses, certificates of need and other regulatory approvals required
or necessary to be applied for or obtained in connection with its business as
presently conducted or as proposed to be conducted, except where the failure to
obtain such license, certificate of need or regulatory approval would not have a
material adverse effect on EPS. All such licenses, certificates of need and
other regulatory approvals relating to the business, operations and facilities
of EPS and each EPS Subsidiary are in full force and effect, except where any
failure of such license, certificate of need or regulatory approval to be in
full force and effect would not have a material adverse effect on EPS and the
EPS Subsidiaries, taken as a whole. Any and all past litigation concerning such
licenses, certificates of need and regulatory approvals, and all claims and
causes of action raised therein, has been finally adjudicated. No such license,
certificate of need or regulatory approval has been revoked, conditioned (except
as may be customary) or restricted, and no action (equitable, legal or
administrative), arbitration or other process is pending, or to the best
knowledge of EPS, threatened, which in any way challenges the validity of, or
seeks to revoke, condition or restrict any such license, certificate of need, or
regulatory approval. Subject to compliance with applicable securities laws and
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR
Act"), the consummation of the Merger will not violate any law or restriction to
which EPS or any EPS Subsidiary is subject which, if violated, would have a
material adverse effect on EPS.

3.17 Commissions and Fees. Except as set forth on Exhibit 3.17 to the EPS
Disclosure Schedule, there are no valid claims for brokerage commissions or
finder's or similar fees in connection with the transactions contemplated by
this Plan of Merger which may be now or hereafter asserted against
MedPartners/Mullikin resulting from any action taken by EPS or its officers,
Directors or agents, or any of them.

3.18 Retirement or Re-Acquisition of MedPartners/Mullikin Common
Stock. EPS is not a party to any agreement the effect of which would be to
require MedPartners/Mullikin directly or indirectly to retire or re-acquire all
or part of the shares of MedPartners/Mullikin Common Stock issued pursuant to
Section 2.1 hereof.

3.19 Disposition of Assets of Surviving Corporation. EPS is not a party to
any plan to dispose of a significant part of the assets of the Surviving
Corporation within two years after the Closing Date, other than dispositions in
the ordinary course of business of the Surviving Corporation and dispositions
intended to eliminate duplicate facilities or excess capacity.

3.20 Vote Required. The affirmative vote of a majority of the outstanding
EPS Shares entitled to vote thereon is the only vote of the holders of any class
or series of EPS capital stock necessary to approve this Plan of Merger, the
Merger and the transactions contemplated hereby; provided, however, if the
approval of the Merger by the EPS shareholders is to be accomplished by action
without a meeting pursuant to Section 1701.54 of the OGCL, the unanimous written
consent of the EPS shareholders shall be required.

3.21 No Untrue Representations. No representation or warranty by EPS in
this Plan of Merger, and no Exhibit or certificate issued by EPS and furnished
or to be furnished to MedPartners/Mullikin and the Subsidiary pursuant hereto,
or in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact in response to the disclosure
requested, or omits or will omit to state a material fact necessary to make the
statements or facts contained therein in response to the disclosure requested
not misleading in light of all of the circumstances then prevailing.

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SECTION 4. JOINT REPRESENTATIONS AND WARRANTIES OF THE SUBSIDIARY AND
MEDPARTNERS/MULLIKIN.

The Subsidiary and MedPartners/Mullikin, jointly and severally, hereby
represent and warrant to EPS as follows:

4.1 Organization, Existence and Capital Stock. The Subsidiary is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. The Subsidiary's authorized capital consists
of 1,000 shares of Common Stock, par value $1.00 per share, all of which shares
are issued and registered in the name of MedPartners/Mullikin. The Subsidiary
has not, within the two years immediately preceding the date of this Plan of
Merger, owned, directly or indirectly, any EPS Shares.

4.2 Power and Authority. The Subsidiary has the corporate power to
execute, deliver and perform this Plan of Merger and all agreements and other
documents executed and delivered, or to be executed and delivered, by it
pursuant to this Plan of Merger, and, subject to the satisfaction of the
conditions precedent set forth herein, has taken all actions required by law,
its Certificate of Incorporation, its By-laws or otherwise, to authorize the
execution and delivery of this Plan of Merger and such related documents. The
execution and delivery of this Plan of Merger does not and, subject to the
receipt of required regulatory approvals and any other required third-party
consents or approvals, the consummation of the Merger contemplated hereby will
not, violate any provisions of the Certificate of Incorporation or By-laws of
the Subsidiary, or any agreement, instrument, order, judgment or decree to which
the Subsidiary is a party or by which it is bound, violate any restrictions of
any kind to which the Subsidiary is subject, or result in the creation of any
lien, charge or encumbrance upon any of the property or assets of the
Subsidiary.

4.3 Commissions and Fees. There are no claims for brokerage commissions,
investment bankers' fees or finder's fees in connection with the transaction
contemplated by this Plan of Merger resulting from any action taken by the
Subsidiary or any of its officers, Directors or agents.

4.4 No Subsidiaries. The Subsidiary does not own stock in, and does not
control directly or indirectly, any other corporation, association or business
organization. The Subsidiary is not a party to any joint venture or partnership.

4.5 Legal Proceedings. There are no actions, suits or proceedings pending
or threatened against the Subsidiary, at law or in equity, relating to or
affecting the Subsidiary, including the Merger. The Subsidiary does not know or
have any reasonable grounds to know of any justification for any such action,
suit or proceeding.

4.6 No Contracts or Liabilities. Other than the obligations created under
this Plan of Merger, the Subsidiary has no obligations or liabilities
(contingent or otherwise) under any contracts, claims, leases, loans or
otherwise.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF MEDPARTNERS/MULLIKIN.

MedPartners/Mullikin hereby represents and warrants to EPS as follows:

5.1 Organization, Existence and Good Standing. MedPartners/Mullikin is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. MedPartners/Mullikin has all necessary
corporate power to own its properties and assets and to carry on its business as
presently conducted. MedPartners/Mullikin is not, and has not been within the
two years immediately preceding the date of this Plan of Merger, a subsidiary or
division of another corporation, nor has MedPartners/Mullikin within such time
owned, directly or indirectly, any EPS Shares.

5.2 MedPartners/Mullikin Capitalization. MedPartners/Mullikin has an
authorized capitalization of 9,500,000 shares of Preferred Stock, par value
$.001 per share, of which no shares are issued and outstanding, and no shares
are held in treasury, 500,000 shares of Series C Junior Participating Preferred
Stock, par value $.001 per share, of which no shares are issued and outstanding
and no shares are held in treasury and 200,000,000 shares of Common Stock, par
value $.001 per share, of which 50,792,415 shares were issued and outstanding at
May 10, 1996, and no shares are held in treasury. All of the issued and
outstanding shares of MedPartners/Mullikin Common Stock have been duly and
validly issued and are fully paid and nonassessa-

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ble. Except as disclosed in the MedPartners/Mullikin S-1 Registration Statement
(as herein defined), and except as described on Exhibit 5.2 to the
MedPartners/Mullikin Disclosure Schedule delivered to EPS at the time of the
execution and delivery of this Plan of Merger (the "MedPartners/Mullikin
Disclosure Schedule"), there are no options, warrants or similar rights granted
by MedPartners/Mullikin or any other agreements to which MedPartners/Mullikin is
a party providing for the issuance or sale by it of any additional securities.
There is no liability for dividends declared or accumulated but unpaid with
respect to any shares of MedPartners/Mullikin Common Stock. MedPartners/Mullikin
has not made any distributions to any holder of MedPartners/Mullikin Common
Stock or participated in or effected any issuance, exchange or retirement of
MedPartners/Mullikin Common Stock, or otherwise changed the equity interests of
holders of MedPartners/Mullikin Common Stock, in contemplation of effecting the
Merger within the two years immediately preceding the date of this Plan of
Merger. Any shares of MedPartners/Mullikin Common Stock that
MedPartners/Mullikin has re-acquired during the two years immediately preceding
the date of this Plan of Merger have been so re-acquired only for purposes other
than Business Combinations.

5.3 MedPartners/Mullikin Common Stock. On the Closing Date,
MedPartners/Mullikin will have a sufficient number of authorized but unissued
and/or treasury shares of its Common Stock available for issuance to the holders
of EPS Shares in accordance with the provisions of this Plan of Merger. The
MedPartners/Mullikin Common Stock to be issued pursuant to this Plan of Merger
will, when so delivered, be (i) duly and validly issued, fully paid and
nonassessable, (ii) issued pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), and (iii) listed
on the NYSE, upon official notice of issuance.

5.4 Subsidiaries and Affiliated Entities. (a) Attached as Exhibit 5.4 to
the MedPartners/Mullikin Disclosure Schedule is a list of all subsidiaries of
MedPartners/Mullikin (individually, a "MedPartners/ Mullikin Subsidiary", and
collectively, the "MedPartners/Mullikin Subsidiaries") and their states of
incorporation and all professional corporations or professional associations of
which MedPartners/Mullikin has control and their states of incorporation
("MedPartners/Mullikin Professional Corporations"). Except as set forth in
Exhibit 5.4, MedPartners/Mullikin does not own stock in and does not control,
directly or indirectly, any other corporation, association, partnership or
business organization.

(b) Also disclosed in Exhibit 5.4 is a list of all general or limited
partnerships in which a general partner is MedPartners/Mullikin, a
MedPartners/Mullikin Subsidiary or another partnership controlled by
MedPartners/Mullikin (individually a "MedPartners/Mullikin Partnership" and
collectively, the "MedPartners/Mullikin Partnerships"), and all limited
liability companies in which MedPartners/Mullikin, a MedPartners/Mullikin
Subsidiary or a MedPartners/Mullikin Partnership is a member (individually, a
"MedPartners/Mullikin LLC" (the MedPartners/Mullikin Professional Corporation
and the MedPartners/ Mullikin LLCs being collectively called the "Other
MedPartners/Mullikin Entities"), and their states of organization. Except as set
forth in Exhibit 5.4, neither MedPartners/Mullikin nor any MedPartners/Mullikin
Subsidiary nor any MedPartners/Mullikin Partnership owns an equity interest in,
nor does such entity control, directly or indirectly, any other joint venture,
limited liability company or partnership.

(c) Except as set forth in Exhibit 5.4, neither MedPartners/Mullikin nor
any MedPartners/Mullikin Subsidiary owns an equity interest in, nor does such
entity control, directly or indirectly, any other joint venture, limited
liability company or partnership.

5.5 Organization, Existence and Good Standing of MedPartners/Mullikin
Subsidiaries. Each MedPartners/Mullikin Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation. Each MedPartners/Mullikin Subsidiary has all
necessary corporate power to own its properties and assets and to carry on its
business as presently conducted.

5.6 Foreign Qualifications. MedPartners/Mullikin and each
MedPartners/Mullikin Subsidiary is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the nature or
character of the property owned, leased or operated by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to so qualify would not have a material adverse effect on
MedPartners/Mullikin.

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5.7 Subsidiary Common Stock. MedPartners/Mullikin owns, beneficially and
of record, all of the issued and outstanding shares of Common Stock, par value
$1.00 per share, of the Subsidiary (the "Subsidiary Common Stock"), which are
validly issued and outstanding, fully paid and nonassessable, free and clear of
all liens and encumbrances. MedPartners/Mullikin has the corporate power to
endorse and surrender such shares of Subsidiary Common Stock for conversion
pursuant to this Plan of Merger. MedPartners/Mullikin has, or will, by the
Effective Time, have taken all such actions as may be required in its capacity
as the sole stockholder of the Subsidiary to approve the Merger.

