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PROSPECTUS SUPPLEMENT NO. 43 Filed Pursuant to Rule 424(b)(3)
To the Prospectus dated January 24, 1997 Registration No.: 333-1926
As Supplemented to date
22,680 Shares
of
Class B Common Stock of
Doctors Health, Inc.
This Prospectus Supplement relates to the proposed acquisition (the
"Acquisition") of certain assets and liabilities (the "Acquired Business") of
Potomac Medical Associates, Inc., a Maryland corporation which owns the medical
practice of Mohammad A. Khalid, M.D. ("Medical Practice"), by Doctors Health,
Inc., a Delaware corporation ("Doctors Health" or the "Company"), and Doctors
Health Montgomery, LLC, a Maryland limited liability company ("Medical Group").
At the closing of the Acquisition, Doctors Health will issue 22,680 shares (the
"Share Consideration") of its Class B Common Stock, par value $.01 per share
(the "Class B Common Stock") and will pay $77,606 ("Cash Consideration") to the
Medical Practice in accordance with the Agreement and Plan of Merger described
in this Prospectus Supplement.
Doctors Health's principal executive office is located at 10451 Mill Run
Circle, Tenth Floor, Owings Mills, Maryland 21117, telephone number (410)
654-5800. Medical Group's principal executive office is located at 10451 Mill
Run Circle, Tenth Floor, Owings Mills, Maryland, telephone number (410)
654-5800. Medical Practice's principal executive office is located at 8830
Cameron Court, #502, Silver Spring, Maryland 20910. The information presented
in this Prospectus Supplement concerning Doctors Health and Medical Group has
been provided by Doctors Health, and the information concerning Medical Practice
has been provided by Medical Practice.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OF ANY
PERSON TO EXCHANGE OR SELL, OR A SOLICITATION FROM ANY PERSON OF AN OFFER TO
EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT, IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF THE
SECURITIES TO WHICH THIS PROSPECTUS SUPPLEMENT RELATES SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED THEREIN IS
CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
See "Risk Factors" on page S-3 for certain information that should be
considered in connection with an investment in securities of Doctors Health.
The date of this Prospectus Supplement is October 20, 1997.
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SUMMARY OF TRANSACTION
The following summary is qualified in its entirety by, and subject to the
more detailed information and financial statements contained in this Prospectus
Supplement and the Prospectus dated January 24, 1997, as supplemented to date by
Prospectus Supplements No. 26 (Shareholders Letter) and 29 (Annual Report).
Unless otherwise defined herein, capitalized terms have the meanings assigned to
them in the Prospectus. See the definitions set forth in the Glossary to the
"Prospectus."
Parties to the Acquisition
Doctors Health. Doctors Health is a Delaware corporation organized in 1994
to develop and consolidate individual and groups of internists, pediatricians
and family practitioners, specialist physicians, hospitals and other health care
providers into primary care-driven, comprehensive managed care health care
delivery networks.
Doctors Health Montgomery, LLC. Doctors Health Montgomery, LLC ("Medical
Group") is a Maryland limited liability company organized in 1996 to conduct
medical practices in Montgomery County, Maryland.
Medical Practice. The Medical Practice is a Maryland corporation which
conducts business in Silver Spring, Maryland.
The Acquisition; Closing
Pursuant to the Agreement and Plan of Merger (the "Acquisition Agreement")
between Medical Practice and Doctors Health, (i) Medical Practice shall merge
with and into Montgomery Newco, Inc., a wholly-owned subsidiary of Doctors
Health, and the separate existence of the Medical Practice shall cease; (ii)
Montgomery Newco shall transfer to Medical Group all right, title and interest
in and to any assets used to provide laboratory services and other services
ancillary to the Medical Practice, (iii) Doctors Health shall issue 22,680
shares of its Class B Common Stock (the "Share Consideration") to Dr. Mohammad
A. Khalid, and (iv) Doctors Health shall pay $77,606 ("Cash Consideration") to
Dr. Mohammad A. Khalid, on the terms and subject to the conditions set forth in
the Acquisition Agreement. A copy of the Acquisition Agreement is attached to
this Prospectus Supplement as Annex A and is incorporated herein by reference.
The Acquisition is to be consummated as soon as practicable after all
approval and events required for the Acquisition have occurred and all
conditions precedent to the Acquisition have been fulfilled or waived or on such
other date on which Medical Practice and Doctors Health may agree (the "Closing
Date"). It is expected that the Closing Date will occur on or before October
30, 1997.
Resale of Class B Common Stock
The shares of Class B Common Stock offered to the Medical Practice by this
Prospectus Supplement have been registered under the Securities Act. The shares
will be subject to the Shareholders Letter Agreement attached hereto as Annex B
and therefore, will not be freely transferable. In addition, under the
Securities Act certain additional restrictions on transfer apply to resale of
shares of the Class B Common Stock received by "affiliates" of Doctors Health.
There is no public market for the Class B Common Stock. See "Resale of Class B
Common Stock."
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RISK FACTORS
Financial Performance of Medical Practice and Doctors Health
Doctors Health negotiated the Share Consideration and Cash Consideration on
the basis of the presence of Medical Practice in a desirable geographic market
into which Doctors Health intends to expand. After the Closing Date, Doctors
Health will recruit additional primary care physicians as members of Medical
Group. There can be no assurance that after the Closing Date of the
Acquisition, such recruitment will be successful, that Medical Practice's
pre-Acquisition relationships with its patients will be beneficial to Doctors
Health and Medical Group, that Doctors Health will be able to successfully
develop an integrated health care delivery network in Montgomery County, or that
Doctors Health can successfully integrate Medical Practice into Global Capitated
Contracts. See the sections in the Prospectus "Risk Factors -- Uncertainty of
Strategy; Acquisition Risks," "-- Integration of Operations," and "-- Dependence
of the Company on Core Medical Groups and IPAs."
