<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION CENTER
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 1997.
COMMISSION FILE NO.: 333-15595-01
HEALTHFIRST MEDICAL GROUP, P.C.
FORMERLY "PHYSICIAN PARTNERS HEALTHFIRST, P.C."
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OREGON 93-1221389
- --------------------------------------------- ------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER ID NO.)
OR ORGANIZATION)
10535 N.E. GLISAN
PORTLAND, OREGON 97220
- --------------------------------------------- ------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 408-2452
------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
As of May 15, 1997, 91 shares of the Registrant's Common Stock, no par
value, were outstanding.
<PAGE> 2
HEALTHFIRST MEDICAL GROUP, P.C.
BALANCE SHEETS - AS OF MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
(All dollar amounts are expressed in thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1 $ 895
Patient accounts receivable, net of allowances
for contractual discounts and
uncollectible accounts of $0 and
$2,465 at March 31, 1997 and
December 31, 1996, respectively -- 6,497
Healthcare and other receivables -- 2,956
Prepaid expenses and deposits 42 201
------------ ------------
Total current assets 43 10,549
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $0 and $5,769 at
March 31, 1997 and December 31, 1996, respectively -- 20,361
OTHER ASSETS --
------------ ------------
Total assets $ 43 $ 30,910
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ -- $ 1,500
Current portion of long-term debt and capital
and direct financing lease obligations -- 4,663
PPI payable 42 --
Accounts payable and accrued expenses -- 2,825
Accrued healthcare costs -- 2,936
Accrued compensation and related expenses -- 3,313
Deferred revenue -- 183
------------ ------------
Total current liabilities 42 15,420
------------ ------------
LONG-TERM DEBT, net of current portion -- 5,066
CAPITAL AND DIRECT FINANCING LEASE
OBLIGATIONS, net of current portion -- 4,265
DEFERRED COMPENSATION AND OTHER LONG-TERM LIABILITIES -- 3,795
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock-
No par value; 1,000,000 shares authorized; 92
and 0 shares issued and outstanding at March 31, 1997 1 --
and December 31, 1996, respectively
Series 1 Class A--Voting; no par value; 800,000 shares
authorized; 0 and 7,000 shares issued and
outstanding at March 31, 1997 and
December 31, 1996, respectively -- 700
Series 2 Class A--Voting; no par value; 200,000
shares authorized; 0 and 2,200 shares issued and
outstanding at March 31, 1997 and
December 31, 1996, respectively -- 330
Series 3, 4 and 5 Class A--Voting; no par
value; 200,000, 100,000 and 100,000
shares authorized, none issued or
outstanding at March 31, 1997
and December 31, 1996 -- --
Class B--Nonvoting; no par value; 300,000
shares authorized; none issued and
outstanding at March 31, 1997 and December 31, 1996 -- --
Additional paid-in capital -- 1,879
Retained earnings -- 1,149
Notes receivable from stockholders for purchase of stock -- (439)
Unamortized value of restricted stock awards -- (1,255)
------------ ------------
Total stockholders' equity 1 2,364
------------ ------------
Total liabilities and stockholders' equity $ 43 $ 30,910
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 3
HEALTHFIRST MEDICAL GROUP, P.C.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(All dollar amounts are expressed in thousands, except for
earnings per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
REVENUES:
Fee-for-service, net $ 9,307 $ 7,598
Prepaid healthcare 6,955 6,756
------------ ------------
Net revenues 16,262 14,354
Less-Provider compensation and benefits 3,944 4,263
------------ ------------
Net revenue less provider compensation and
benefits 12,318 10,091
------------ ------------
OPERATING EXPENSES:
Clinic salaries, wages and benefits 4,584 3,874
Purchased medical services 2,288 2,065
Medical and office supplies 1,581 1,336
General and administrative expenses 1,444 1,684
Lease and rent expense 525 415
Provision for uncollectible accounts 484 366
Depreciation and amortization 425 384
------------ ------------
Total operating expenses 11,331 10,124
------------ ------------
Operating income (loss) 987 (33)
OTHER INCOME (EXPENSE):
Interest income 73 251
Interest expense (305) (214)
Management Fee (497) --
------------ ------------
Net income before provision for income taxes 258 4
------------ ------------