5.8 Power and Authority. MedPartners/Mullikin has corporate power to
execute, deliver and perform this Plan of Merger and all agreements and other
documents executed and delivered, or to be executed and delivered, by it
pursuant to this Plan of Merger, and, subject to the satisfaction of the
conditions precedent set forth herein has taken all actions required by law, its
Certificate of Incorporation, its By-laws or otherwise, to authorize the
execution and delivery of this Plan of Merger and such related documents. The
execution and delivery of this Plan of Merger does not and, subject to the
receipt of required regulatory approvals and any other required third-party
consents or approvals, the consummation of the Merger contemplated hereby will
not, violate any provisions of the Certificate of Incorporation or By-laws of
MedPartners/Mullikin, or any provision of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree to which MedPartners/Mullikin is a party
or by which it is bound, or violate any restrictions of any kind to which
MedPartners/Mullikin is subject. The execution and delivery of this Plan of
Merger has been approved by the Board of Directors of MedPartners/ Mullikin.

5.9 MedPartners/Mullikin Public Information. MedPartners/Mullikin has
heretofore furnished EPS with information regarding MedPartners/Mullikin
including its Prospectus dated March 13, 1996 (Registration No. 333-1130)
relating to the offer and sale of 8,250,000 shares of MedPartners/Mullikin
Common Stock (the "Prospectus"), its Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 ("10-K") and its Quarterly Report for the quarter
ended March 31, 1996 ("10-Q") filed with the Securities and Exchange Commission
("SEC")(as any such documents have been amended since their original filing, the
"MedPartners/Mullikin Documents"). As of their respective filing dates, the
MedPartners/Mullikin Documents did not contain any untrue statements of material
facts or omit to state material facts required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. As of their respective filing dates, the
MedPartners/Mullikin Documents complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended ("Securities
Act") and the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
the rules and regulations promulgated under such statutes The financial
statements contained in the MedPartners/ Mullikin Documents, together with the
notes thereto, have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods indicated
(except as may be indicated in the notes thereto, or, in the case of the
unaudited financial statements, as permitted by Form 10-Q), reflect all known
liabilities of MedPartners/Mullikin, fixed or contingent, required to be stated
therein, and present fairly the financial condition of MedPartners/Mullikin at
said dates and the consolidated results of operations and cash flows of
MedPartners/Mullikin for the periods then ended. The consolidated balance sheet
of MedPartners/Mullikin at December 31,1995, included in the 10-K is herein
sometimes referred to as the "MedPartners/Mullikin Balance Sheet."
MedPartners/Mullikin has also furnished EPS with a copy of the press release
dated May 14, 1996, announcing the proposed merger of Caremark International
with and into MedPartners/Mullikin after which the name of MedPartners/Mullikin
will be MedPartners, Inc.

5.10 Legal Proceedings. There is no pending or threatened litigation,
governmental investigation, condemnation or other proceeding against or relating
to or affecting MedPartners/Mullikin or the transactions contemplated by this
Plan of Merger for which MedPartners/Mullikin is uninsured or which, if resolved
adversely to MedPartners/Mullikin, would have a material adverse effect on
MedPartners/Mullikin and, to the knowledge of MedPartners/Mullikin, no basis for
any such action exists.

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5.11 Subsequent Events. Except as set forth on Exhibit 5.11 to the
MedPartners/Mullikin Disclosure Schedule, MedPartners/Mullikin has not, since
the date of the MedPartners/Mullikin Balance Sheet:

(a) Incurred any material adverse change.

(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on
the MedPartners/Mullikin Balance Sheet or (ii) liabilities incurred since
the date of the MedPartners/Mullikin Balance Sheet in the ordinary course
of business, which discharge or satisfaction would have a material adverse
effect on MedPartners/Mullikin.

(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor which would have a
material adverse effect on MedPartners/Mullikin, except as may have been
required due to income or operations of MedPartners/Mullikin since the date
of the MedPartners/Mullikin Balance Sheet.

(e) Sold or transferred any of the assets material to the consolidated
business of MedPartners/ Mullikin, canceled any material debts or claims or
waived any material rights, except in the ordinary course of business.

(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable
by MedPartners/Mullikin to any officer or employee, consultant or agent
(other than normal merit increases), or by means of any bonus or pension
plan, contract or other commitment, increased in a material respect the
compensation of any officer, employee, consultant or agent.

(h) Issued any stock, bonds or other securities or any options or
rights to purchase any of its securities.

5.12 Compliance with Laws in General. MedPartners/Mullikin has not
received any notices of material violations of any federal, state and local
laws, regulations and ordinances relating to its business and operations,
including, without limitation, the Federal Environmental Protection Act, the
Occupational Safety and Health Act, the Americans with Disabilities Act, the
Medicare or applicable Medicaid statutes and regulations and any Environmental
Laws, and no notice of any pending inspection or violation of any such law,
regulation or ordinance has been received by MedPartners/Mullikin which, if it
were determined that a violation had occurred, would have a material adverse
effect on MedPartners/Mullikin.

5.13 Regulatory Approvals. Except as disclosed in the MedPartners/Mullikin
S-1 Registration Statement or in Exhibit 5.13 to the MedPartners/Mullikin
Disclosure Schedule, MedPartners/Mullikin and each MedPartners/Mullikin
Subsidiary, as applicable, holds all licenses, certificates of need and other
regulatory approvals required or necessary to be applied for or obtained in
connection with its business as presently conducted or as proposed to be
conducted, except where the failure to obtain such license, certificate of need
or regulatory approval would not have a material adverse effect on
MedPartners/Mullikin. All such licenses, certificates of need and other
regulatory approvals relating to the business, operations and facilities of
MedPartners/Mullikin and each MedPartners/Mullikin Subsidiary are in full force
and effect, except where any failure of such license, certificate of need or
regulatory approval to be in full force and effect would not have a material
adverse effect on MedPartners/Mullikin. Any and all past litigation concerning
such licenses, certificates of need and regulatory approvals, and all claims and
causes of action raised therein, has been finally adjudicated. No such license,
certificate of need or regulatory approval has been revoked, conditioned (except
as may be customary) or restricted, and no action (equitable, legal or
administrative), arbitration or

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other process is pending, or to the best knowledge of MedPartners/Mullikin,
threatened, which in any way challenges the validity of, or seeks to revoke,
condition or restrict any such license, certificate of need, or regulatory
approval. Subject to compliance with applicable securities laws and the HSR Act,
the consummation of the Merger will not violate any law or restriction to which
MedPartners/Mullikin is subject which, if violated, would have a material
adverse effect on MedPartners/Mullikin.

5.14 Investment Intent. MedPartners/Mullikin is acquiring the EPS Shares
hereunder for its own account and not with a view to the distribution or sale
thereof, and MedPartners/Mullikin has no understanding, agreement or arrangement
to sell, distribute, partition or otherwise transfer or assign all or any part
of the EPS Shares to any other person, firm or corporation.

5.15 Commissions and Fees. There are no claims for brokerage commissions,
investment bankers' fees or finder's fees in connection with the transactions
contemplated by this Plan of Merger resulting from any action taken by
MedPartners/Mullikin or any of its officers, Directors or agents.

5.16 Retirement or Re-Acquisition of MedPartners/Mullikin Common
Stock. MedPartners/Mullikin has not agreed directly or indirectly to retire or
re-acquire all or part of the shares of MedPartners/Mullikin Common Stock issued
pursuant to Section 2.1 hereof.

5.17 Disposition of Assets of Surviving Corporation. MedPartners/Mullikin
does not intend or plan to dispose of, or to cause the Surviving Corporation to
dispose of, a significant part of the assets of the Surviving Corporation within
two years after the Effective Date, other than dispositions in the ordinary
course of business of the Surviving Corporation and dispositions intended to
eliminate duplicate facilities or excess capacity.

5.18 No Untrue Representations. No representation or warranty by
MedPartners/Mullikin in this Plan of Merger, and no Exhibit or certificate
issued by MedPartners/Mullikin and furnished or to be furnished to EPS pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact in response to the
disclosure requested, or omits or will omit to state a material fact necessary
to make the statements or facts contained therein in response to the disclosure
requested not misleading in light of all of the circumstances then prevailing.

SECTION 6. ACCESS TO INFORMATION AND DOCUMENTS.

6.1 Access to Information. (a) Between the date hereof and the Closing
Date, EPS will give to MedPartners/Mullikin and its counsel, accountants and
other representatives full access to all the properties, documents, contracts,
personnel files and other records of such party and shall furnish
MedPartners/Mullikin with copies of such documents and with such information
with respect to the affairs of such party as the other party may from time to
time reasonably request. EPS will disclose and make available to MedPartners/
Mullikin and its representatives all books, contracts, accounts, personnel
records, letters of intent, papers, records, communications with regulatory
authorities and other documents relating to the business and operations of EPS.
In addition, EPS shall make available to MedPartners/Mullikin all such banking,
investment and financial information as shall be necessary to allow for the
efficient integration of EPS's banking, investment and financial arrangements
with those of MedPartners/Mullikin at the Effective Time.

(b) In connection with the foregoing, EPS acknowledges that it is a
condition to the consummation of the Merger that the consent of
MedPartners/Mullikin's Required Lenders hereunder be obtained as contemplated by
Section 9.2(g) of this Plan of Merger, and that in connection with the obtaining
of such consent, MedPartners/Mullikin will be required to provide certain
information and make certain representations and warranties about EPS and its
business. EPS hereby agrees that it shall provide MedPartners/ Mullikin with
such information and documentation as MedPartners/Mullikin shall reasonably
request in order to obtain such consent.

6.2 Return of Records. If the transactions contemplated hereby are not
consummated and this Plan of Merger terminates,each party agrees to promptly
return all documents, contracts, records or properties of the other party and
all copies thereof furnished pursuant to this Section 6 or otherwise. All
information disclosed by any party or any affiliate or representative of any
party shall be deemed to be "Evaluation Material" under

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the terms of the Confidentiality Agreement between EPS and Team Health Group,
Inc. (the "Confidentiality Agreement").

6.3 Effect of Access. (a) Nothing contained in this Section 6 shall be
deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the assets of the other party.

(b) With respect to matters as to which any party has made express
representations or warranties herein, the parties shall be entitled to rely upon
such express representations and warranties irrespective of any investigations
made by such parties, except to the extent that such investigations result in
actual knowledge of the inaccuracy or falsehood of particular representations
and warranties.

SECTION 7. COVENANTS.

7.1 Preservation of Business. EPS will use its reasonable best efforts to
preserve the business organization of EPS intact, to keep available to
MedPartners/Mullikin and the Surviving Corporation the services of the present
employees and independent contractors of EPS, and to preserve for MedPartners/
Mullikin and the Surviving Corporation the goodwill of the suppliers, customers
and others having business relations with EPS.

7.2 Material Transactions. Prior to the Effective Time, EPS will not
(other than as contemplated by the terms of the Plan of Merger and the related
documents, and other than with respect to transactions for which binding
commitments have been entered into prior to the date hereof and transactions
described on Exhibit 7.2 to the EPS Disclosure Schedule which do not vary
materially from the terms set forth on such Exhibit 7.2), without first
obtaining the written consent of MedPartners/Mullikin:

(a) Encumber any asset or enter into any transaction or make any
contract or commitment relating to the properties, assets and business of
EPS or the EPS Subsidiaries, other than in the ordinary course of business
or as otherwise disclosed herein.

(b) Enter into any employment contract which is not terminable upon
notice of 30 days or less, at will, and without penalty to EPS except as
provided herein.

(c) Enter into any contract or agreement (i) which cannot be performed
within three months or less, or (ii) which involves the expenditure of over
$25,000.

(d) Issue or sell, or agree to issue or sell, any shares of capital
stock or other securities of EPS.