Doctors Health has a limited operating history and for the fiscal year
ended June 30, 1996 and the nine months ended March 31, 1997, recorded a net
loss of approximately $6.6 million and $10.3 million, respectively. Doctors
Health is likely to record a net loss for the fiscal year ending June 30, 1997.
There can be no assurance that after the Closing Date Doctors Health will earn
operating profits.
Risk Factors set forth in the Prospectus dated January 24, 1997
The Risk Factors set forth in the Prospectus are incorporated herein by
reference and should be read carefully.
PROPOSED ACQUISITION OF MEDICAL PRACTICE BY DOCTORS HEALTH
The following description of the Acquisition does not purport to be
complete and is qualified in its entirety by reference to the Acquisition
Agreement, a copy of which is attached to this Prospectus Supplement as Annex A
and is incorporated herein. Representatives of Medical Practice are urged to
read the Acquisition Agreement in its entirety.
General
On the Closing Date of the Acquisition, (i) Medical Practice shall merge
with and into Montgomery Newco, Inc., a wholly-owned subsidiary of Doctors
Health, and the separate existence of Medical Practice shall cease; (ii)
Montgomery Newco shall transfer to Doctors Health Montgomery, LLC all right,
title and interest in and to any assets used to provide laboratory services and
other services ancillary to the Medical Practice, (iii) Doctors Health shall
issue 22,680 shares (the "Share Consideration") of its Class B Common Stock to
Dr. Mohammad A. Khalid, and (iv) Doctors Health shall pay $77,606 ("Cash
Consideration") to Dr. Mohammad A. Khalid, on the terms and subject to the
conditions set forth in the Acquisition Agreement.
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Background of the Acquisition
The health care industry is undergoing rapid evolution, including the
consolidation of individual medical practices into larger medical groups and
independent practice associations as well as radical changes in the way
physicians are compensated for the delivery of medical services.
In Baltimore, Maryland, Washington, D.C., Northern Virginia and surrounding
regions, physicians have increasingly become affiliated with managed care and
medical management companies such as Doctors Health which provide physicians
with certain administrative, billing, bookkeeping and budgeting services.
Companies such as Doctors Health also provide the physicians with access to
Managed Care contracts and necessary tools to perform such contracts, including
state of the art disease management protocols, care management, referral
management and utilization review services. In this environment, Doctors Health
has been entering into contractual and equity ownership relationships with
primary care physicians, specialists and other health care providers in order to
develop an Integrated Health Care Delivery System that focuses on managed care.
Against this backdrop, Doctors Health and the Medical Practice
independently reached the conclusion that developing alliances with additional
provider groups and companies focusing on the efficient delivery of health care
would enhance their abilities to respond to changing conditions in the health
care industry.
Reasons for the Acquisition
As part of its business strategy, Doctors Health seeks to negotiate Global
Capitated Contracts by, among other things, providing Payors with established
health care delivery networks capable of providing for the delivery of medical
care to Enrollees of the HMO or other Payor. In order to accomplish this
strategy, Doctors Health seeks to establish networks throughout the Baltimore
and Washington metropolitan area, Northern Virginia and surrounding regions.
For Doctors Health, Medical Practice represents an opportunity to implement its
business plan in a market where it does not currently operate, and to earn
revenues through inclusion of Medical Practice in Doctors Health's Managed Care
contracts.
Approval by the Doctors Health Board
For the reasons described below, the Doctors Health Board has approved the
Acquisition.
Doctors Health continuously analyzes potential acquisition candidates in
Maryland, the District of Columbia and Virginia. The Doctors Health Board of
Directors believes that the Acquisition is fair to and in the best interests of
Doctors Health for the reasons described below. Accordingly, the Doctors Health
Board of Directors has approved the Acquisition Agreement and the Acquisition.
The Doctors Health Board of Directors consulted with Doctors Health
management and legal counsel. It considered the following factors to be
material to and in support of its final determination:
(i) The Acquisition is expected to enable Doctors Health to take
advantage of Medical Practice's existing goodwill, infrastructure and
leadership in areas in which Medical Group's members practice in order to
establish an Integrated Health Care Delivery System in those areas. Such
expansion of Doctors Health's existing network is expected to enhance
Doctors Health's ability to win new Payor contracts and to attract
additional Enrollees.
(ii) The Acquisition and the efforts of Doctors Health to establish an
Integrated Health Care Delivery System are expected to substantially
increase Doctors Health's size in terms of revenues, profits, physicians
and locations which is expected to enhance Doctors Health's
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reputation in the Mid-Atlantic region, making it easier to attract and
retain new physicians and win new Payor contracts.
In addition to the foregoing, the Doctors Health Board of Directors
generally considered those matters discussed under "RISK FACTORS". The Board of
Doctors Health concluded that the risks did not outweigh the advantages of the
Acquisition and that the Acquisition was in the best interests of Doctors Health
and its stockholders.
Accounting Treatment
The Acquisition will be accounted for as a purchase transaction for
financial reporting purposes under APB 16.
THE ACQUISITION AGREEMENT
Set forth below is a summary of the material terms of the Acquisition
Agreement. The following description does not purport to be complete and is
qualified in its entirety by reference to the Acquisition Agreement, a copy of
which is attached as Annex A to this Prospectus Supplement and is incorporated
by reference herein.
General
On the Closing Date of the Acquisition, (i) Medical Practice shall merge
with and into Montgomery Newco, Inc., a wholly-owned subsidiary of Doctors
Health, and the separate existence of Medical Practice shall cease; (ii)
Montgomery Newco shall transfer to Medical Group its right, title, and interest
in and to any assets used to provide laboratory services and other services
ancillary to the Medical Practice, (iii) Doctors Health shall issue 22,680
shares (the "Share Consideration") of its Class B Common Stock to the Physician,
and (iv) Doctors Health shall pay $77,606 ("Cash Consideration") to the
Physician, on the terms and subject to the conditions set forth in the
Acquisition Agreement.