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET INCOME $ 258 $ 4
============ ============
EARNINGS PER SHARE $ 2,804.35 $ 56.34
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 92 71
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
HEALTHFIRST MEDICAL GROUP, P.C.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(All dollar amounts are expressed in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 258 $ 4
Adjustment to reconcile net income to net cash
provided by (used in) operating activities- -- --
Depreciation and amortization 148 384
Changes in operating assets and liabilities
(excluding assets and liabilities purchased from
Suburban or assigned to Physician Partners, Inc.):
Patient accounts receivable, net (178) (404)
Healthcare and other receivables 691 93
Inventories of drugs and supplies -- 195
Prepaid expenses and deposits (92) 13
Other assets (169) (73)
Accounts payable and accrued expenses (119) 317
PPI Payable 42 --
Accrued healthcare costs (748) (142)
Accrued compensation and related expenses 154 195
Deferred revenue 68 151
Deferred compensation and other long-term liabilities 108 (160)
------------ ------------
Net cash provided by operating activities 163 573
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (92) (870)
Cash received in acquisition of Suburban -- 231
------------ ------------
Net cash used in investing activities (92) (639)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under line of credit agreement 1,000 --
Proceeds from issuance of long-term debt -- 247
Principal payments on long-term obligations (734) (158)
Proceeds from repayments of notes receivable from stockholders 17 5
Cash contributed to Physicians Partners, Inc. in merger (1,157) --
Costs incurred related to Physician Partners, Inc. transaction (91) --
------------ ------------
Net cash provided by (used in) financing activities (965) 94
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (894) 28
CASH AND CASH EQUIVALENTS, beginning of period 895 125
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 1 $ 153
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
HEALTHFIRST MEDICAL GROUP, P.C.
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(All dollar amounts are expressed in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 169 $ 194
Cash paid for income taxes 1 40
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations with related parties totaling $3,575 were assumed in
the acquisition of Suburban in February 1996.
In 1996, HealthFirst acquired all of the outstanding stock of Suburban in
exchange for 2,200 shares of HealthFirst Series 2 Class A stock. The acquisition
was recorded under the purchase method of accounting. The fair values of
Suburban's assets, including $231,000 of cash, and liabilities at the date of
acquisition are presented below:
<TABLE>
<S> <C>
Current assets $ 2,284
Property, plant and equipment 5,325
Other long-term assets 99
Current liabilities (2,833)
Long-term liabilities (4,617)
-----------
Net equity acquired $ 258
===========
</TABLE>
In February 1997, HealthFirst assigned all assets and liabilities to Physician
Partners, Inc. as part of the reorganization and merger transaction. The book
value Corvallis' assets and liabilities, including $1.2 million of cash, at the
date of the transaction are presented below:
<TABLE>
<S> <C>
Current assets $ 10,239
Property, plant and equipment 20,305
Other long-term assets 277
Current liabilities 11,112
Long-term liabilities 17,163
Contributed Equity 2,546
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
HEALTHFIRST MEDICAL GROUP, P.C.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1. BASIS OF PRESENTATION:
The accompanying unaudited financial statements 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.
In the opinion of the management of HealthFirst Medical Group P.C.
(HealthFirst), the unaudited interim financial statements contained in this
report reflect all adjustments, consisting of only normal recurring accruals,
which are necessary for a fair presentation of the financial position and the
results of operations for the interim periods presented. The results of
operations for any interim period are not necessarily indicative results for the
full year.
These financial statements, footnote disclosures and other information should be
read on conjunction with the financial statements and the notes thereto included
in HealthFirst's special filing under Form 10-K for the year ended December 31,
1996.