(e) Except as provided below in this Section 7, make any payment or
distribution to the trustee under any bonus, pension, profit-sharing or
retirement plan or incur any obligation to make any such payment or
contribution which is not in accordance with EPS's usual past practice, or
make any payment or contributions or incur any obligation pursuant to or in
respect of any other plan or contract or arrangement providing for bonuses,
executive incentive compensation, pensions, deferred compensation,
retirement payments, profit-sharing or the like, establish or enter into
any such plan, contract or arrangement, or terminate any plan.

(f) Extend credit to anyone except in the ordinary course of business
consistent with prior practices.

(g) Guarantee the obligation of any person, firm or corporation except
in the ordinary course of business consistent with prior practices.

(h) Amend its Articles of Incorporation or Code of Regulations.

(i) Except as provided below in this Section 7, take any action of a
character described in Section 3.11(a) through 3.11(h).

7.3 Meeting of EPS Shareholders. EPS will take all steps necessary in
accordance with its Articles of Incorporation and Code of Regulations to call,
give notice of, convene and hold a meeting of its shareholders (the
"Shareholders Meeting") as soon as practicable after the effectiveness of the
Registration Statement (as defined in Section 7.4 hereof), for the purpose of
approving this Plan of Merger and for such other purposes as

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may be necessary. Unless this Plan of Merger shall have been validly terminated
as provided herein, the Board of Directors of EPS (subject to the provisions of
Section 8.1(d) hereof) will (i) recommend to its shareholders the approval of
this Plan of Merger, the transactions contemplated hereby and any other matters
to be submitted to the shareholders in connection therewith, to the extent that
such approval is required by applicable law in order to consummate the Merger,
and (ii) use its reasonable, good faith efforts to obtain the approval by its
shareholders of this Plan of Merger and the transactions contemplated hereby.

7.4 Registration Statement. (a) MedPartners/Mullikin shall prepare and
file with the SEC and any other applicable regulatory bodies, as soon as
reasonably practicable, but in any event within 30 days, a Registration
Statement on Form S-4 with respect to the shares of MedPartners/Mullikin Common
Stock to be issued in the Merger (the "Registration Statement"), and will
otherwise proceed promptly to satisfy the requirements of the Securities Act,
including Rule 145 thereunder. Such Registration Statement shall contain a proxy
statement of EPS (the "Proxy Statement") containing the information required by
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
MedPartners/Mullikin shall take all reasonable steps to cause the Registration
Statement to be declared effective and to maintain such effectiveness until all
of the shares covered thereby have been distributed. MedPartners/Mullikin shall
promptly amend or supplement the Registration Statement to the extent necessary
in order to make the statements therein not misleading or to correct any
misstatements which have become false or misleading. MedPartners/Mullikin shall
use its reasonable, good faith efforts to have the Proxy Statement approved by
the SEC under the provisions of the Exchange Act. MedPartners/Mullikin shall
provide EPS with copies of all filings made pursuant to this Section 7.4 and
shall consult with EPS on responses to any comments made by the Staff of the SEC
with respect thereto.

(b) The information specifically designated as being supplied by EPS for
inclusion in the Registration Statement shall not, at the time the Registration
Statement is declared effective, at the time the Proxy Statement is first mailed
to holders of EPS Shares, at the time of the Shareholders Meeting and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, not misleading. The information specifically designated
as being supplied by EPS for inclusion in the Proxy Statement shall not, at the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to holders of EPS Shares, at the time of the Shareholders Meeting
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to EPS, or its officers or Directors, should
be discovered by EPS which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, EPS shall
promptly inform MedPartners/Mullikin. All documents, if any, that EPS is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder.

(c) The information specifically designated as being supplied by
MedPartners/Mullikin for inclusion in the Registration Statement shall not, at
the time the Registration Statement is declared effective, at the time the Proxy
Statement is first mailed to holders of EPS Shares, at the time of the
Shareholders Meeting and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, not misleading. The
information specifically designated as being supplied by MedPartners/Mullikin
for inclusion in the Proxy Statement to be sent to the holders of EPS Shares in
connection with the Shareholders Meeting shall not, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
holders of EPS Shares, at the time of the Shareholders Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, not misleading. If at any time prior to the Effective
Time any event or circumstance relating to MedPartners/Mullikin or its officers
or Directors, should be discovered by MedPartners/Mullikin which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement, MedPartners/Mullikin shall promptly inform EPS and shall promptly
file such amendment to the Registra-

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tion Statement. All documents that MedPartners/Mullikin is responsible for
filing with the SEC in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.

(d) Prior to the Closing Date, MedPartners/Mullikin shall use its
reasonable, good faith efforts to cause the shares of MedPartners/Mullikin
Common Stock to be issued pursuant to the Merger to be registered or qualified
under all applicable securities or Blue Sky laws of each of the states and
territories of the United States, and to take any other actions which may be
necessary to enable the MedPartners/Mullikin Common Stock to be issued pursuant
to the Merger to be distributed in each such jurisdiction.

(e) Prior to the Closing Date, MedPartners/Mullikin shall file a Subsequent
Listing Application with the NYSE relating to the shares of MedPartners/Mullikin
Common Stock to be issued in connection with the Merger, and shall cause such
shares of MedPartners/Mullikin Common Stock to be listed on the NYSE, upon
official notice of issuance, prior to the Closing Date.

(f) EPS shall furnish all information to MedPartners/Mullikin with respect
to EPS as MedPartners/ Mullikin may reasonably request for inclusion in the
Registration Statement and the Proxy Statement and shall otherwise cooperate
with MedPartners/Mullikin in the preparation and filing of such documents.

7.5 State Takeover Laws. EPS shall take all reasonable steps necessary and
within its power to exempt the Merger from the requirements of any state
takeover statute or other similar state law which would prevent or impede the
consummation of the transactions contemplated hereby, by action of EPS's Board
of Directors.

7.6 HSR Act Compliance. If required, as determined by
MedPartners/Mullikin, MedPartners/Mullikin and EPS shall promptly make their
respective filings, and shall thereafter use their reasonable, good faith
efforts to promptly make any required submissions, under the HSR Act with
respect to the Merger and the transactions contemplated hereby.
MedPartners/Mullikin and EPS will use their respective reasonable, good faith
efforts to obtain all other permits, authorizations, consents and approvals from
third parties and governmental authorities necessary to consummate the Merger
and the transactions contemplated hereby.

7.7 Public Disclosures. MedPartners/Mullikin and EPS will consult with
each other before issuing any press release or otherwise making any public
statement with respect to the transactions contemplated by this Plan of Merger,
and shall not issue any such press release or make any such public statement
prior to such consultation except as may be required by applicable law or
requirements of the NYSE. The parties shall issue a joint press release,
mutually acceptable to MedPartners/Mullikin and EPS, as required by applicable
law.

7.8 Resignation of EPS Directors. On or prior to the Closing Date, EPS
shall deliver to MedPartners/ Mullikin evidence satisfactory to
MedPartners/Mullikin of the resignation of the Directors of EPS, such
resignations to be effective on the Closing Date.

7.9 Notice of Subsequent Events. Each party hereto shall notify the other
parties of any changes, additions or events of which they have knowledge which
would cause any material change in or material addition to any Exhibit to its
Disclosure Schedule delivered by the notifying party under this Plan of Merger,
promptly after the occurrence of the same. If the effect of such change or
addition would, individually or in the aggregate with the effect of changes or
additions previously disclosed pursuant to this Section 7.9, constitute a
material adverse effect on the notifying party, the non-notifying party may,
within ten days after receipt of such notice, elect to terminate this Plan of
Merger. If the non-notifying party does not give written notice of such
termination within such 10-day period, the non-notifying party shall be deemed
to have consented to such change or addition and shall not be entitled to
terminate this Plan of Merger by reason thereof.

7.10 No Solicitations. Either MedPartners/Mullikin or EPS may, directly or
indirectly, furnish information and access, in response to unsolicited requests
therefor, to the same extent permitted by Section 6.1, to any corporation,
partnership, person or other entity or group, pursuant to appropriate
confidentiality agreements, and may participate in discussions and negotiate
with such corporation, partnership, person or other entity or group concerning
any proposal to acquire such party upon a merger, purchase of assets, purchase
of or tender offer for shares of its Common Stock or similar transaction (an
"Acquisition

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Transaction"), if the Board of Directors of MedPartners/Mullikin or EPS, as the
case may be, determines in its good faith judgment in the exercise of its
fiduciary duties or the exercise of its duties under Rule 14e-2 under the
Exchange Act, after consultation with legal counsel and its financial advisors,
that such action is appropriate in furtherance of the best interest of its
stockholders. Except as set forth above, MedPartners/ Mullikin or EPS shall not,
and will direct each officer, Director, employee, representative and agent of
such party not to, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with or provide any information to any
corporation, partnership, person or other entity or group (other than
MedPartners/Mullikin or an affiliate or associate or agent of
MedPartners/Mullikin) concerning any merger, sale of assets, sale of or tender
offer for its shares or similar transactions involving such party. Such party
shall promptly notify the other party if it shall, on or after the date hereof,
have entered into a confidentiality agreement with any third party in response
to any unsolicited request for information and access in connection with a
possible Acquisition Transaction involving such party, such notification to
include the identity of such third party and the proposed terms of such possible
Acquisition Transaction.

7.11 Other Actions. Subject to the provisions of Section 7.10 hereof, none
of EPS, MedPartners/ Mullikin and the Subsidiary shall knowingly or
intentionally take any action, or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of its
representations and warranties set forth herein being or becoming untrue in any
material respect, or in any of the conditions to the Merger set forth in this
Plan of Merger not being satisfied, or (unless such action is required by
applicable law) which would materially adversely affect the ability of EPS or
MedPartners/Mullikin to obtain any consents or approvals required for the
consummation of the Merger without imposition of a condition or restriction
which would have a material adverse effect on the Surviving Corporation or which
would otherwise materially impair the ability of EPS or MedPartners/Mullikin to
consummate the Merger in accordance with the terms of this Plan of Merger or
materially delay such consummation.

7.12 Accounting Methods. Neither MedPartners/Mullikin nor EPS shall
change, in any material respect, its methods of accounting in effect at its most
recent fiscal year end, except as required by changes in generally accepted
accounting principles as concurred by such parties' independent accountants.

7.13 Pooling of Interests. Neither MedPartners/Mullikin nor EPS shall
intentionally take or cause to be taken any action, whether on or before the
Effective Time, which would disqualify the Merger as a "pooling of interests"
for accounting purposes.

7.14 Affiliate and Pooling Agreements. MedPartners/Mullikin and EPS will
each use their respective reasonable, good faith efforts to cause each of their
respective Directors and executive officers and each of their respective
"affiliates" (within the meaning of Rule 145 under the Securities Act) to
execute and deliver to MedPartners/Mullikin as soon as practicable an agreement
in the form attached hereto as Exhibit 7.14 relating to the disposition of the
EPS Shares and shares of MedPartners/Mullikin Common Stock held by such person
and the shares of MedPartners/Mullikin Common Stock issuable pursuant to this
Plan of Merger.

7.15 Cooperation. (a) MedPartners/Mullikin and EPS shall together, or
pursuant to an allocation of responsibility agreed to between them, (i)
cooperate with one another in determining whether any filings are required to be
made or consents are required to be obtained in any jurisdiction prior to the
Effective Time in connection with the consummation of the transactions
contemplated hereby and cooperate in making any such filings promptly and in
seeking to obtain timely any such consents, (ii) use their respective best
efforts to cause to be lifted any injunction prohibiting the Merger, or any part
thereof, or the other transactions contemplated hereby, and (iii) furnish to one
another and to one another's counsel all such information as may be required to
effect the foregoing actions.