Representations and Warranties
The Acquisition Agreement contains various representations and warranties
by Doctors Health relating to, among other things (i) organization and corporate
power and authority, (ii) authority to enter into and perform the Acquisition
Agreement, and (iii) that the shares of the Class B Common Stock to be issued
will be fully paid and nonassessable. The Acquisition Agreement contains
various representations and warranties by Physician and the Medical Practice
relating to, among other things, (i) ownership of the practice and title and
condition to assets, (ii) compliance with agreements, (iii) compliance with
laws, (iv) absence of litigation, (v) information as to contracts, (vi)
information as to taxes, and (vii) information as to financial statements and
accounts receivable.
Additional Covenants and Agreements
Pursuant to the Acquisition Agreement, Medical Practice and Physician have
agreed among other things (i) to provide to Medical Group or Doctors Health all
information necessary to allow such parties to comply with applicable law, and
(ii) to provide on the Closing Date an ASCII formatted file with patient
demographics and accounts receivable. If Medical Practice does not have the
capability to provide this information, Doctors Health will assist Medical
Practice in converting such information to a format acceptable to Doctors
Health. Pursuant to the Acquisition Agreement, each of the physicians
practicing with the Medical Practice have agreed that if the employment
agreement between such Physician and Medical Group (each, an "Employment
Agreement") is terminated under certain circumstances provided for in the
Employment Agreement, such physician agrees (a) to cooperate with Doctors
Health, Medical Group and each stockholder of the Medical Group to organize a
new corporation or other entity to provide
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primary medical care and related services, (b) to engage in the practice of
medicine exclusively through such new primary care entity, and (c) to enter into
an employment agreement with such new entity on terms substantially similar to
the Employment Agreement and to use best efforts to cause such new entity to
enter into an agreement with Doctors Health for the provision of assets,
facilities and non-professional services, substantially similar to the Physician
Services Organization Agreement between Doctors Health and Medical Group.
Employment Agreement
At the Closing, the Physician shall enter into an Employment Agreement with
Medical Group. See "BUSINESS - Development of Integrated Health Care Delivery
System- Employment of Physicians by the Core Medical Group" in the Prospectus
dated January 24, 1997 for a description of the material terms of the Employment
Agreement.
Additions and Withdrawals of Physicians from Medical Group
Under the terms of the Acquisition Agreement, Doctors Health shall have the
exclusive authority (a) to negotiate the price and terms with respect to the
acquisition from time to time of the medical practices of such additional
physicians and such additional physician's employment by Medical Group or
additional medical groups organized by Doctors Health, and (b) to negotiate the
withdrawal of physicians from the Medical Group. In such connection, each
physician practicing with Medical Practice irrevocably appoints Doctors Health
and the Chairman of Medical Group (or their designee) as attorney-in-fact and
agent to execute any documents required to provide for the admission or
withdrawal of physicians as members of Medical Group and any other transaction
related to acquisition of medical practices, and releases and agrees to
indemnify and hold harmless Doctors Health and the Chairman of Medical Group and
their directors, officers, employees or shareholders from any claims arising in
connection with their performance of their duties in such connection.
Additional Agreements
Pursuant to the Acquisition Agreement, Medical Practice and Doctors Health
have made the following additional agreements:
Access to Information. Medical Practice shall provide to Doctors Health
and Medical Group and their respective accountants, counsel, financial advisors
and other representatives reasonable access during normal business hours
throughout the period prior to the earlier of the termination of the Acquisition
Agreement or the Closing Date to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, tax returns)
and, during such period, shall furnish promptly to one another (i) a copy of
each report, schedule and other document filed or received by any of them
pursuant to the requirements of federal or state securities laws or filed by any
of them with the Commission in connection with the transactions contemplated by
the Acquisition Agreement or which may have a material effect on their
respective businesses, properties or personnel and (ii) such other information
concerning their respective businesses, properties and personal as they shall
reasonably request. The parties shall hold and shall use their reasonable best
efforts to hold in strict confidence all confidential information obtained in
the course of their respective investigations.
In the event that the Acquisition Agreement is terminated in accordance
with its terms, each party shall promptly return to the other all non-public
written material provided pursuant to this section and shall not retain any
copies, extracts or other reproduction in whole or in part of such written
material.
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BUSINESS OF DOCTORS HEALTH
The business of Doctors Health is described in the Prospectus.
BUSINESS OF MEDICAL PRACTICE
The Medical Practice conducts a medical practice at 8830 Cameron Court,
#502, Silver Spring, Maryland 20910.
RESALE OF CLASS B COMMON STOCK
The shares of Class B Common Stock of Doctors Health offered by this
Prospectus Supplement have been registered under the Securities Act, allowing
persons or entities who are not "affiliates" of Doctors Health or Medical
Practice (as defined under the Securities Act, but generally including
directors, certain executive offices, and 10% or more stockholders of Doctors
Health or Medical Practice) to trade them freely and without restriction under
the Securities Act except as limited by certain contractual restrictions set
forth in the Stockholders Agreement or otherwise. Each person or entity who may
be deemed an "affiliate" of Doctors Health will be subject to certain
limitations imposed by the Securities Act, and the rules, regulations and
releases promulgated thereunder, with respect to the sale or other disposition
of the shares of Class B Common Stock to be received by the "affiliate" pursuant
to the Acquisition. This Prospectus does not cover any resales of Class B
Common Stock received by Affiliates of Medical Practice.