2. REORGANIZATION AND MERGER AGREEMENT:
On February 1, 1997, certain reorganization and merger transactions (the
"Transactions") contemplated by the Amended and Restated Agreement and Plan of
Reorganization and Merger, dated as of September 19, 1996, as amended on
November 4, 1996, November 29, 1996 and December 31, 1996 (the "Reorganization
and Merger Agreement") among Medford Clinic, P.C. ("Old Medford"), HealthFirst
Medical Group, P.C. ("Old HealthFirst"), The Corvallis Clinic, P.C. ("Old
Corvallis," and, together with Old Medford and Old HealthFirst, referred to
herein, collectively as "Old PC's"), and Physician Partners, Inc. ("PPI"), were
consummated. Pursuant to the terms of the Reorganization and Merger Agreement,
each Old PC affected (a) a reorganization of its corporate structure by (i)
incorporating a wholly-owned professional corporation subsidiary ( a "New PC"),
(ii) transferring to the New PC certain assets and liabilities relating to the
provider professional services business, (iii) making a pro rata distribution to
its shareholders of all of the capital stock of the New PC, (iv) converting such
Old PC from a professional corporation to a business corporation and (v)
entering into a 40 -year management agreement (the "Management Agreement") with
PPI and (b) a merger with and into PPI, resulting in consolidation of the
operations (other than the provider professional services businesses) of Old
PC's. HealthFirst is the New PC incorporated by Old HealthFirst pursuant to the
Reorganization and Merger Agreement.
The Transactions resulted in a separation of operations of Old HealthFirst
between medical professional services activities (i.e., providers of medical
services), which were transferred to HealthFirst, and the physician practice
management activities of the business, which were transferred to PPI. In
addition, substantially all of the assets and liabilities of the three Old PC's,
i.e., cash, receivables, inventories, prepaids, property, plant and equipment,
payables, accruals, debt, and certain contractual commitments, were transferred
to PPI. As consideration, the shareholders of Old PC's received stock of PPI.
Under the management agreement, PPI provides physician practice management
services to HealthFirst. Services provided include management and administrative
services, capital resources, facilities, equipment and supplies. As
consideration, PPI is entitled to (a) reimbursement of all managerial costs and
expenses (Manager's Expenses) incurred by PPI and (b) a management fee equal to
16% of (i) net revenues relating to services provided by the HealhtFirst less
(ii) Manager's Expenses. HealthFirst is responsible for providing medical
services and the related costs for provider compensation and benefits.
The parties to the Transactions have received an opinion from tax counsel that
for federal income tax purposes, it is more likely than not that the merger will
be a tax-free transaction. No ruling was requested from the Internal Revenue
Service (IRS) regarding the tax consequences of the Transactions. If the IRS or
tax court were to determine that the merger was not tax free, there would be
significant adverse tax consequence to the parties to the Transactions and their
respective shareholders.
<PAGE> 7
In connection with the Transactions, the three Old PC's entered into an Expense
Sharing Agreement, which establishes the basis upon which certain costs incurred
in connection with the Transactions are to be allocated between the three Old
PC's. HealthFirst and other New PC's have assumed the obligations under the
Expense Sharing Agreement. HealthFirst's share of such costs are reflected as a
charge to retained earnings.
3. EARNINGS PER SHARE:
All share and per share data have been retroactively restated to give effect to
the recapitalization resulting from the Transactions.
4. EQUITY ROLLFORWARD:
The Transactions resulted in the Old HealthFirst's Common Stock being retired
and new shares being issued by HealthFirst. In addition, Old HealthFirst's
equity at the date of the Transactions was assumed by PPI.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion includes some forward-looking statements that involve a
number of risks and uncertainties. Future results may differ materially from
historical results or from results or outcomes currently expected or sought by
HealthFirst.
OVERVIEW
HealthFirst, an Oregon professional corporation, is a multi-specialty medical
clinic. HealthFirst was founded in 1997 pursuant to certain reorganization and
merger transactions (the "Transactions") contemplated by the Amended and
Restated Agreement and Plan of Reorganization and Merger, dated as of September
19, 1996, as amended on November 4, 1996, November 29, 1996 and December 31,
1996 (the "Reorganization and Merger Agreement") among Medford Clinic, P.C.