(b) Subject to the terms and conditions herein provided, and unless this
Plan of Merger shall have been validly terminated as provided herein, each of
MedPartners/Mullikin and EPS shall use all reasonable efforts (i) to take, or
cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party (or any subsidiaries or
affiliates of such party) with respect to the Plan of Merger and to consummate
the transactions contemplated hereby, subject to the vote of EPS's shareholders
described above, and (ii) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any governmental entity and/or any other public or

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private third party which is required to be obtained or made by such party or
any of its subsidiaries or affiliates in connection with this Plan of Merger and
the transactions contemplated hereby. Each of MedPartners/ Mullikin and EPS will
promptly cooperate with and furnish information to the other in connection with
any such burden suffered by, or requirement imposed upon, either of them or any
of their subsidiaries or affiliates in connection with the foregoing.

7.16 Publication of Combined Results. MedPartners/Mullikin agrees that
within 30 days after the end of the first full calendar month following the
Effective Time, MedPartners/Mullikin shall cause publication of the combined
results of operations of MedPartners/Mullikin and EPS, provided however that
such period shall be tolled for such period as the financial statements required
for the preparation of such financial statements for such publication are not
reasonably available to MedPartners/Mullikin. For purposes of this Section 7.16,
the term "publication" shall have the meaning provided in SEC Accounting Series
Release No. 135.

7.17 Tax Opinions. Counsel for each of MedPartners/Mullikin and EPS shall
render opinions as to the federal income tax consequences of the Merger, which
opinions shall be filed as Exhibits to the Registration Statement. Each of
MedPartners/Mullikin and EPS agrees that it shall provide certificates
containing reasonable representations to such counsel in connection with the
rendering of such opinions.

7.18 Release of Restrictions on EPS Shares. Pursuant to Reg. Section
1.83-5(b), promulgated under 26 U.S.C. Section 83, the parties hereto shall
treat the consummation of the Merger as a noncompensatory cancellation of any
restrictions which were applicable to the EPS Shares prior to the Effective
Time.

7.19 Payments in Satisfaction of Finder's Fees. On the Closing Date,
immediately prior to the Effective Time, MedPartners/Mullikin shall pay to each
person listed on Exhibit 7.19 attached to this Plan of Merger, by certified
check, the amount set forth opposite that person's name but only if, in respect
of such person, MedPartners/Mullikin shall have received an executed release
substantially in the form of Exhibit 7.19(a) attached to this Plan of Merger.

7.20 Consent of Required Lenders. MedPartners/Mullikin shall use its best
efforts to obtain the consent of MedPartners/Mullikin's Required Lenders as
contemplated by Section 9.2(g) of this Plan of Merger.

7.21 Compliance with Restrictions on Corporate Practice of
Medicine. MedPartners/Mullikin shall comply with all applicable laws and
regulations restricting the corporate practice of medicine in the State of Ohio.

7.22 Amendment of EPS Deferred Compensation Plan. EPS shall amend the
Emergency Professional Services, Inc. Deferred Compensation Plan (the "DCP") in
form and manner reasonably satisfactory to MedPartners/Mullikin, to provide,
inter alia, that:

(i) the DCP's liability (sum of the account balances) shall be frozen
on the basis of the account balances adjusted as of January 31, 1996;

(ii) in addition to the payout provisions of the DCP, a participant
may commence to receive payments under the DCP upon satisfaction of the
DCP's existing age and service requirements without regard to whether the
participant continues to perform professional services in connection with
MedPartners/Mullikin or any MedPartners/Mullikin Subsidiary;

(iii) any amounts credited to a participant's account which are not
vested at the earliest time the participant either (a) ceased to be
employed by EPS prior to the Effective Time; (b) after the Effective Time,
ceases to perform professional services in connection with the business of
MedPartners/Mullikin and all MedPartners/Mullikin Subsidiaries; or (c)
commences to receive benefit payments under the DCP, shall be forfeited and
such amounts shall be reallocated (on the basis of the participants'
relative account balances) to the remaining participants who are still
performing professional services in connection with the business of
MedPartners/Mullikin and all MedPartners/Mullikin Subsidiaries and who have
not begun to receive benefits under the DCP.

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7.23 Amendment of EPS Pension Plan. Prior to the Effective Time, EPS shall
amend the Emergency Professional Services, Inc. Employees' Money Purchase
Pension Trust and Plan (the "MPP"), in form and manner reasonably satisfactory
to MedPartners/Mullikin, to provide, inter alia, that:

(i) EPS's contribution to the MPP for the period which commenced
February 1, 1996 and ending on the Closing Date shall, subject to
applicable law, be equitably prorated to reflect the fact that the plan
year is less than 12 months; and

(ii) effective as of the Closing Date, each participant will have a
fully vested and nonforfeitable interest in his accounts under the MPP.

7.24 Employee Benefit Plan Service. For purposes of determining either
eligibility under any employee benefit plan or arrangement maintained by
MedPartners/Mullikin and/or a MedPartners/Mullikin Subsidiary or the vested
percentage under any tax qualified retirement plan maintained by
MedPartners/Mullikin and/or a MedPartners/Mullikin Subsidiary, all periods of
employment with EPS through the Effective Time shall be treated as service with
MedPartners/Mullikin or a MedPartners/Mullikin Subsidiary, and MedPartners/
Mullikin shall take, and cause any MedPartners/Mullikin Subsidiary to take, all
actions necessary to effect such result.

7.25 EPS Profit Sharing Contribution. EPS shall not make any discretionary
contribution to the PSP in respect of the period commencing February 1, 1996 and
ending on the Closing Date.

7.26 EPS Employee Benefit Plans. After the Closing Date, EPS's employee
benefit plans, including the MPP and PSP (collectively, the "EPS Retirement
Plans"), shall continue in effect, except as provided in Sections 7.22, 7.23 and
7.25, until such time as MedPartners/Mullikin shall implement a substantially
uniform employee benefit program for substantially all of its United States
operations (the "Substitution Date"). After the Closing Date and until 30 days
after the Substitution Date, subject to the approval of MedPartners/Mullikin,
which approval shall not be unreasonably withheld, MedPartners/Mullikin shall
take, and shall cause the MedPartners/Mullikin Subsidiaries to take, such
actions as may be directed in writing by James J. Rybak, M.D. (as of the date of
this Plan of Merger, the president of EPS), or such other person designated in
writing by Dr. Rybak, with respect to the termination of, or disposition of the
assets of, the EPS Retirement Plans, in accordance with applicable law,
regulation or plan documents.

7.27 New EPS. Prior to the Effective Time, EPS shall form a new entity
("New EPS") which entity shall enter into each of the independent contractor
agreements as provided in Section 9.2(i) and the sole shareholder of which shall
be a physician licensed to practice medicine in the state of Ohio.

7.28 Independent Contractor Agreements. EPS shall and MedPartners/Mullikin
shall, or cause a MedPartners/Mullikin Subsidiary to, use their reasonable best
efforts to engage as an independent contractor, effective as of the Effective
Time, each person described in Exhibit 7.28 attached to this Plan of Merger, on
a basis generally consistent with that discussed between EPS and Team Health
Group, Inc., a wholly-owned subsidiary of MedPartners/Mullikin, and otherwise on
the terms set forth below:

(i) with respect to the persons described in Part A of Exhibit 7.28,
on the basis of an Independent Contractor Agreement substantially in the
form of Exhibit 7.28(a) attached to this Plan of Merger;

(ii) with respect of the persons described in Part B of Exhibit 7.28,
on the basis of an Independent Contractor Agreement substantially in the
form of Exhibit 7.28(b) attached to this Plan of Merger;

(iii) with respect of the persons described in Part C of Exhibit 7.28,
on the basis of an Independent Contractor Agreement substantially in the
form of Exhibit 7.28(c) attached to this Plan of Merger

7.29 MedPartners/Mullikin Guaranty. MedPartners/Mullikin shall execute a
document, in form reasonably satisfactory to EPS, pursuant to which
MedPartners/Mullikin shall guarantee the performance of the Surviving
Corporation's obligations under the DCP.

7.30 Continued Malpractice Coverage. In respect of all medical services
provided by any Doctor in connection with EPS's business prior to the Effective
Time, after the Effective Time, MedPartners/Mullikin shall, and shall cause the
MedPartners/Mullikin Subsidiaries to, maintain medical malpractice insurance

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coverage, in the same amounts and on the same basis as in existence at the
Effective Time, for so long as any such Doctor may remain subject to medical
malpractice claims in connection with EPS's business prior to the Effective
Time.

7.31 Purchase of Additional Insurance. MedPartners/Mullikin shall have
completed all due diligence related to malpractice or potential malpractice
claims in respect of EPS's business not later than July 26, 1996, and may
purchase additional medical malpractice coverage in respect of EPS's business,
the premiums for which shall not exceed $500,000, if in its reasonable judgment,
it determines that it is probable that, in respect of medical malpractice claims
which were not disclosed in the Plan of Merger or the Exhibits to the EPS
Disclosure Schedule, EPS would incur liability in excess of the policy limits of
its malpractice insurance coverage. The $44 million amount which appears in the
definition of "Merger Consideration" in Section 2.1(c), shall be reduced by the
amount of such premium, provided that MedPartners/Mullikin shall have (i)
actually paid the premium for such additional insurance coverage which coverage
shall be in existence at the Effective Time, and (ii) notified EPS in writing of
the malpractice insurance purchase and the amount of such premium not later than
21 days from the date hereof.

7.32 Best Efforts. EPS shall use its reasonable best efforts to assist
MedPartners/Mullikin and/or its designees with regard to the due diligence
described in Section 7.31 and Section 9.2(o).

SECTION 8. TERMINATION, AMENDMENT AND WAIVER.

8.1 Termination. This Plan of Merger may be terminated at any time prior
to the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the holders of EPS Shares:

(a) by mutual written consent of MedPartners/Mullikin, the Subsidiary
and EPS;

(b) by either MedPartners/Mullikin or EPS (i) if the holders of more
than 10% of the issued and outstanding EPS Shares vote against the approval
of the Merger at the EPS Shareholders' Meeting if such meeting occurs less
than ten (10) days prior to the Closing Date, or (ii) prior to the Closing
Date, there are Dissenting Shares constituting more than 10% of the issued
and outstanding EPS Shares

(i) if, upon a vote at a duly held meeting of shareholders or any
adjournment thereof, or otherwise, any required approval of the holders
of EPS Shares shall not have been obtained;

(ii) if the Merger shall not have been consummated on or before
September 30, 1996, unless the failure to consummate the Merger is the
result of a willful and material breach of this Plan of Merger by the
party seeking to terminate this Plan of Merger; provided, however, that
the passage of such period shall be tolled for any part thereof (but not
exceeding 60 days in the aggregate) during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or the
calling or holding of a meeting of shareholders;

(iii) if any court of competent jurisdiction or other governmental
entity shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become
final and nonappealable;

(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Plan of Merger which (A) would give rise to the failure of a condition
set forth in Section 9.2(a) or (b) or Section 9.3(a) or (b), as
applicable, and (B) cannot be or has not been cured within 30 days after
the giving of written notice to the breaching party of such breach (a
"Material Breach") (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other
agreement contained in this Plan of Merger); or

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(v) if either MedPartners/Mullikin or EPS gives notice of
termination pursuant to Section 7.9;

(d) by either MedPartners/Mullikin or EPS in the event that (i) all of
the conditions to the obligation of such party to effect the Merger set
forth in Section 9.1 shall have been satisfied and (ii) any condition to
the obligation of such party to effect the Merger set forth in Section 9.2
(in the case of MedPartners/Mullikin) or Section 9.3 (in the case of EPS)
is not capable of being satisfied prior to the end of the period referred
to in Section 8.1(c)(ii);

(e) by EPS, if EPS's Board of Directors shall have (i) determined, in
the exercise of its fiduciary duties under applicable law, not to recommend
the Merger to the holders of EPS Shares or shall have withdrawn such
recommendation or (ii) approved, recommended or endorsed any Acquisition
Transaction (as defined in Section 7.10) other than this Plan of Merger or
(iii) resolved to do any of the foregoing; or

(f) by either MedPartners/Mullikin or EPS, if the condition set forth
in Section 9.1(f) is not satisfied by September 30, 1996.