In addition to the restrictions on resale that may be imposed on
"affiliates" under the Securities Act, the share of Class B Common Stock of
Doctors Health received by persons or entities (whether or not they are deemed
to be "affiliates") pursuant to the Acquisition are and will be subject to the
terms of Doctors Health's Stockholders Agreement (a copy of which is attached
hereto as Annex B) which provides significant contractual restrictions on the
resale of such Class B Common Stock until an initial public offering for cash of
the Common Stock of Doctors Health or other event constituting a "change in
control" of Doctors Health. The Stockholders Agreement provides that the
signatories may sell and transfer the stock of the Company held by them only
pursuant to such agreement. The Stockholders Agreement contemplated that
Doctors Health may redeem shares of the Class B Common Stock upon an
"Involuntary Transfer" resulting generally from the insolvency of a stockholder
or upon divorce of an individual stockholder. "Voluntary Transfers" are
permitted only after a stockholders offers its stock , upon the same terms and
conditions contained in the offer it wishes to accept, to all other stockholders
on the terms set forth in the Stockholders Agreement. Individual stockholders
may in certain circumstances make estate planning transfers for the benefit of
themselves or family members on certain conditions.
Under the Stockholders Agreement, in the event of an "Involuntary Transfer"
or the death or disability of a management Stockholder, the purchase of the
stock and the transferring stockholder may agree on the purchase price of the
stock to be sold in such event. If the parties cannot agree on a price, the
price shall be the fair market value of the stock, as determined by a jointly
selected appraiser, as of the last day of the calendar month immediately
preceding the event giving rise to the purchase of the stock, in
accordance with the procedures set forth in the Stockholders Agreement. in the
event of a "Voluntary Transfer", the purchase price to be paid by the other
stockholders or Doctors Health, if they exercise their options to purchase the
stock, will be the price at which the stockholder proposes to transfer his stock
to the proposed third party transferee.
LEGAL MATTERS
The validity of the Class B Common Stock offered hereby has been passed
upon for the Company by Venable, Baetjer and Howard, LLP, Baltimore, Maryland.
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ANNEX A
_______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
DOCTORS HEALTH, INC.,
DOCTORS HEALTH MONTGOMERY, LLC.
MONTGOMERY NEWCO, INC.,
MOHAMMAD A. KHALID, M.D.
and
POTOMAC MEDICAL ASSOCIATES, INC.
Dated as of October ___, 1997
_______________________________________________________________________________
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of this
______ day of October, 1997 by and among DOCTORS HEALTH, INC. a Maryland
corporation ("Doctors Health"), MONTGOMERY NEWCO, INC., a Maryland corporation
and a wholly-owned subsidiary of Doctors Health ("Newco"), DOCTORS HEALTH
MONTGOMERY, LLC, a Maryland LLC (the "LLC"), POTOMAC MEDICAL ASSOCIATES, INC.,
a Maryland corporation ("Potomac"), and MOHAMMAD A. KHALID, M.D., who is the
sole stockholder of Potomac (the "Physician" or the "Potomac Stockholder").
RECITALS
WHEREAS, the Physician has determined to terminate his practice of
medicine through Potomac and has agreed to transfer his medical practice as
conducted through Potomac to Doctors Health and to become a member and an
employee of the LLC pursuant to an Employment Agreement and an Amendment to the
Operating Agreement of the LLC of even date herewith;
WHEREAS, Doctors Health, Newco, the LLC, and Potomac desire that
Potomac and Newco merge on the terms and conditions contained herein (the
"Merger");
WHEREAS, in furtherance of the Merger, each of the Boards of Directors
of Doctors Health, Potomac and Newco, and the stockholder of Potomac and Newco,
have deemed the Merger to be advisable and in the best interests of such
entities and their respective stockholders upon the terms and conditions herein
contained; and
WHEREAS, each of the Boards of Directors of Doctors Health, Potomac
and Newco, and the stockholders of Potomac and Newco, have approved the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
(a) Subject to the terms and conditions hereof, at the Effective
Time (as herein defined), (i) Potomac shall be merged with and into Newco (the
"Merger"), (ii) the separate existence of Potomac shall cease, (iii) Newco shall
continue as the surviving corporation, and (iv) the issued and outstanding
shares of Potomac Common Stock (the "Potomac Common Shares") shall be converted
into the right to receive the consideration set forth in Section 1.5 hereof
(the "Merger Consideration") in accordance with the Articles of Merger attached
hereto as Exhibit A (the "Articles of Merger").
(b) Simultaneously upon execution of this Agreement, the parties
hereto shall cause the Merger to be consummated by the filing of the Articles of
Merger with the Maryland State Department of Assessments and Taxation ("SDAT"),
together with any other documents required by law to effectuate the Merger, all
of which shall be prepared, executed and delivered by the appropriate parties as
promptly as required. The Merger shall become effective as of the time and date
the Articles of Merger are filed and accepted for record (the "Effective Time").
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(c) Except as specifically set forth herein, the identity,
existence, purposes, powers, objects, franchises, privileges, rights, property
and immunities of Newco and Doctors Health shall continue unaffected and
unimpaired by the Merger.
(d) At the Effective Time, the Potomac Common Shares issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, automatically
be converted into, and constitute a right to receive, the Merger Shares.
(e) At the Effective Time, all of the shares of Newco Common
Stock issued and outstanding immediately prior to the Effective Time (the "Newco
Shares") shall remain issued and outstanding and unchanged.
1.2 Surrender of Certificates: Conversion of Potomac Common Shares.
(a) Upon surrender of the certificates representing Potomac
Common Shares to Doctors Health, together with an Assignment Separate from
Certificate duly executed by the Potomac Stockholder, the Potomac Stockholder
shall receive, as soon as practicable thereafter and in exchange therefor, the
Merger Consideration.
(b) From and after the Effective Time, the Potomac Stockholder
shall cease to have any rights as a stockholder of Potomac, except the right to
enforce the obligation of Doctors Health to issue to him the Merger
Consideration.
1.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at or immediately following the
Effective Time at the offices of Doctors Health, Inc., 10451 Mill Run Circle,
10th Floor, Owings Mills, Maryland. The date of the Closing is referred to
herein as the "Closing Date." The parties agree that the Merger and all other
transactions contemplated by this Agreement and the other documents executed and
delivered in connection with the Merger (the "Merger Documents") shall be deemed
to have occurred on, and shall be treated for financial accounting purposes as
being effective from and as of, the Effective Time.