("Old Medford"), HealthFirst Medical Group, P.C. ("Old HealthFirst"), The
Corvallis Clinic, P.C. ("Old Corvallis," and, together with Old Medford and Old
HealthFirst, referred to herein, collectively as "Old PC's"), and Physician
Partners, Inc. ("PPI"). Old HealthFirst was founded in February 1996 in a merger
between the Metropolitan Clinic, P.C. (Metropolitan), founded in 1906, and
Suburban Medical Clinic, P.C. (Suburban), founded in 1956. Pursuant to the terms
of the Reorganization and Merger Agreement, each Old PC affected (a) a
reorganization of its corporate structure by (i) incorporating a wholly-owned
professional corporation subsidiary ( a "New PC"), (ii) transferring to the New
PC certain assets and liabilities relating to the provider professional services
business, (iii) making a pro rata distribution to its shareholders of all of the
capital stock of the New PC, (iv) converting such Old PC from a professional
corporation to a business corporation and (v) entering into a 40 -year
management agreement (the "Management Agreement") with PPI and (b) a merger with
and into PPI, resulting in consolidation of the operations (other than the
provider professional services businesses) of Old PC's. HealthFirst is the New
PC incorporated by Old HealthFirst pursuant to the Reorganization and Merger
Agreement.
HealthFirst consists of 145 professional providers who offer a wide range of
primary and specialty care services including allergy, dermatology,
gastroenterology, hematology/oncology, infectious disease, pediatrics,
geriatrics, obstetrics/gynecology, podiatry, rheumatology, and surgery.
HealthFirst's operations are located in and around Portland, Oregon.
HealthFirst believes that group practice offers the best means of promoting and
maintaining the highest standard of medical care. HealthFirst's strategy is to
position itself in a competitive network as the healthcare industry develops.
HealthFirst's relationship with PPI enhances its capacity to provide a high
quality of clinical care and to compete economically in both managed care and
fee-for-service markets.
To increase revenue, HealthFirst will work with PPI to recruit additional
physicians and merge other physician groups in the area into their clinic. PPI
is working on initiatives to reduce the Manager's Expenses of HealthFirst (which
are paid by PPI and reimbursed by HealthFirst) through regional purchasing and
insurance contracts, and through the consolidation of various services.
RESULTS OF OPERATIONS
1997 Compared to 1996
Net fee-for-service revenue increased from $7.6 million for the first quarter of
1996 to $9.3 million for the first quarter of 1997, an increase of 22%. The
increase was due to the addition of several providers during the last half of
1996 which are now at higher production levels and an increase in office hours
beginning in December 1996. Prepaid healthcare revenue remained relatively
stable.
Total operating expenses increased $1.2 million, or 12%, from $10.1 million for
the first quarter of 1996 to $11.3 million for the first quarter of 1997. Clinic
salaries, wages and benefits accounted for $700,000 of the increase which was
due to an increase in employees of 11% to support the providers added during the
last half of 1996. The remaining increase is mainly due to purchased medical
services increasing as a result of an increase in capitated lives and medical
and office supplies increasing due to higher production levels.
<PAGE> 9
Interest income decreased $180,000 and interest expense increased $90,000 from
the first quarter of 1996 to the first quarter of 1997. The decrease in interest
income and the increase in interest expense is due to the use of cash and
borrowings to fund operations and to build the Tualatin facility. The management
fee of $490,000 represents the management fee paid to PPI for February and March
1997. There was no such management fee in 1996 as the Management Agreement was
not effective until February 1, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations generated $160,000 of cash for the first quarter of
1997, compared to $570,000 for the first quarter of 1996. The first quarter of
1997 includes only one month of activity due to the Transactions on February 1,
1997.
As a result of the Transactions, PPI assumed all financing activities relating
to the working capital needs of HealthFirst and will purchase the necessary
capital equipment for HealthFirst. In the Transactions, all debt of HealthFirst
became debt of PPI.