8.2 Effect of Termination. In the event of termination of this Plan of
Merger as provided in Section 8.1, this Plan of Merger shall forthwith become
void and have no effect, without any liability or obligation on the part of any
party, other than the provisions of Sections 6.2, 8.2 and 8.6, and except to the
extent that such termination results from the willful and material breach by a
party of any of its representations, warranties, covenants or other agreements
set forth in this Plan of Merger.

8.3 Amendment. This Plan of Merger may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the holders of EPS Shares; provided, however, that after any
such approval, there shall be made no amendment that pursuant to Section 251(d)
of the DGCL or Section 1701.78(G) of the OGCL requires further approval by such
shareholders. This Plan of Merger may not be amended except by an instrument in
writing signed on behalf of each of the parties.

8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Plan of Merger or in any
document delivered pursuant to this Plan of Merger or (c) subject to the proviso
of Section 8.3, waive compliance with any of the agreements or conditions
contained in this Plan of Merger. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this Plan of
Merger to assert any of its rights under this Plan of Merger or otherwise shall
not constitute a waiver of such rights, except as otherwise provided in Section
7.9.

8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Plan of Merger pursuant to Section 8.1, an amendment of this
Plan of Merger pursuant to Section 8.3, or an extension or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of
MedPartners/Mullikin, the Subsidiary or EPS, action by its Board of Directors or
the duly authorized designee of the Board of Directors.

8.6 Expenses. All costs and expenses incurred in connection with the Plan
of Merger and the transactions contemplated hereby shall be paid by the party
incurring such expense, except for all HSR Act filing fees which shall be paid
by MedPartners/Mullikin, it being understood that if the Merger is consummated,
by reason thereof, MedPartners/Mullikin will indirectly bear the expenses
incurred by EPS.

SECTION 9. CONDITIONS TO CLOSING.

9.1 Mutual Conditions. The respective obligations of each party to effect
the Merger shall be subject to the satisfaction, at or prior to the Closing
Date, of the following conditions (any of which may be waived in writing by
MedPartners/Mullikin, the Subsidiary and EPS):

(a) None of MedPartners/Mullikin, the Subsidiary or EPS nor any of
their respective subsidiaries shall be subject to any order, decree or
injunction by a court of competent jurisdiction which (i) prevents or
materially delays the consummation of the Merger or (ii) would impose any
material limitation on the

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ability of MedPartners/Mullikin effectively to exercise full rights of
ownership of the Common Stock of the Surviving Corporation or any material
portion of the assets or business of EPS, taken as a whole.

(b) No statute, rule or regulation shall have been enacted by the
government (or any governmental agency) of the United States or any state,
municipality or other political subdivision thereof that makes the
consummation of the Merger and any other transaction contemplated hereby
illegal.

(c) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.

(d) The holders of shares of EPS Shares shall have approved the
adoption of this Plan of Merger and any other matters submitted to them in
accordance with the provisions of Section 7.3 hereof.

(e) The shares of MedPartners/Mullikin Common Stock to be issued in
connection with the Merger shall have been listed on the NYSE, upon
official notice of issuance, and shall have been issued in transactions
qualified or exempt from registration under applicable securities or Blue
Sky laws of such states and territories of the United States as may be
required.

(f) The Merger shall qualify for "pooling of interests" accounting
treatment, and MedPartners/ Mullikin and EPS shall each have received a
letter to that effect from Ernst & Young, LLP dated not later than the date
of the mailing of the Proxy Statement.

(g) The Registration Statement shall have been declared effective and
no stop order with respect to the Registration Statement shall be in
effect.

(h) MedPartners/Mullikin, the Subsidiary and EPS shall have received
all consents, approvals and authorizations of third parties with respect to
all material leases and management agreements to which such parties are
parties, which consents, approvals and authorizations are required of such
third parties by such documents, in form and substance acceptable to
MedPartners/Mullikin or EPS, as the case may be, except where the failure
to obtain such consent, approval or authorization would not have a material
effect on the business of the Surviving Corporation.

9.2 Conditions to Obligations of MedPartners/Mullikin and the
Subsidiary. The obligations of MedPartners/Mullikin and the Subsidiary to
consummate the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions (any of which may be waived by MedPartners/Mullikin and the
Subsidiary):

(a) Each of the agreements of EPS to be performed at or prior to the
Closing Date pursuant to the terms hereof shall have been duly performed in
all material respects, and EPS shall have performed, in all material
respects, all of the acts required to be performed by it at or prior to the
Closing Date by the terms hereof.

(a) The representation and warranty of EPS set forth in Section
3.11(a) shall be true and correct as of the date of this Plan of Merger and
as of the Closing Date. The representations and warranties of EPS set forth
in this Plan of Merger that are qualified as to materiality shall be true
and correct, and those that are not so qualified shall be true and correct
in all material respects, as of the date of this Plan of Merger and as of
the Closing as though made at and as of such time, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so qualified
shall be true and correct in all material respects, as of such earlier
date); provided, however, that EPS shall not be deemed to be in breach of
any such representations or warranties by taking any action permitted (or
approved by MedPartners/Mullikin) under Section 7.2 or otherwise permitted
herein. MedPartners/ Mullikin and the Subsidiary shall have been furnished
with a certificate, executed by a duly authorized officer of EPS, dated the
Closing Date, certifying in such detail as MedPartners/Mullikin and the
Subsidiary may reasonably request as to the fulfillment of the foregoing
conditions.

(c) MedPartners/Mullikin and the Subsidiary shall have obtained, or
obtained the transfer of, any licenses and other regulatory approvals
necessary to allow the Surviving Corporation to operate EPS's

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business, unless the failure to obtain such transfer or approval would not
have a material adverse effect on EPS.

(d) MedPartners/Mullikin shall have received an opinion from Calfee,
Halter & Griswold, substantially to the effect set forth in Exhibit 9.2(d)
hereto.

(e) MedPartners/Mullikin shall have received an opinion from Haskell,
Slaughter & Young, L.L.C., to the effect that the Merger will constitute a
reorganization within Section 368(a) of the Code which opinion may be based
upon reasonable representations of fact provided by MedPartners/Mullikin,
EPS and the Subsidiary.

(f) EPS and each holder of EPS Shares (other than any dissenting
shareholder described in Section 2.1(d) hereof) shall have executed and
delivered a Release in the form of Exhibit 9.2(f) attached hereto.

(g) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Plan of Merger shall have been obtained or made, except
for filings in connection with the Merger and any other documents required
to be filed after the Effective Time.

(h) MedPartners/Mullikin shall have received "Affiliate Letters" as
provided in Section 7.14 herein from each of the affiliates of EPS.

(i) The Required Lenders (as defined in the Revolving Credit and
Reimbursement Agreement, dated as of November 21, 1995, among
MedPartners/Mullikin and NationsBank of Georgia, N.A., as agent for the
parties thereto) shall, in their sole discretion, have approved the Merger
and the transactions contemplated by the Merger.

(j) A sufficient number of Independent Contractor Agreements between
New EPS and EPS's physicians described in Section 7.28 hereof, shall have
been executed prior to the Closing Date, such that, in the reasonable
judgment of MedPartners/Mullikin, the operation of the Surviving
Corporation's business after the Closing Date will not be materially
impaired.

(k) Each EPS Shareholder (other than shareholders described in the
first sentence of Section 2.1(d)) shall have executed and delivered an
Indemnification Agreement substantially in the form of Exhibit 9.2(k)
attached to this Plan of Merger.

(l) EPS and each person who performed medical services in connection
with EPS's business prior to the Effective Time and who signs an
Independent Contractor Agreement with MedPartners/Mullikin or a
MedPartners/Mullikin Subsidiary shall have executed and delivered a Release
substantially in the form of Exhibit 9.2(l) attached to this Plan of
Merger.

(m) EPS and each holder of EPS Shares (other than any dissenting
shareholder described in Section 2.1(d) of this Plan of Merger) shall have
executed and delivered a Release substantially in the form of Exhibit
9.2(m) attached to this Plan of Merger.

(n) EPS shall have obtained the written consent of Lakewood Hospital
Association to the transaction contemplated by the Plan of Merger.

(o) MedPartners/Mullikin shall not have formed a reasonable belief by
July 26, 1996, subject to the reasonable best efforts assistance of EPS,
that it is probable that, in respect of medical malpractice claims arising
out of events or incidents which occurred prior to the Closing Date and
which were disclosed in the Plan of Merger or the Exhibits to the EPS
Disclosure Schedule, EPS would incur liability in excess of the policy
limits of its malpractice insurance coverage.

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9.3 Conditions to Obligations of EPS. The obligations of EPS to consummate
the Merger and the other transactions contemplated hereby shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions
(any of which may be waived by EPS):

(a) Each of the agreements of MedPartners/Mullikin and the Subsidiary
to be performed at or prior to the Closing Date pursuant to the terms
hereof shall have been duly performed, in all material respects, and
MedPartners/Mullikin and the Subsidiary shall have performed, in all
material respects, all of the acts required to be performed by them at or
prior to the Closing Date by the terms hereof.

(b) The representation and warranty of MedPartners/Mullikin set forth
in Section 5.11(a) shall be true and correct as of the date of the Plan of
Merger and as of the Closing Date. The representations and warranties of
MedPartners/Mullikin set forth in this Plan of Merger that are qualified as
to materiality shall be true and correct, and those that are not so
qualified shall be true and correct in all material respects, as of the
date of this Plan of Merger and as of the Closing as though made at and as
of such time, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties that are qualified as to materiality shall be true and correct,
and those that are not so qualified shall be true and correct in all
material respects, as of such earlier date). EPS shall have been furnished
with a certificate, executed by duly authorized officers of MedPartners/
Mullikin and the Subsidiary, dated the Closing Date, certifying in such
detail as EPS may reasonably request as to the fulfillment of the foregoing
conditions.

(c) EPS shall have received an opinion from Haskell Slaughter & Young,
L.L.C., substantially to the effect set forth in Exhibit 9.3(c) hereto.

(d) EPS shall have received an opinion from Calfee, Halter & Griswold,
to the effect that the Merger will constitute a reorganization within
Section 368(a) of the Code which opinion may be based upon reasonable
representations of fact provided by MedPartners/Mullikin, EPS, the EPS
shareholders and the Subsidiary, and may be reasonably subject to
reasonable and customary assumptions and exceptions.

(e) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Plan of Merger shall have been obtained or made, except
for filings in connection with the Merger and any other documents required
to be filed after the Effective Time.

(f) EPS shall have received a Certificate in the form of Exhibit
9.3(f) attached to this Plan of Merger, executed by MedPartners/Mullikin,
the Subsidiary and the physician licensed to practice medicine in the State
of Ohio who, effective as of the Effective Time, will hold all of the
capital stock of New EPS in trust for MedPartners/Mullikin.

(g) EPS shall have received an opinion from Carleton, McCreary Holmes
& Co., Cleveland, Ohio, that the consideration to be received by the EPS
shareholders in the Merger is fair from a financial point of view.

SECTION 10. MISCELLANEOUS.

10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Plan of Merger or in any instrument
delivered pursuant to this Plan of Merger shall survive the Effective Time.