1.4 Deliveries by Potomac and the Potomac Stockholder. At the
Closing, Potomac and the Potomac Stockholder shall deliver the following to
Doctors Health and Newco:
(a) Merger Documents. A certified copy of the executed Articles
of Merger, a copy of the Shareholders Letter Agreement, the Employment Agreement
between the Physician and the LLC, certain side letter agreements, and
amendments to the Physician Services Organization Agreement and Operating
Agreement of the LLC, each signed by the Potomac Stockholder and/or Potomac, as
applicable;
(b) Governmental Consents. Evidence of such federal, state or
other government or governmental agency or authority certificates, permits,
licenses and other authorizations, authorities and approvals which are necessary
to consummate the Merger and all other transactions contemplated in this
Agreement and in the other Merger Documents;
(c) Charter Documents. Certified copies of the Articles of
Incorporation and Bylaws of Potomac;
(d) Other Documents. Such other instruments and documents as
are contemplated hereby or by any of the other Merger Documents or which counsel
to Doctors Health or Newco reasonably requests as necessary or appropriate to
carry out the terms and provisions hereof or thereof.
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1.5 Deliveries by Newco and Doctors Health.
(a) Prospectus. A Prospectus which is part of a Registration
Statement which has been declared effective by the Securities and Exchange
Commission and one or more Prospectus Supplements which contain more recent and
updated information regarding Doctors Health (collectively, the "Prospectus").
(b) Merger Consideration. As consideration for the Merger,
Potomac Stockholder shall in the aggregate receive the following consideration:
(i) Cash. Cash in the amount of $77,606.00.
(ii) Class B Common Stock. One or more certificates
representing 22,680 shares of the Class B Common Stock of Doctors Health (the
"Merger Shares").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DOCTORS HEALTH AND NEWCO
2.1 Doctors Health and Newco represent and warrant to the Physician
as of the Closing Date as follows:
(a) Organization and Power. Each of Doctors Health and Newco is
a corporation duly incorporated and organized, validly existing and in good
standing under the laws of the State of Maryland. Each of Doctors Health and
Newco has full power and authority (corporate and other) to own and hold its
properties and to conduct its business as currently conducted.
(b) Authorization of Agreement. The execution, delivery and
performance of this Agreement and the other Closing Documents to which Doctors
Health or Newco is a party have been duly and validly authorized by Doctors
Health or Newco and executed on behalf of Doctors Health or Newco, and no other
proceedings are necessary to authorize this Agreement.
(c) Class B Common Stock. The Board of Directors of Doctors
Health has authorized the issuance of the Merger Shares to the Physician, and
upon issuance to the Physician of the Merger Shares, the Merger Shares shall
constitute fully paid and nonassessable shares of the Class B Common Stock of
Doctors Health.
(d) Registration Statement. The Merger Shares have been
registered pursuant to the Securities Act of 1933 pursuant to a registration
statement, which includes a Prospectus and any Prospectus Supplements, covering
the issuance of shares of Class B Common Stock of Doctors Health (the
"Registration Statement"). The Registration Statement is in effect and there
are no stop orders issued by federal or state authorities with respect to the
issuance of securities pursuant to the Registration Statement. The Registration
Statement (i) complies as to form in all material respects with the rules and
regulations of the U.S. Securities and Exchange Commission and (ii) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement contained
therein, in light of the circumstances under which they were or will be made,
not misleading.
(e) Accounts Receivable. The pre-closing accounts receivable
of Potomac that are collected after the Closing by Doctors Health and Newco will
be utilized by Doctors Health for, and applied to, the payment of the expenses
of the Care Center of Mohammad Khalid, M.D.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF POTOMAC AND THE POTOMAC STOCKHOLDER
3.1 Potomac and the Potomac Stockholder hereby, jointly and
severally, represent, warrant and covenant to Doctors Health and Newco as
follows:
(a) Ownership of Practice; Title to and Condition of Assets.
Except as listed on Schedule 3.1(a), Potomac owns and has good and marketable
title to all of the assets, rights, franchises and privileges used or usable in
the Physician's Medical Practice, free and clear of all liens or encumbrances of
any kind. The Assets are in good operating condition and repair, ordinary wear
and tear excepted. Potomac or the Physician do not hold fee title to any real
property related to the Medical Practice.
(b) No Conflicts. The execution, delivery and performance by
Potomac or Potomac Stockholder of this Agreement and the other Closing Documents
to which he is a party do not conflict with or violate any contract or agreement
to which Potomac or Potomac Stockholder is subject.
(c) Compliance With Laws. Potomac or the Potomac Stockholder is
not in violation of any order, writ, decree, or judgment of any court, or
governmental or regulatory body which violation would (i) affect the legality,
validity or enforceability of this Agreement or any other Closing Documents or
(ii) have a material adverse effect on Potomac, its assets, or the Physician's
Medical Practice.
(d) Litigation. There are no lawsuits, proceedings or
investigations pending or threatened against Potomac, the Physician or the
Physician's Medical Practice.
(e) Contracts. Schedule 3.1(e) is a true and complete list of
all material contracts or agreements of Potomac or the Physician related to the
Medical Practice (the "Contracts"). All of the Contracts are in full force and
effect, and there exists no default under any such Contract. There are no
written or oral binding "side agreements" with any Person whereby Potomac or the
Physician has agreed to do any material act or thing beyond the requirements of
the Contracts.
(f) Taxes. Potomac or the Physician has duly filed all Medical
Practice and personal federal, state and local tax returns, declarations or
statements which are required to be filed for all periods up to and through the
Closing Date and paid all taxes due.
(g) Financial Statements.. Attached as Schedule 3.1(g) is a
true and complete copy of an internally prepared or audited accrual basis
financial statement of the Medical Practice dated as of __________________.