<PAGE> 10
HEALTHFIRST MEDICAL GROUP, P.C.
PART II--OTHER INFORMATION
ITEM 1: Legal Proceedings
None.
ITEM 2: Changes in Securities
None.
ITEM 3: Defaults Upon Senior Securities
None.
ITEM 4: Submission of Matters to a Vote of Security Holders
On February 27, 1997, at a special meeting of HealthFirst's
shareholders, the shareholders amended HealthFirst's Bylaws. The
amended Bylaws were approved unanimously, with 60 votes cast in favor
of the proposed amendment to such Bylaws; there were no
abstentions.
On March 17, 1997, a special meeting of HealthFirst's shareholders was
held to decrease the size of HealthFirst's Board of Directors to seven
directors and to elect new directors. Three new directors--Keith S.
Hansen, M.D., David L. Perry, M.D. and David E. Schute, M.D.--were
elected at such special meeting. Theresa L. Hyzer, M.D., Malcolm L.
McAninch, M.D., James C. Ritzenthaler, M.D. and John D. Teller, M.D.
continued as directors after such special meeting. The following chart
tabulates the number of votes cast for and against each director
nominated for election at such special meeting; there were no
abstentions.
<TABLE>
<CAPTION>
For Against
<S> <C> <C>
Leigh C. Dolin 41 43
Keith S. Hansen, M.D. 70 14
Theresa L. Hyzer, M.D. 52 32
Malcolm L. McAninch, M.D. 68 16
David L. Perry, M.D. 78 6
James C. Ritzenthaler, M.D. 62 22
Matthew M. Shelley, M.D. 46 38
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C>
David E. Schute, M.D. 61 23
John D. Teller, M.D. 70 14
R. Bastian Wagner, M.D. 24 60
</TABLE>
ITEM 5: Other Information
None.
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
3(ii) - Amended Bylaws of HealthFirst
27 - Financial Data Schedule (for SEC use
only)
(b) Reports on Form 8-K
None.
<PAGE> 12
HEALTHFIRST MEDICAL GROUP, P.C.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTHFIRST MEDICAL GROUP, P.C.
(Registrant)
Date: May 15, 1997 By: /s/ DAVID L. PERRY, M.D.
David L. Perry, M.D., ----------------------------------
President
Date: May 15, 1997 By: /s/ KAREN M. SHEPARD
Karen M. Shepard, ----------------------------------
Chief Financial Officer
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits
--------
<S> <C>
3(ii) - Amended Bylaws of HealthFirst
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT (3ii)
AMENDMENTS TO BYLAWS
OF
HEALTHFIRST MEDICAL GROUP, P.C.
FEBRUARY 27, 1997
In Article III, Section 1 is amended to read as follows:
"The business and affairs of the Corporation shall be managed by a
Board consisting of seven (7) Directors."
In Article III, Section 2.1 is amended to read as follows:
"Each Director shall be Shareholder of the Corporation, and shall
continuously remain a Shareholder of the Corporation. A person may be a
Director of the Corporation even if that person is not licensed to
practice medicine in the State of Oregon, provided that a majority of
the Directors are so licensed."
In Article III, Section 3 is amended to read as follows:
"The Directors shall serve three (3) year terms. There shall be three
(3) groups of Directors, Group A, Group B, and Group C. Group A shall
be composed of two (2) Directors, Group B shall be composed of two (2)
Directors, and Group C shall be composed of three (3) Directors. In
connection with the special meeting of Shareholders held in March or
April of 1997, the then-current Board of Directors shall designate the
Group to which each newly-elected Director will be assigned. The terms
of the Group A Directors shall expire on December 31, 1997. The terms
of the Group B Directors shall expire on December 31, 1998. The terms
of the Group C Directors shall expire on December 31, 1999. At each
annual Shareholder's meeting, Directors shall be chosen for terms of
three (3) years, to succeed those whose terms expire. There shall be no
limitation upon the number of successive terms which a Director may
serve.