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10.2 Notices. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery or by
facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:

If to MedPartners/Mullikin:

J. Brooke Johnston, Jr., Esq.
Senior Vice President and General Counsel
MedPartners/Mullikin, Inc.
4000 Galleria Tower, Suite 1000
Birmingham, Alabama 35244
Facsimile: (205) 933-7082

with a copy to:

F. Hampton McFadden, Jr., Esq.
Haskell Slaughter & Young, L.L.C.
1200 AmSouth/Harbert Plaza
Birmingham, Alabama 35203
Facsimile: (205) 324-1133

If to Team Health Group, Inc.

Team Health Group, Inc.
1900 Winston Road, Suite 300
Knoxville, Tennessee 37919
Facsimile: (423) 539-8003

If to EPS:

James J. Rybak, President
Emergency Professional Services
7321 Pearl Rd.
Middleburg Heights, Ohio 44130
Facsimile: (216) 842-8835

with a copy to:

Kenneth R. Schmeichel, Esq.
Calfee, Halter & Griswold
1400 McDonald Investment Center
Cleveland, Ohio 44114
Facsimile: (216) 241-0816

All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications with the overnight courier.

10.3 Further Assurances. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Plan of Merger.

10.4 Indemnification. MedPartners/Mullikin and the Subsidiary agree that
all rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers of EPS as provided in its Articles of Incorporation or Code of
Regulations shall survive the Merger and shall continue in full force and effect
in accordance with their terms. The provisions of this Section 10.4 are intended
to be for the benefit of, and shall be enforceable by, each such indemnified
party and each such indemnified party's heirs and representatives.

10.5 Governing Law. This Plan of Merger shall be interpreted, construed
and enforced in accordance with the laws of the State of Delaware, applied
without giving effect to any conflicts-of-law principles.

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10.6 "Including". The word "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation", "but not limited to", or words of
similar import) is used with reference to the word "including" or the similar
items or matters, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of the
general statement, term or matter.

10.7 "Knowledge". "To the knowledge", "to the best knowledge, information
and belief", or any similar phrase shall be deemed to refer to the knowledge of
the Chairman of the Board, Chief Executive Officer or Chief Financial Officer of
a party and to include the assurance that such knowledge is based upon a
reasonable investigation, unless otherwise expressly provided.

10.8 "Material adverse change" or "material adverse effect". "Material
adverse change" or "material adverse effect" means, when used in connection with
EPS or MedPartners/Mullikin, any change, effect, event or occurrence that has,
or is reasonably likely to have, individually or in the aggregate, a material
adverse impact on the business or financial position of such party and its
subsidiaries taken as a whole; provided, however, that "material adverse change"
and "material adverse effect" shall be deemed to exclude the impact of (i)
changes in generally accepted accounting principles, (ii) changes in applicable
law, and (iii) any changes resulting from any restructuring or other similar
charges or write-offs taken by EPS with the consent of MedPartners/Mullikin;
provided, however, that no such charges or write-offs will be taken if such
would adversely affect pooling-of-interests accounting treatment for the Merger.
Moreover, it shall not be deemed a "material adverse change" or "material
adverse effect" so long as future financial performance shall be consistent with
discussions between the parties in connection with the Merger.

10.9 "Hazardous Materials". The term "Hazardous Materials" means any
material which has been determined by any applicable governmental authority to
be harmful to the health or safety of human or animal life or vegetation,
regardless of whether such material is found on or below the surface of the
ground, in any surface or underground water, airborne in ambient air or in the
air inside any structure built or located upon or below the surface of the
ground or in building materials or in improvements of any structures, or in any
personal property located or used in any such structure, including, but not
limited to, all hazardous substances, imminently hazardous substances, hazardous
wastes, toxic substances, infectious wastes, pollutants and contaminants from
time to time defined, listed, identified, designated or classified as such under
any Environmental Laws (as defined in Section 10.10) regardless of the quantity
of any such material.

10.10 Environmental Laws. The term "Environmental Laws" means any federal,
state or local statute, regulation, rule or ordinance, and any judicial or
administrative interpretation thereof, regulating the use, generation, handling,
storage, transportation, discharge, emission, spillage or other release of
Hazardous Materials or relating to the protection of the environment.

10.11 Captions. The captions or headings in this Plan of Merger are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this Plan of
Merger.

10.12 Integration of Exhibits. All Exhibits attached to this Plan of
Merger are integral parts of this Plan of Merger as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all purposes
and not only in connection with the specific representation in which they are
explicitly referenced.

10.13 Entire Agreement. This instrument, including all Exhibits attached
hereto and the Confidentiality Agreement contain the entire agreement of the
parties and supersede any and all prior or contemporaneous agreements between
the parties, written or oral, with respect to the transactions contemplated
hereby. Such agreement may not be changed or terminated orally, but may only be
changed by an agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification, extension, discharge or
termination is sought.

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10.14 Counterparts. This Plan of Merger may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.

10.15 Binding Effect. This Plan of Merger shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Plan of Merger. No party may assign any right or obligation hereunder
without the prior written consent of the other parties.

10.16 No Rule of Construction. The parties acknowledge that this Plan of
Merger was initially prepared by MedPartners/Mullikin, and that all parties have
read and negotiated the language used in this Plan of Merger. The parties agree
that, because all parties participated in negotiating and drafting this Plan of
Merger, no rule of construction shall apply to this Plan of Merger which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Plan of Merger.

IN WITNESS WHEREOF, MedPartners/Mullikin, the Subsidiary and EPS have
caused this Plan and Agreement of Merger to be executed by their respective duly
authorized officers, all as of the day and year first above written.

MEDPARTNERS/MULLIKIN, INC.

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

EPS MERGER CORPORATION

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

EMERGENCY PROFESSIONAL SERVICES,
INC.

------------------------------------
James J. Rybak, M.D.
President

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ANNEX B

Carleton, McCreary, Holmes & Co.

600 Superior Avenue, 10th floor Tel 216.781.9035
Cleveland, Ohio 44114 Fax 216.781.6627

August 2, 1996

The Board of Directors
Emergency Professional Services, Inc.
7123 Pearl Road
Middleburg Hts., OH 44130

Dear Members of the Board:

You have requested our opinion as to the fairness, from a financial point of
view, to the holders (collectively, the "Stockholders") of the Common Stock,
par value $.01 per share (the "Common Stock"), of Emergency Professional
Services, Inc. ("EPS") of the consideration (the "Merger Consideration") to be
received by the Stockholders in the proposed merger (the "Merger") of EPS and
EPS Merger Corporation, wholly owned by MedPartners/Mullikin, Inc. ("MDM").

We understand that the Merger is to be effected pursuant to an Agreement and
Plan of Merger duly executed July 10, 1996 between EPS, EPS Merger Corporation
and MDM (the "Merger Agreement") whereby the shareholders of EPS shall receive
MDM Common Stock equal to the Merger Consideration. The Merger Consideration is
defined by the number of MDM shares (rounded to the nearest whole share) equal
to $44 million divided by the average of the last reported sales price per share
of MDM Common Stock for the fifteen consecutive trading days ending at the close
of trading on the second trading day immediately preceding the date on which the
shareholders of EPS meet to consider the merger.

Carleton, McCreary, Holmes & Co. has, from time to time, acted as financial
advisor to EPS and has acted as its financial advisor in connection with the
proposed Merger. We have, among other things:

i. Reviewed the terms and conditions of the Merger Agreement;

ii. Analyzed certain historical business and financial information
relating to EPS including the Audited Financial Statements of EPS
for each of the fiscal years ended January 31, 1994, January 31,
1995 and January 31, 1996;

iii. Reviewed certain financial forecasts, industry reports and other
data provided to us by EPS relating to its business;

iv. Conducted discussions with members of the senior management of EPS
with respect to its past and current business operations,
financial condition and future prospects;

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<PAGE> 260

The Board of Directors
8/2/96
Page 2
- ----------------------

v. Reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the business of EPS;

vi. Reviewed the financial terms of certain recent business
combinations in the health care industry specifically and in other
industries generally;

vii. Conducted such other financial studies, analyses and
investigations as we deemed appropriate.

We have relied upon the accuracy and completeness of the financial and other
information provided by EPS to us and have not undertaken any independent
verification of such information or any independent valuation or appraisal of
any of the assets of EPS. With respect to the financial forecasts referred to
above, we have assumed that they have been prepared on a reasonable basis
reflecting the best currently available judgments of EPS management as to the
future financial performance of EPS. Further, our opinion is based on economic,
monetary and market conditions existing on the date of this opinion.

This opinion shall not be deemed to be a recommendation to any stockholder of
EPS as to how such stockholder should vote with respect to the Merger.

Based on the foregoing and such factors as we deemed relevant, including our
assessment of current economic, monetary and market conditions, we are of the
opinion that as of the date hereof, the Merger Consideration is fair to the
Stockholders from a financial point of view.

Very truly yours,

/s/ Carleton, McCreary, Holmes & Co.

Carleton, McCreary, Holmes & Co.

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<PAGE> 261

ANNEX C

1701.85 RELIEF FOR DISSENTING SHAREHOLDERS; QUALIFICATION; PROCEDURES. --
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.

(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.

(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.

(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving of the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.

(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph, by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.

(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,

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within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505, of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.

(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken, and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.

(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay fair
cash value of them terminates if any of the following applies:

(a) The dissenting shareholder has not complied with this section, unless
the corporation by its directors waives such failure;

(b) The corporation abandons the action involved or is finally enjoined or
prevented from carrying it out, or the shareholders rescind their adoption, of
the action involved;

C-2
<PAGE> 263

(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder nor
the corporation filed or joined in a complaint under division (B) of this
section within the period provided in that division.

(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.

(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination. (Last amended by S.B. 74, L. '94, eff. 7-1-94.)

C-3
<PAGE> 264

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

MEDPARTNERS/MULLIKIN, INC.

Section 102(b)(7) of the DGCL grants corporations the right to limit or
eliminate the personal liability of their directors in certain circumstances in
accordance with provisions therein set forth. MedPartners/ Mullikin's Restated
Certificate of Incorporation contains a provision eliminating or limiting
director liability to MedPartners/Mullikin and its stockholders for monetary
damages arising from acts or omissions in the director's capacity as a director.
The provision does not, however, eliminate or limit the personal liability of a
director (i) for any breach of such director's duty of loyalty to
MedPartners/Mullikin or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under the Delaware statutory provision making directors personally liable,
under a negligence standard, for unlawful dividends or unlawful stock purchases
or redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the Board
of Directors of MedPartners/Mullikin protection against awards of monetary
damages resulting from breaches of their duty of care (except as indicated
above). As a result of this provision, the ability of MedPartners/ Mullikin or a
stockholder thereof to successfully prosecute an action against a director for a
breach of his duty of care is limited. However, the provision does not affect
the availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his duty of care. The SEC has taken the position
that the provision will have no effect on claims arising under the federal
securities laws.

Section 145 of the DGCL grants corporations the right to indemnify their
directors, officers, employees and agents in accordance with the provisions
therein set forth. MedPartners/Mullikin's Amended and Restated By-laws provide
for mandatory indemnification rights, subject to limited exceptions, to any
director, officer, employee, or agent of MedPartners/Mullikin who, by reason of
the fact that he or she is a director, officer, employee, or agent of
MedPartners/Mullikin, is involved in a legal proceeding of any nature. Such
indemnification rights include reimbursement for expenses incurred by such
director, officer, employee, or agent in advance of the final disposition of
such proceeding in accordance with the applicable provisions of the DGCL.

MedPartners/Mullikin has entered into agreements with all of its directors
and its executive officers pursuant to which MedPartners/Mullikin has agreed to
indemnify such directors and executive officers against liability incurred by
them by reason of their services of a director to the fullest extent allowable
under applicable law. In addition, MedPartners/Mullikin has purchased insurance
containing customary terms and conditions as permitted by Delaware law on behalf
of its directors and officers, which may cover liabilities under the Securities
Act of 1933.

