FPA Closes $25 Million Bridge Loan, Providing Time, Liquidity Needed For Continued Talks on Consensual Restructuring.

SAN DIEGO--(BUSINESS WIRE)--July 2, 1998--

Major Lenders Grant Waivers, Standstill Through December 1, 1998

FPA Medical Management, Inc. (FPAM) today announced the successful completion of a $25 million, five month senior secured bridge facility.

The Company will use $22 million of the proceeds for payments to providers and key service vendors including third-party billing and MIS services, to pay quarterly malpractice insurance premiums nationwide, for professional and administrative payrolls and for general corporate purposes. The remaining proceeds will be used for budgeted corporate purposes to support the Company's physician management services contracts at hospital emergency departments, urgent care, radiology and correctional facilities.

Separately, the Company obtained key waivers from approximately 78% of its existing lenders covering all defaults or events of default existing as of June 30, 1998 and prospective payment, financial covenant and certain other defaults through the earlier of December 1, 1998 or the occurrence of a future default not covered by the waiver agreement. Under the agreement, FPA will defer any payment of principal and interest under its existing $315 million loan agreement through December 1, 1998. While certain defaults remain technically outstanding under the existing agreement, FPA's banks have agreed not to accelerate the credit facility during the waiver period.

Stephen J. Dresnick, MD, FACEP, who was appointed President and Chief Executive Officer of FPA on March 26, 1998, said the agreements reached with the Company's lenders provide FPA with needed liquidity and additional time to complete discussions with its lenders and strategic investors for the consensual restructuring of the Company's businesses.

Dr. Dresnick continued, "Over the past couple of weeks, FPA's new management team has shared with the Company's bank group its strategic plan for turning FPA around. We are gratified that our lenders have the confidence in FPA and its management team to provide these additional funds. As a result of their cooperation and the continued hard work and dedication of our employees, we are making great strides towards implementing our turnaround plan," he said. "With the continued support of our banks, as well as the continued cooperation and support of our payors, health care providers and creditors, we are confident that, in a reasonable period of time, we can preserve our core businesses and return this company to profitability once again."

FPA said that, in addition to using the proceeds of the bridge loans to preserve the Company's business enterprise value and core businesses, the Company is developing a one year strategic plan to preserve key markets within its provider network and is in third-party discussions for the orderly exit and transition from non-core markets. As part of these discussions, FPA and PacifiCare are taking steps to terminate certain of their agreements to provide for the orderly transition of patient care in selected markets, while discussing possible arrangements to go forward together in FPA's core markets.

The Company said discussions are also continuing with FPA's banks and strategic investors regarding a consensual restructuring of FPA's businesses and balance sheet. The Company said that it expects to complete these discussions during the summer, and, as it had indicated before, a restructuring could be implemented through a chapter 11 reorganization case. FPA said that its strategic plan, which includes an expanded cost and profit enhancement program, remains dependent upon the continued support of the banks, payors and providers. The Company said that the plan includes the paring of non-core assets and should result in a substantial improvement in cash flow.

The Company also announced that NASDAQ informed the Company that it had not met NASDAQ's minimum bid listing requirement for its common stock and was subject to delisting effective September 30, 1998 if the Company did not meet NASDAQ listing requirements during the 90 day watch period.

FPA's agreements with its banks provide for the $25 million bridge loan to be made directly to a wholly-owned subsidiary of FPA, Sterling Healthcare Group, Inc., although $11 million of the loan proceeds are being used to fund FPA's general corporate purposes other than the Sterling operations. The loan is guaranteed by FPA and each of Sterling's direct and indirect subsidiaries. FPA's existing banks have subordinated their prior liens to the new bridge financing and extended other accommodations to FPA. The agreements reached by the Company with FPA's banks will be filed with the Securities and Exchange Commission.

This Press Release contains statements which constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" in this Press Release include the intent, belief or current expectations of the Company and members of its senior management team with respect to the timing of, completion of and scope of the current strategic business plan, bank financing, and the public or private offering of debt and/or equity securities, debt and equity market conditions and the Company's future liquidity as well as the assumptions upon which such statements are based. While the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to, further adverse developments with respect to the Company's liquidity position or operations of the Company's various businesses, adverse developments in the Company's efforts to renegotiate its funding and adverse developments in the bank financing or public or private markets for debt or equity securities, or adverse developments in the timing or results of the Company's current strategic business plan, the difficulty in controlling health care costs and integrating new operations, the ability of the Company to realize the anticipated general and administrative expense savings and overhead reductions presently contemplated, the ability of the Company to return the Company's operations to profitability, the level and nature of any restructuring and other one-time charges, the difficulty in estimating costs relating to exiting certain markets and consolidating and closing certain operations, and the possible negative effects of prospective health care reform. Additional factors that would cause actual results to differ materially from those contemplated within this Press Release can also be found in the Company's Form 8-K periodic filings during 1998, Form 10-Q for the quarter ended March 31, 1998, and the Company's Form 10-K for the year ended December 31, 1997.

   CONTACT: Sitrick And Company
             Michael Sitrick
             Steven Seiler
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             John Grimaldi
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