The term of each Director shall begin on January 1 after his or her
election by Shareholders as provided in Article II, Section 7 above, or
such other date as is specified by the Board of Directors, and shall
continue until his or her successor has been elected and qualified."
Page 1 - Amendments To Bylaws
<PAGE> 2
Article III, Section 13, Section 13.1 (Executive Committee) is deleted in its
entirety.
In Article III, Section 13.2, the words "Section 13.2 - Standing Committees" are
deleted. In Article III, the numbering of Section 13.2.1 is changed to Section
13.1.
In Article III, the numbering of Section 13.2.2 is changed to Section 13.2.
In Article IV, Section 1, the first sentence is amended to read as follows:
"Officers of the Corporation shall be a President, a Vice President, a
Secretary, and a Treasurer.
In Article IV, Section 2, the sentence which reads:
"Until January 1, 1998, two officers shall each shall be former
physician shareholders in Metropolitan Clinic, P.C. and two officers
each shall be former physician shareholders in Suburban Medical Clinic,
Inc."
is deleted.
In Article V, Section 2 is amended to read as follows:
"Section 2. - Vice President.
The Vice President shall, in the case of absence, disability or death
of the President, perform and be vested with all the duties and powers
of the President, until the President has resumed such duties or the
President's successor is appointed; and shall perform such other duties
as the Board of Directors prescribes."
Section 2 (Secretary) is renumbered "Section 3", and Section 3 (Treasurer) is
renumbered "Section 4".
In Article VI, Section 7.1.3 is amended to read as follow:
"Upon the loss or revocation of a Shareholder's license with the State
of Oregon to render professional medical service, a Shareholder shall
be deemed to have offered the Shares for sale to the Corporation at a
price hereafter determined, and the Corporation shall have the right
but not the obligation to purchase all of the offered Shares within
sixty (60) days after the offer."
Page 2 - Amendments To Bylaws
<PAGE> 3
In Article VI, Section 7.1.4 is amended to read as follows:
"If a Shareholder's employment with Corporation is terminated for any
reason, or if the Corporation redeems the Shareholder's Shares in the
Corporation, the Shareholder shall be deemed to be have offered the
Shares for sale to the Corporation at a price hereafter determined, and
the Corporation shall have the right but not the obligation to purchase
all of the offered Shares within sixty (60) days after the offer."
In Article VI, Section 7.1.5 is amended to read as follows:
"Thirty (30) days after the death of any Shareholder the Personal
Representative of the deceased Shareholder's estate or the successor in
interest of such Shares shall be deemed to have offered all of the
decedent's Shares for sale to the Corporation at the price determined
hereafter. The Corporation shall have the right but not the obligation
to purchase the Shares within sixty (60) days after the offer."
In Article VI, Section 7.1.6, the last sentence is amended to read as follows:
"Within sixty (60) days of receipt of notice of such Event of
Bankruptcy, the Corporation shall have the right but not the obligation
to purchase the Bankrupt Shareholder's Shares."
In all other respects the Bylaws are hereby ratified and confirmed.
DATED this 27th day of February, 1997.
HEALTHFIRST MEDICAL GROUP, P.C.
By: /s/ VERN R. WILLIAMS
----------------------------------
Vern R. Williams, M.D., Secretary
Page 3 - Amendments To Bylaws
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 001029817
<NAME> HEALTHFIRST MEDICAL GROUP, P.C.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 43
<CURRENT-LIABILITIES> 42
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 43
<SALES> 0
<TOTAL-REVENUES> 16,262
<CGS> 0
<TOTAL-COSTS> 15,275
<OTHER-EXPENSES> 497
<LOSS-PROVISION> 484
<INTEREST-EXPENSE> 305
<INCOME-PRETAX> 258
<INCOME-TAX> 0
<INCOME-CONTINUING> 258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258
<EPS-PRIMARY> 2,804.35
<EPS-DILUTED> 2,804.35
</TABLE>