See Item 22 of this Registration Statement on Form S-4.

EPS

Section 1701.13 of the OGCL sets forth the conditions and limitations
governing the indemnification of officers, directors and other persons. Section
1701.13 provides that a corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation in a similar capacity with another corporation or other entity,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement incurred in connection therewith if he acted in good faith and in
a manner that he reasonably believed to be in the best interests of the
corporation and, with respect to a criminal proceeding, had no reasonable cause
to believe that his conduct was unlawful. With respect to a suit by or in the
right of the corporation, indemnity may be provided to the foregoing persons
under Section 1701.13 on a basis similar

II-1
<PAGE> 265

to that set forth above, except that no indemnity may be provided in respect of
any claim, issue or matter as to which such person has been adjudged to be
liable to the corporation unless and to the extent that the Court of Common
Pleas or the court in which such action, suit or proceeding was brought
determines that despite the adjudication of liability but in view of all the
circumstances of the case such person is entitled to indemnity for such expenses
as the court deems proper. Moreover, Section 1701.13 provides for mandatory
indemnification of a director, officer, employee or agent of the corporation to
the extent that such person has been successful in defense of any such action,
suit or proceeding and provides that a corporation shall pay the expenses of an
officer or director in defending an action, suit or proceeding upon receipt of
an undertaking to repay such amounts if it is ultimately determined that such
person is not entitled to be indemnified. Section 1701.13 establishes provisions
for determining whether a given person is entitled to indemnification, and also
provides that the indemnification provided by or granted under Section 1701.13
is not exclusive of any rights to indemnity or advancement of expenses to which
such person may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise.

Under the terms of the EPS Articles and the EPS Code of Regulations,
subject to Section 1701.13 of the OGCL (which sets forth the conditions and
limitations governing the indemnification of officers, directors and other
persons), EPS will indemnify any director or officer or any former director or
officer of the Registrant against expenses, including attorney's fees,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him by reason of the fact that he is or was such director or officer
in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.

ITEM 21. EXHIBITS.

Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <C> <S>
(2)-1 -- Amended and Restated Plan and Agreement of Merger, dated as of July 10, 1996, among
MedPartners/Mullikin, Inc., EPS Merger Corporation and Emergency Professional
Services, Inc., attached to this Registration Statement as Annex A to the
Prospectus-Proxy Statement for EPS, is hereby incorporated herein by reference.
List of Exhibits to Plan and Agreement of Merger.
(3)-1 -- MedPartners/Mullikin, Inc. Second Amended and Restated Certificate of
Incorporation, filed as Exhibit (3)-1 to MedPartners/Mullikin's Registration
Statement on Form S-4 (Registration No. 333-09767) is hereby incorporated herein by
reference.
(3)-2 -- MedPartners/Mullikin, Inc. Amended and Restated By-laws, filed as Exhibit (3)-2 to
MedPartners/Mullikin's Registration Statement on Form S-4 (Registration No.
333-00774) is hereby incorporated herein by reference.
(4)-1 -- MedPartners/Mullikin, Inc. Stockholders' Rights Plan, filed as Exhibit (4)-1 to
MedPartners/ Mullikin's Registration Statement on Form S-4 (Registration No.
333-00774) is hereby incorporated herein by reference.
(5) -- Opinion of Haskell Slaughter & Young LLC, as to the legality of the shares of
MedPartners/ Mullikin Common Stock being registered. (to be filed by amendment)
(8)-1 -- Opinion of Haskell Slaughter & Young LLC as to certain federal income tax
consequences of the Merger. (to be filed by amendment)
(8)-2 -- Opinion of Calfee, Halter & Griswold as to certain federal income tax consequences
of the Merger. (to be filed by amendment)
(11) -- Statement re: Computation of Per Share Earnings.
(21) -- Subsidiaries of MedPartners/Mullikin.
(23)-1 -- Consent of Ernst & Young LLP. See pages immediately following signature pages to
the Registration Statement.
(23)-2 -- Consent of Price Waterhouse LLP. See pages immediately following signature pages to
the Registration Statement.
</TABLE>

II-2
<PAGE> 266

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <C> <S>
(23)-3 -- Consent of Haskell Slaughter & Young Professional Association (included in the
opinions filed as Exhibit (5) and (8)-1.
(23)-4 -- Consent of Calfee, Halter & Griswold (included in the opinion filed as Exhibit
(8)-2).
(24) -- Powers of Attorney.
(99)-1 -- EPS Proxy.
(99)-2 -- Consent of Carleton, McCreary, Holmes & Co.
</TABLE>

ITEM 22. UNDERTAKINGS.

(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) The undersigned Registrant hereby undertakes as follows: that prior to
any public re-offering of the securities registered hereunder through use of a
prospectus which is part of the registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such re-offering prospectus will contain the information called
for by the applicable registration form with respect to re-offerings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.

(3) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not subject of and included in
the Registration Statement when it became effective.

II-3
<PAGE> 267

(5) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.

II-4
<PAGE> 268

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama, on August 30, 1996.

MEDPARTNERS/MULLIKIN, INC.

By /s/ LARRY R. HOUSE
------------------------------------
Larry R. House
Chairman of the Board, President and
Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Larry R. House and Harold O. Knight, Jr., and
each of them, his attorney-in-fact with power of substitution for him in any and
all capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this Registration Statement
relates, or other instruments he deems necessary or appropriate, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------------- ------------------------------- ----------------
<C> <S> <C>
/s/ LARRY R. HOUSE Chairman of the Board, August 30, 1996
------------------------------------- President and Chief Executive
Larry R. House Officer and Director

/s/ HAROLD O. KNIGHT, JR. Executive Vice President and August 30, 1996
------------------------------------- Chief Financial Officer
Harold O. Knight, Jr. (Principal Financial and
Accounting Officer)

/s/ RICHARD M. SCRUSHY Director August 30, 1996
-------------------------------------
Richard M. Scrushy

/s/ LARRY D. STRIPLIN, JR. Director August 30, 1996
-------------------------------------
Larry D. Striplin, Jr.

/s/ CHARLES W. NEWHALL, III Director August 30, 1996
-------------------------------------
Charles W. Newhall, III

/s/ SCOTT F. MEADOW Director August 30, 1996
-------------------------------------
Scott F. Meadow

/s/ TED H. McCOURTNEY, JR. Director August 30, 1996
-------------------------------------
Ted H. McCourtney, Jr.

/s/ WALTER T. MULLIKIN, M.D. Director August 30, 1996
-------------------------------------
Walter T. Mullikin, M.D.

/s/ JOHN S. McDONALD, J.D. Director August 30, 1996
-------------------------------------
John S. McDonald, J.D.
</TABLE>

II-5
<PAGE> 269

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------------------------------------------- ------------------------------- ----------------
<C> <S> <C>
/s/ RICHARD J. KRAMER Director August 30, 1996
-------------------------------
Richard J. Kramer

/s/ ROSALIO J. LOPEZ, M.D. Director August 30, 1996
-------------------------------
Rosalio J. Lopez, M.D.
</TABLE>

II-6
<PAGE> 270

EXHIBIT (23)-1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Experts" and to
the use of our reports on the entities and dated as listed below in the
Registration Statement (Form S-4, No. 333-0000) and the related
Prospectus -- Proxy Statement of MedPartners/Mullikin, Inc. for the registration
of its Common Stock:

<TABLE>
<S> <C>
MedPartners/Mullikin, Inc. ....................................... February 22, 1996
CHS Management, Inc. ............................................. July 26, 1996
Cardinal Healthcare, P.A.......................................... June 19, 1996
New Management.................................................... July 26, 1996
Emergency Professional Services, Inc.............................. July 12, 1996
</TABLE>

ERNST & YOUNG LLP

Birmingham, Alabama
August 29, 1996
<PAGE> 271

EXHIBIT (23)-2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus relating to the Merger with
Emergency Professional Services, Inc. constituting part of this Registration
Statement on Form S-4 of MedPartners/Mullikin, Inc. of our report dated January
24, 1996, except as to the third paragraph of Note 14, which is dated as of
March 19, 1996, relating to the financial statements of Caremark International
Inc., which appears in such Prospectus. We also consent to the references to us
under the headings "Experts" in such Prospectus.

PRICE WATERHOUSE LLP

Chicago, IL
August 30, 1996
<PAGE> 272

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ----------
<C> <C> <S> <C>
(2)-1 -- Amended and Restated Plan and Agreement of Merger, dated as of July 10,
1996, among MedPartners/Mullikin, Inc., EPS Merger Corporation and
Emergency Professional Services, Inc., attached to this Registration
Statement as Annex A to the Prospectus-Proxy Statement for EPS, is hereby
incorporated herein by reference.
List of Exhibits to Plan and Agreement of Merger.
(3)-1 -- MedPartners/Mullikin, Inc. Second Amended and Restated Certificate of
Incorporation, filed as Exhibit (3)-1 to MedPartners/Mullikin's
Registration Statement on Form S-4 (Registration No. 333-09767) is hereby
incorporated herein by reference.
(3)-2 -- MedPartners/Mullikin, Inc. Amended and Restated By-laws, filed as Exhibit
(3)-2 to MedPartners/Mullikin's Registration Statement on Form S-4
(Registration No. 333-00774) is hereby incorporated herein by reference.
(4)-1 -- MedPartners/Mullikin, Inc. Stockholders' Rights Plan, filed as Exhibit
(4)-1 to MedPartners/Mullikin's Registration Statement on Form S-4
(Registration No. 333-00774) is hereby incorporated herein by reference.
(5) -- Opinion of Haskell Slaughter & Young LLC, as to the legality of the
shares of MedPartners/Mullikin Common Stock being registered. (to be
filed by amendment)
(8)-1 -- Opinion of Haskell Slaughter & Young LLC as to certain federal income tax
consequences of the Merger. (to be filed by amendment)
(8)-2 -- Opinion of Calfee, Halter & Griswold as to certain federal income tax
consequences of the Merger. (to be filed by amendment)
(11) -- Statement re: Computation of Per Share Earnings.
(21) -- Subsidiaries of MedPartners/Mullikin.
(23)-1 -- Consent of Ernst & Young LLP. See pages immediately following signature
pages to the Registration Statement.
(23)-2 -- Consent of Price Waterhouse LLP. See pages immediately following
signature pages to the Registration Statement.
(23)-3 -- Consent of Haskell Slaughter & Young Professional Association (included
in the opinions filed as Exhibit (5) and (8)-1.
(23)-4 -- Consent of Calfee, Halter & Griswold (included in the opinion filed as
Exhibit (8)-2).
(24) -- Powers of Attorney. See the signature page to the original filing of this
Registration Statement on Form S-4.
(99)-1 -- EPS Proxy.
(99)-2 -- Consent of Carleton, McCreary, Holmes & Co.
</TABLE>

<PAGE> 1

EXHIBIT 2-1

LIST OF THE EXHIBITS OF PLAN AND AGREEMENT OF MERGER

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ----- ----------------------- ----
<S> <C> <C>
1. - Schedule 3.2 - EPS Options

2. - Schedule 3.3 - EPS Subsidiaries

3. - Schedule 3.7 - EPS Financial Statements

4. - Schedule 3.8 - EPS Contracts

5. - Schedule 3.9 - EPS Properties

6. - Schedule 3.10 - EPS Legal Proceedings

7. - Schedule 3.11 - EPS Subsequent Events

8. - Schedule 3.14 - EPS Employee Benefit Plans

9. - Schedule 3.15 - EPS Compliance with Laws

10. - Schedule 3.16 - EPS Regulatory Approvals

11. - Schedule 3.17 - EPS Commissions or Finders Fees

12. - Schedule 5.2 - MedPartners/Mullikin Options

13. - Schedule 5.4 - MedPartners/Mullikin Subsidiaries

14. - Schedule 5.11 - MedPartners/Mullikin Subsequent Events

15. - Schedule 5.13 - MedPartners/Mullikin Employee Benefit Plans

16. - Exhibit 7.13 - Form of "Affiliate" Letter

17. - Exhibit 9.2(d) - Form of Opinion from Calfee, Halter & Griswold

18. - Exhibit 9.3(d) - Form of Opinion of Haskell Slaughter & Young, L.L.C.
</TABLE>

<PAGE> 1
EXHIBIT 11

MEDPARTNERS/MULLIKIN, INC.