Such financial statements fairly and accurately present the assets, liabilities
and results of operations of the Medical Practice and there are no undisclosed
liabilities or obligations (contingent or accrued) that are not reflected on
such financial statements or set forth on Schedule 3.1(g).
(h) Receipt of Prospectus. The Physician acknowledges that he
has received the Prospectus.
(i) Employee Benefit Plans. Except for those plans set forth on
Schedule 3.1(i), Potomac does not have and has never had any employee benefit
plan, including, without limitation, any plan, agreement or arrangement relating
to deferred compensation, pension, profit sharing, retirement income or other
benefits, stock purchase, stock ownership and stock option, stock appreciation
rights, bonus, severance arrangement, health and welfare benefits, insurance
benefits or any other employee benefits or fringe benefit plan (together with
the plans referred to in the next sentence, the
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"Plans"). Except as set forth on Schedule 3.1(i), Potomac does not participate
in, or contribute to, nor has it ever participated in or contributed to, any
multi-employer plan within the meaning of ERISA Section 4001(a)(3), nor does
Potomac have or might have in the future, any multi-employer plan withdrawal
liability under Subtitle E of Part IV of ERISA. To the extent Potomac has any
Plans, Potomac shall take all actions and do all things necessary prior to the
Effective Time to terminate such Plans or freeze the assets and accounts of such
Plans, as applicable and necessary to ensure that Doctors Health or Newco shall
not assume any liability or obligation for, or become a sponsor of, such Plans
after the Effective Time. The Potomac Stockholder shall indemnify and hold
harmless Doctors Health and Newco after the Effective Time for any liability or
obligation that may be incurred by Doctors Health or Newco from and after the
Effective Time.
ARTICLE IV
INDEMNIFICATION
4.1 Tax Indemnities and Related Matters.
(a) Tax Indemnities Provided by the Potomac Stockholder. In
addition to any other indemnities provided by the Potomac Stockholder and
Potomac hereunder, Potomac Stockholder will provide Doctors Health and Newco
with an indemnity for Taxes as follows. Potomac Stockholder agree to pay,
indemnify defend and hold harmless Doctors Health and Newco and all of the
members of their affiliated group within the meaning of Section 1504 of the Code
from and against any and all Taxes of Potomac with respect to any period (or any
portion thereof) up to and including the Effective Time, except for Taxes of
Potomac which are reflected as current liabilities for Taxes on Potomac
Financial Statements.
(b) Tax Indemnity Provided by Doctors Health and Newco. Doctors
Health and Newco agree to pay, indemnify, defend and hold harmless the Potomac
Stockholder from and against any and all Taxes of Newco with respect to any
period (or any portion thereof) beginning after the Effective Time. In no event
will Doctors Health or Newco indemnify the Potomac Stockholder or Potomac for
Taxes that arise as a result of a failure of the Merger to qualify as a
reorganization within the meaning of Section 368(a) of the Code unless such
failure is due to a breach of any representation, warranty or covenant of
Doctors Health or Newco under the terms of this Agreement or the other Merger
Documents.
(c) Procedures Relating to Indemnification of Tax Claims.
(i) If a claim for Taxes shall be made by any taxing
authority in writing (a "Tax Claim") which, if successful, might result in an
indemnity payment pursuant to Section 4.1(a) or (b) hereof, the party seeking
the indemnification (the "Tax Indemnified Party") shall notify the other party
(the "Tax Indemnifying Party") in writing of such Tax Claim within fifteen (15)
days of receipt of the Tax Claim from the taxing authority. Upon notice to the
Tax Indemnified Party, within fifteen days (15) after receipt of the notice of
such Tax Claim from the Tax Indemnified Party, the Tax Indemnifying Party may
assume (at its own cost and expense) control of and contest such Tax Claim. If
such control is assumed, the Tax Indemnifying Party may, in its reasonable
discretion, pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any taxing authority with respect thereto, and
may, in its reasonable discretion, either pay the Tax Claim and sue for a refund
where applicable law permits such refund suits or contest such Tax Claim in any
permissible manner. In no case shall the Tax Indemnified Party or its
designated affiliates settle or otherwise compromise any Tax Claim referred to
in the preceding sentence without the Tax Indemnifying Party's prior written
consent, which consent may not be unreasonably withheld.
(ii) Alternatively, if the Tax Indemnifying Party requests
in writing within fifteen (25) days after receipt of notice of such Tax Claim
from the Tax Indemnified Party, the Tax Indemnified Party shall contest such Tax
Claim. The Tax Indemnifying Party shall be obligated to pay all
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reasonable out-of-pocket costs and expenses (including legal fees and expenses)
which the Tax Indemnified Party or its designated affiliates may incur in so
contesting such Tax Claim as such costs and expenses are incurred: Under the
terms of this Section 4.1(c)(ii), the Tax Indemnified Party shall have the full
right to contest such Tax Claim except that the Tax Indemnifying Party shall
have the right, at its option and expense and with counsel of its choice, to
participate in such contest. The Tax Indemnifying Party shall be entitled to
settle or agree to pay in full such Tax Claim (in its sole discretion) and
thereafter pursue its right under this Agreement.
(iii) If the Tax Claim has not been contested, the Tax
Indemnifying Party shall pay the Tax Indemnified Party all indemnity amounts
with respect to such Tax Claim within ten (10) days after receipt by the Tax
Indemnifying Party of a written demand therefor. If the Tax Indemnifying Party
has assumed control of the contest of such Tax Claim as provided above (or has
requested the Tax Indemnified Party to contest such proposed adjustment within
the time provide above), the Tax Indemnifying Party shall pay the Tax
Indemnified Party all indemnity amounts with respect to such Tax Claim within
ten (10) days after such Tax Claim is paid by the Indemnified Party or a Final
Determination has been made with respect to such Tax Claim.