COMPUTATIONS OF PRO FORMA NET INCOME (LOSS) PER SHARE

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- -------------------
1993 1994 1995 1995 1996
-------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Pro forma net income (loss) . . . . . . . . . . . . . . . . . $ (1,768) $(3,072) $ 558 $ 10,731 $ (5,275)
======== ======= ======= ======== ========

PRIMARY
Weighted average common shares outstanding . . . . . . . . . 19,955 28,105 40,509 40,590 49,152
Weighted average redeemable preferred stock . . . . . . . . -- -- 1,131 -- --
Net common shares issuable on exercise of certain
stock options(1)(2) . . . . . . . . . . . . . . . . . . . . -- -- 1,080 1,277 882
-------- ------- ------- -------- --------
Average common and common equivalent shares outstanding . . 19,955 28,105 42,720 41,867 50,034
======== ======= ======= ======== ========
Per share amounts . . . . . . . . . . . . . . . . . . . . . $ (0.09) $ (0.11) $ 0.01 $ 0.26 $ (0.11)
======== ======= ======= ======== ========

FULLY DILUTED
Weighted average common shares outstanding . . . . . . . . . 19,955 28,105 40,509 40,590 49,152
Weighted average redeemable preferred stock . . . . . . . . -- -- 1,131 -- --
Net common shares issuable on exercise of certain
stock options(1)(2) . . . . . . . . . . . . . . . . . . . . -- -- 1,080 1,300 882
-------- ------- ------- -------- --------
Average common and common equivalent shares outstanding . . 19,955 28,105 42,720 41,890 50,034
======== ======= ======= ======== ========
Per share amounts . . . . . . . . . . . . . . . . . . . . . $ (0.09) $ (0.11) $ 0.01 $ 0.26 $ (0.11)
======== ======= ======= ======== ========

PRO FORMA(3)
Weighted average common shares outstanding . . . . . . . . . 19,955 28,105 40,509 40,590 49,152
Weighted average redeemable convertible preferred stock . . 7,001 7,001 1,131 -- --
Net common shares issuable on exercise of certain stock
options(1) . . . . . . . . . . . . . . . . . . . . . . . . 1,447 1,447 1,080 1,277 882
-------- ------- ------- -------- --------
Average pro forma common and common equivalent shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . 28,403 36,553 42,720 41,867 50,034
======== ======= ======= ======== ========
Per share amounts . . . . . . . . . . . . . . . . . . . . . $ (0.06) $ (0.08) $ 0.01 $ 0.26 $ (0.11)
======== ======= ======= ======== ========
</TABLE>

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

(1) Net common shares issuable on exercise of certain stock options is
calculated based on the treasury stock method using the average market
price for the primary calculation and the ending market price, if
higher than the average, for the fully diluted calculation.
(2) Common shares issuable on exercise of certain stock options were not
included in the calculation of average common and common equivalent
shares outstanding for 1993 and 1994 since the effect of inclusion
would be antidilutive.
(3) Pro forma net loss per share is computed by dividing pro forma net
loss by the number of common and common equivalent shares outstanding
during the periods in accordance with the applicable rules of the
Securities and Exchange Commission. All stock options and warrants
issued have been considered as outstanding common stock equivalents
for all periods presented, even if anti-dilutive, under the treasury
stock method. Shares of common stock issued upon conversion of the
redeemable convertible preferred stock were assumed to be common stock
equivalents for all periods presented.
<PAGE> 2
NOTE: The Company has merged with the following entities subsequent to
December 31, 1994 in transactions that were accounted for as pooling
of interests. Accordingly, the Company's historical computations of
pro forma net loss per share for all periods prior to the effective
dates of these mergers have been restated to include the results of
these entities.

<TABLE>
<CAPTION>
ENTITY NAME EFFECTIVE DATE OF MERGER
- ----------- ------------------------
<S> <C>
MEDCTR, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 20, 1995
Team Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 1995
Texas Back Institute Physicians, P.A. . . . . . . . . . . . . . . . . . . . September 29, 1995
Texas Back Institute, Inc. . . . . . . . . . . . . . . . . . . . . . . . . November 2, 1995
Vanguard Healthcare Group, Inc. . . . . . . . . . . . . . . . . . . . . . . November 13, 1995
Mullikin Medical Enterprises, L.P. and related real estate partnerships . . November 29, 1995
Retina and Vitreous Associates of Alabama, P.C. . . . . . . . . . . . . . . December 29, 1995
Pacific Physician Services, Inc. . . . . . . . . . . . . . . . . . . . . . February 22, 1996
</TABLE>

<PAGE> 1

EXHIBIT 21

SUBSIDIARIES
OF
MEDPARTNERS/MULLIKIN, INC.

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF ORGANIZATION
- ------------------------------------------------------------------------ -----------------------
<S> <C>
PPM Merger Corporation.................................................. Delaware
EPA Inc................................................................. Delaware
EPS Merger Corporation.................................................. Delaware
CHS Merger Corporation.................................................. Delaware
MedPartners, Inc........................................................ Delaware
MedPartners Acquisition Corporation..................................... Delaware
MedPartners of Florida, Inc. ........................................... Florida
MedPartners Aviation, Inc. ............................................. Delaware
PPS Merger Corporation.................................................. Delaware
Bay Area Practice Management Group, Inc. ............................... California
Greeley Clinic, Inc. ................................................... Oregon
LFMG, Inc. ............................................................. California
MMC (BAFP), Inc. ....................................................... California
MME (Center), Inc. ..................................................... California
Pacific Medical Group, Inc. ............................................ Oregon
St. Johns Clinic, Inc. ................................................. Oregon
The Tigard Clinic, Inc. ................................................ Oregon
MME (WCMG), Inc. ....................................................... California
MME (WCPCMG), Inc. ..................................................... California
Cerritos Investment Group............................................... California
Family Medical Center................................................... Oregon
5000 Airport Plaza, L.P. ............................................... California
Surgical Partners of Plano I, L.P. ..................................... Texas
Surgical Partners of Plano, L.L.C. ..................................... Oregon
CareSelect Group, Inc. ................................................. Texas
Pacific Physician Services, Inc. ....................................... Delaware
Reliant Healthcare Systems, Inc. ....................................... California
Hauch, Incorporated..................................................... California
PPS Valley Management, Inc. ............................................ California
Physicians' Hospital Management Corporation............................. Delaware
Pacific Physician Services Arizona, Inc. ............................... Delaware
Pacific Physicians Services Nevada, Inc. ............................... Delaware
Sierra Meadows Associates (Partnership)................................. Nevada
PPS Riverside Division Acquisition and Management Corporation I......... Delaware
PPS Nevada Corporation Investment....................................... Nevada
PPS East, Inc. ......................................................... Delaware
PPS North Carolina Medical Management Inc. ............................. North Carolina
Pacific Indemnity, Ltd. ................................................ British Virgin Islands
PPS Medical Management and Consulting, L.L.C. ..........................
Team Health Group, Inc. ................................................ Tennessee
Southeastern Emergency Physicians, Inc. ................................ Tennessee
Southeastern Emergency Physicians of Memphis, Inc. ..................... Tennessee
Emergency Coverage Corporation.......................................... Tennessee
Americare Medical Services, Inc. ....................................... Tennessee
Med. Assure Systems, Inc. .............................................. Tennessee
Clinic Management Services, Inc. ....................................... Tennessee
Hospital Based Physician Services, Inc. ................................ Tennessee
Daniel & Yeager, Inc. .................................................. Alabama
Teleradiology Associates, Inc. ......................................... North Carolina
Team Radiology, Inc. ................................................... Tennessee
Emergicare Management, Inc. ............................................ Tennessee
</TABLE>

<PAGE> 1

EXHIBIT 99.1
EMERGENCY PROFESSIONAL SERVICES, INC.

PROXY

SPECIAL MEETING OF SHAREHOLDERS -- SEPTEMBER 16, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned shareholder hereby appoints JAMES J. RYBAK, M.D. and MICHAEL
C. THOMAS, M.D., and each of them, the proxies and attorneys of the undersigned
to vote all Common Shares which the undersigned is entitled to vote at the
Special Meeting of Shareholders of Emergency Professional Services, Inc. to be
held on September 16, 1996, or any adjournment thereof, upon the matters
described in the accompanying Notice of Special Meeting of Shareholders and
Prospectus-Proxy Statement, as set forth on the reverse side hereof, and in
their discretion to vote upon any other matter or proposal that may properly
come before the meeting or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE SHAREHOLDER. IF NO SUCH DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU
SIGN AND RETURN THIS PROXY CARD. AN ABSTENTION ON A PROPOSAL WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE PROPOSAL.

THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3. VOTES MUST BE
INDICATED BY AN X IN THE APPROPRIATE BOX WRITTEN IN BLACK OR BLUE INK.

(1) Adoption of the Plan and Agreement of Merger dated as of July 10, 1996,
(the "Plan of Merger"), by and among Emergency Professional Services, Inc.,
MedPartners/Mullikin, Inc. and EPS Merger Corporation, and the transactions
contemplated thereby.

/ / FOR / / AGAINST / / ABSTAIN

(2) Adoption of an amendment to the Emergency Professional Services, Inc.
Deferred Compensation Plan in accordance with Section 7.22 of the Plan of
Merger.

/ / FOR / / AGAINST / / ABSTAIN

(Continued on reverse side)

(3) Adoption of an amendment to the Emergency Professional Services, Inc.
Stock Bonus Plan to eliminate restrictions on shares issued pursuant to the Plan
and to terminate the Plan.

/ / FOR / / AGAINST / / ABSTAIN

(4) IN ACCORDANCE WITH THEIR DISCRETION, TO VOTE UPON ANY OTHER MATTER OR
PROPOSAL THAT MAY PROPERLY COME BEFORE THE MEETING.

Please sign, date and return the Proxy Card promptly using the enclosed
envelope.

Printed Name(s):

------------------------------
Signature(s):

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

Date:
-------------------------

NOTE: Please sign exactly as
your name appears hereon.
Joint owners of shares should
both sign this Proxy Card.
When signing as an attorney,
executor, administrator,
trustee or guardian, please
provide your full title.

<PAGE> 1

EXHIBIT 99.2

CONSENT OF FINANCIAL ADVISOR TO EMERGENCY PROFESSIONAL SERVICES, INC.

We understand that our opinion will be filed with the Securities and
Exchange Commission and distributed to Emergency Professional Services, Inc.'s
("EPS") shareholders as part of the Proxy Statement relating to the proposed
merger of EPS Merger Corporation, Inc., a wholly owned subsidiary of
MedPartners/Mullikin, Inc., into EPS (the "Merger"). We further understand that
our opinion may be referred to in any filings with the Securities and Exchange
Commission describing the Merger. We hereby consent to the foregoing uses of the
opinion and to the reference to, and the use of, our name in connection
therewith.

/s/ CARLETON, MCCREARY, HOLMES & CO.
------------------------------------------
Carleton, MCCreary, Holmes & Co.

Cleveland, Ohio
August 30, 1996