(iv) For purposes of this Section 4.1(c), a "Final
Determination" shall mean (x) the entry of a decision of a court of competent
jurisdiction at such time as an appeal may no longer be taken from such decision
or (y) the execution of a closing agreement or its equivalent between the
particular taxpayer and the Internal Revenue Service, as provided in Section
7121 and Section 7122, respectively, of the Code, or a corresponding agreement
between the particular taxpayer and the particular state or local taxing
authority.
(d) Tax Return Filings and Related Payments. The accounting
firm retained by Potomac and Potomac Stockholder shall prepare the corporate
federal and state income tax returns of Potomac for the tax year ending
immediately prior to the Effective Time. Arthur Anderson, LLP or such other
accounting firm as Doctors Health shall determine shall prepare or cause to be
prepared, and shall file, or cause to be filed, on a timely basis all other Tax
Returns with respect to Newco due after the Effective Time. In connection
therewith, Potomac Stockholder shall be responsible for and shall pay any Taxes
for which Potomac Stockholder have agreed to indemnify Doctors Health and Newco
pursuant to Section 4.1(a) hereof. Doctors Health and Newco will use reasonable
efforts to provide Potomac Stockholder with copies of such Tax Returns (and
related elections) covering the Taxes described in Section 4.1(a), at least 10
days prior to the date Doctors Health and Newco plan to file such Tax Returns,
accompanied by a statement calculating in detail Potomac Stockholder' obligation
pursuant to Section 4.1(a) hereof. Potomac Stockholder may have these Tax
Returns reviewed by accountants or attorneys at their personal expense. Potomac
Stockholder shall pay to Newco the amount of their indemnification obligations
within ten (10) days of receiving copies of such Tax Returns unless the parties
are unable to agree on the amount of the indemnification obligation hereunder,
in which case the amount of the indemnification obligation which is not in
dispute shall be paid to Newco within ten (10) days and the amount in dispute
shall be resolved by a nationally recognized accounting firm acceptable to both
parties whose fees and expenses shall be paid by Newco and Potomac Stockholder
in proportion to each party's respective liability for Taxes as determined by
the accounting firm. Potomac Stockholder shall pay the amount of Taxes
determined by the accounting firm within five days of receipt of such written
determination, together with interest based on the prime rate on such due date
as such rate as published in The Wall Street Journal (Eastern edition). Such
interest shall accrue from the date the payment was due to the taxing authority
until the date Newco receives payment. Potomac Stockholder shall not file or
cause to be filed an amended Tax Return or claim for refund for Potomac for any
tax year or period ending on or before the Effective Time without the consent of
Newco and Doctors Health.
(e) Certain Tax Information. Potomac Stockholder, Potomac,
Newco and Doctors Health agree to cooperate and to file their federal and state
income tax returns in a manner consistent with the transactions contemplated by
this Agreement (including the preparation and filing of all
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information, schedules or forms required pursuant to Income Tax Regulation
1.368-3, related to tax-free reorganizations, which shall be prepared by Doctors
Health and reviewed by Potomac's and Potomac Stockholder' accountants). Potomac
Stockholder, Potomac, Newco and Doctors Health agree to cooperate and to furnish
or cause to be furnished to each other (at reasonable times and at no charge)
upon request as promptly as practicable such information (including access to
books and records) pertinent to such tax filings or as may be necessary in the
preparation for any audit or the prosecution or defense of any claim, suit or
proceeding relating to any Tax Claim which may result in a party being liable
under the indemnification provisions of Section 4.1(a) and/or (b) hereof.
(f) For purposes of this Agreement,
(i) the term "Tax Returns" shall mean any return, report,
information return or other documents (including any related or supporting
information) required to be supplied to any taxing authority with respect to
Taxes; and
(ii) the term "Taxes" shall mean all taxes, charges, fees,
levies, penalties or other assessments imposed by any United States federal,
state, local or foreign taxing authority, including, but not limited to, income,
gross receipts, ad valorem, excise, real property, personal property, sales,
use, transfer, franchise, employment, payroll withholding, social security,
Medicare or other taxes, including any interest, penalties, or additions
attributable thereto.
(g) Specific Indemnities. In addition to the other indemnities
provided by the Potomac Stockholder and Potomac in this Section 4.1, the Potomac
Stockholder and Potomac will indemnify (to the extent the claim is not otherwise
covered by insurance), defend and hold harmless Newco and Doctors Health from
and against any and all claims, demands or suits, losses, liabilities,
penalties, damages, obligations, payments, costs and expenses (including the
costs and expenses of any and all (i) actions, suits, proceedings,
investigations, assessments, judgments, settlements and compromises relating
thereto, and (ii) reasonable attorneys' fees) asserted against or suffered by
Newco or Doctors Health relating to, resulting from or arising out of the
operation of Potomac, the Medical Practice and the medical services provided by
Potomac Stockholder and Potomac prior to the Effective Time (collectively, the
"Specific Indemnifiable Losses").
(h) Consequential Damages. The Specific Indemnifiable Losses
will include incidental, consequential, special and punitive damages awarded
against an Indemnitee in favor of a third party. Specific Indemnifiable Losses
will not include incidental or consequential damages suffered by an Indemnitee
as a result of any matter for which indemnification is made under this
Agreement.
ARTICLE V
CONFIDENTIALITY
The parties hereto agree that the terms of this Agreement, the price
paid in connection with the Merger, the terms of the Professional Services
Employment Agreement between the Potomac Stockholder and the LLC and any other
oral or written agreement, financial information or data executed, provided to,
or gathered, developed, compiled or similarly obtained in any manner whatsoever
by any party in regard to the negotiation and consummation of the transactions
contemplated hereby is confidential and shall not be disclosed, duplicated or
distributed by any party to any third party, except as may be required by law or
government regulation, including without limitation as may be required by the
Securities Act of 1933 and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder. Doctors Health, Potomac and Potomac
Stockholder shall not make any public announcement or press release without the
prior written consent of the other party unless such disclosure is required by
applicable law, or governmental regulation. This obligation shall not apply to
information (1)
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which becomes publicly available through no action or inaction on the part of
any party, or (2) which is made available on a non-confidential basis by third
parties who, to any party's knowledge, are not bound by a confidentiality
obligation. This obligation of confidentiality shall survive the termination or
expiration of this Agreement, regardless of the reasons of any such termination
or expiration, for five years.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS OF PHYSICIAN
6.1. Information. The Physician agrees to provide to the LLC or to
Doctors Health promptly upon request all information necessary to allow the LLC
or Doctors Health to comply with applicable law, including, without limitation,
information relating to employees of the Physician and employee benefits
provided by the Physician to such employees. On the Closing Date, the Physician
has provided Doctors Health an ASCII-formatted file with patient demographics
and an ASCII-formatted file with demographics and accounts receivable. If the
Physician does not have the capability of providing this information, Doctors
Health will assist the Physician in converting such information to a format
acceptable to Doctor Health as soon as practicable.
6.2. Reformation of Group Practice. If the Employment Agreement
between the Physician and the LLC is terminated on the basis of Section 4.7 of
the Employment Agreement or otherwise as a result of the Insolvency (as that
term is defined in Section 4.7 of the Employment Agreement) of the LLC, the
Physician agrees to (a) cooperate with Doctors Health, the LLC and each other
Member of the LLC to organize a new corporation, partnership or limited
liability company to provide primary medical care and related services and (b)
to engage in the practice of medicine exclusively through such new primary care
entity. The Physician will enter into an employment agreement with such new
entity on terms substantially similar to the terms of the Employment Agreement
and will use his or her best efforts to cause such new entity to enter into an
agreement with Doctors Health for the provision of assets, facilities and
non-professional services, including management services, on terms, including
provisions for Management Fees, substantially similar to the terms of the
Physician Services Organization Agreement between Doctors Health and the LLC.
6.3. Addition and Withdrawal of Physicians. Doctors Health shall have
exclusive authority to (a) negotiate the price and terms with respect to the
acquisition from time to time of the medical practices of additional physicians
and such physicians' employment by the LLC or other Medical Groups organized by
Doctors Health, and (b) negotiate the withdrawal of physicians from the LLC.
Each party agrees to use its best efforts to permit the addition and withdrawal
of physicians as members of the LLC.
6.4 Appointment as Agent; Specific Performance; Release. The
Physician irrevocably appoints Doctors Health and the Chairman of the LLC (or
their designees) as his attorney in fact and agent to carry out the provisions
of this Section 6, to execute any document required to provide for the admission
or withdrawal of physicians as members of the LLC, and any other transaction
related to acquisition of medical practices. The parties agree that such
appointment is coupled with an interest. The Physician releases and agrees to
indemnify and hold harmless Doctors Health and the Chairman of the LLC and their
directors, officers, employees or shareholders from any claims arising in
connection with the performance of their duties under this Section 6.4.
6.5 Acquisitions and Withdrawals Other Than Through The LLC. If
Doctors Health decides to acquire physician practices or services through one or
more additional medical groups or other entities and not through the LLC, the
foregoing provisions of this Section 6.5 shall apply with appropriate
modifications to reflect the substitution of such additional medical groups or
other entities.
ARTICLE VII
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MISCELLANEOUS
7.1 Survival. The representations and warranties contained in this
Agreement or in any instrument delivered hereunder shall survive the
effectiveness of the Merger contemplated hereby and shall not terminate until
the third anniversary of the Effective Time. The tax and specific indemnities
provided in Article IV and each of the other covenants and agreements set forth
herein shall survive until the expiration of the applicable statutes of
limitation for the matter(s) at issue or any specific period of time set forth
herein for such survival. Nothing contained herein, however, shall affect the
obligations of any party hereto to perform the agreements and covenants on its
part to be performed either before or after such date.
7.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Maryland, without regard to its conflict of laws
provision.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party below, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
If to Potomac or the Potomac Stockholder: Mohammad A. Khalid, M.D.
8830 Cameron Street, #502
Silver Spring, Maryland 20910
If to Doctors Health or Newco: Doctors Health, Inc.
10451 Mill Run Circle, 10th Floor
Owings Mills, Maryland 21117
Attention: President
Copy to: Doctors Health, Inc.
10451 Mill Run Circle, 10th Floor
Owings Mills, Maryland 21117
Attention: Corporate Counsel
7.7 Finder's Fee. Each party hereto will indemnify and hold harmless
the others against and in respect of any claim for any finder's fee, brokerage
or other commissions relative to this
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Agreement or to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to have been made by
such party with any third party.
7.8 Expenses. Except as provided in Article IV hereof, each party
shall pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement. If any action at law or
in equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
7.9 Amendments and Waivers.
(a) This Agreement may, to the maximum extent permitted by
applicable law, be amended by the parties hereto only by an instrument executed
by each of the parties hereto.
(b) Any term, provision or condition of this Agreement (other
than as prohibited by applicable law) may be waived in writing at any time by
the party which is entitled to the benefits thereof.
7.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.
7.11 Definitions. Any capitalized terms not otherwise defined herein
shall have the meaning set forth in the Definition Appendix attached hereto as
Appendix A.
IN WITNESS WHEREOF, the parties have duly executed this Agreement or
caused it to be executed as an instrument under seal by their authorized
officers as of the date and year first above written.
WITNESS/ATTEST: DOCTORS HEALTH, INC.
_________________________ By: _____________________(SEAL)
Stewart B. Gold, President
MONTGOMERY NEWCO, INC.
___________________________ By: _____________________(SEAL)
Paul A. Serini, Vice President
DOCTORS HEALTH MONTGOMERY, LLC
___________________________ By: _____________________(SEAL)
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MOHAMMAD A. KHALID, M.D.
__________________________ __________________________(SEAL)
POTOMAC MEDICAL ASSOCIATES, INC.
__________________________ By: _____________________(SEAL)
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