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PROSPECTUS SUPPLEMENT NO. 22 Filed Pursuant to Rule 424(b)(3)
To the Prospectus dated January 24, 1997 Registration No.: 333-1926
As Supplemented to date
10,719 Shares
of
Class B Common Stock of
Doctors Health System, Inc.
This Prospectus Supplement relates to the proposed acquisition (the
"Acquisition") of certain assets and liabilities (the "Acquired Business") of
Michael Dobridge, M.D., P.A., a Maryland corporation ("Medical Practice") by
Doctors Health System, Inc., a Maryland 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 10,719 shares (the "Share Consideration") of its Class B Common
Stock, par value $.01 per share (the "Class B Common Stock") and will pay
$76,400.00 ("Cash Consideration") to the Medical Practice in accordance with
the Practice Transfer Agreement 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, 10th Floor, Owings Mills, Maryland, telephone number (410)
654-5800. Medical Practice's principal executive office is located at 13975
Connecticut Avenue, N.W., Silver Spring, Maryland 20906. 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 June 18, 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. 1, 2 and 14. 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 Maryland 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 through a Physician, office manager and nurse in Silver
Spring, Maryland.
The Acquisition; Closing
Pursuant to the Practice Transfer Agreement (the "Acquisition Agreement")
between Medical Practice and Doctors Health, (i) Medical Practice shall
transfer to Doctors Health all of its right, title and interest in and to
certain assets of the Medical Practice pursuant to the Acquisition Agreement,
subject to certain exclusions stated therein, (ii) Medical Practice 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 10,719 shares of its Class
B Common Stock (the "Share Consideration") to Dr. Michael Dobridge and (iv)
Doctors Health shall pay $76,400.00 ("Cash Consideration") to Dr. Michael
Dobridge, 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 about
June 18, 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 Stockholders 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 share 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 in 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 to Montgomery
County, Maryland. 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,
Maryland, 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
transfer to Doctors Health certain of its assets; (ii) Medical Practice
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
10,719 shares (the "Share Consideration") of its Class B Common Stock to Dr.
Michael Dobridge, and (iv) Doctors Health shall pay $73,887.50 ("Cash
Consideration") to Dr. Michael Dobridge, on the terms and subject to the
conditions set forth in the Acquisition Agreement.
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
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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 Montgomery County, Maryland market in order to establish
an Integrated Health Care Delivery System in Montgomery County,
Maryland. 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 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.
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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
transfer to Doctors Health certain of its assets; (ii) Medical Practice 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 10,719 shares (the "Share
Consideration") of its Class B Common Stock to the Physician, and (iv)
Doctors Health shall pay $76,400.00 ("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 promptly with 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 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.
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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.
BUSINESS OF DOCTORS HEALTH
The business of Doctors Health is described in the Prospectus.
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BUSINESS OF MEDICAL PRACTICE
The Medical Practice conducts an internal medicine practice at 13975
Connecticut Avenue, #308, Silver Spring, Maryland 20906. The Medical
Practice conducts its business through one physician, Dr. Michael Dobridge
and an office staff.
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 cop 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 have been passed
upon for the Company by Venable, Baetjer and Howard, LLP, Baltimore, Maryland.
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ATTACHMENTS
Annex A - Practice Transfer Agreement
Annex B - Stockholders Agreement (delivered to Medical Practice as
Prospectus Supplement No. 2)
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APPENDIX A
PRACTICE TRANSFER AGREEMENT
By and among
Doctors Health Montgomery, LLC,
Doctors Health System, Inc. and
Dr. Michael Dobridge
June 18, 1997
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Practice Transfer Agreement
Table of Contents
Page
Section 1 INTRODUCTION 3
Section 2 TRANSFER OF MEDICAL PRACTICE;
PURCHASE PRICE 3
Section 3 REPRESENTATIONS AND WARRANTIES
OF DOCTORS HEALTH 4
Section 4 REPRESENTATIONS AND WARRANTIES
OF THE PHYSICIAN 5
Section 5 ADDITIONAL COVENANTS AND
AGREEMENTS OF THE PHYSICIAN 7
Section 6 ADDITION AND WITHDRAWAL OF
PHYSICIANS 7
Section 7 LITIGATION 8
Section 8 MISCELLANEOUS 8
2
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PRACTICE TRANSFER AGREEMENT
This Practice Transfer Agreement, dated as of the 18th day of June,
1997, (the "Closing Date") by and among Doctors Health Montgomery, LLC, a
Maryland limited liability company (the "Medical Group"); Doctors Health
System, Inc., a Maryland corporation ("Doctors Health"); and Dr. Michael
Dobridge (the "Physician").
The parties to this Agreement, intending to be legally bound, agree
as follows:
1. Purpose. The Physician has decided to transfer certain assets and
liabilities of his medical practice (the "Medical Practice") to Doctors
Health and the Medical Group and to engage in the practice of medicine
exclusively through and with the Medical Group and as an employee of the
Medical Group. Doctors Health and the Medical Group desire to acquire certain
assets and liabilities of the Medical Practice, and the Medical Group wishes
to admit the Physician as a member and to employ the Physician.
2. Transfer of the Medical Practice.
2.1. Transfer of Assets. The Physician transfers to Doctors Health
all of his or her right, title and interest in and to the Medical Practice,
including all assets relating thereto (excluding assets used by the Physician
to provide laboratory services and other services ancillary to his or her
Medical Practice and excluding the accounts receivables of the Medical
Practice outstanding on the Closing Date) as listed on Schedule 2.1(a). The
Physician transfers to the Medical Group all of his or her right, title and
interest in and to any assets used by the Physician to provide laboratory
services and other services ancillary to his or her Medical Practice as set
forth on Schedule 2.1(b). The assets listed on Schedules 2.1(a) and 2.1(b)
are referred to in this Agreement as the "Assets."
2.2. Assumption of Liabilities.
(a) Doctors Health assumes the liabilities and obligations of
the Physician listed on Schedule 2.2(a) to the extent that such liabilities
and obligations relate to the conduct of the Medical Practice after the
Closing Date. The Medical Group assumes the liabilities and obligations of
the Physician listed on Schedule 2.2(b). Neither Doctors Health nor the
Medical Group assume any other liabilities or obligations of the Physician
except as listed on Schedules 2.2(a) and 2.2(b), respectively. The
liabilities listed on Schedules 2.2(a) and 2.2(b) are referred to in this
Agreement as the "Liabilities."
(b) On the Closing Date, the Physician shall have paid all
trade payables and other obligations or liabilities of the Medical Practice
which have been incurred on or before the Closing Date and, in any event, the
Physician shall be liable for all such trade payables without regard to when
the Physician receives an invoice with respect to such medical practice
obligations. Doctors Health does not assume any responsibility for payment
of such medical practice obligations.
2.3. Purchase Price. As payment for the transfer of the Assets
to Doctors Health and the Medical Group, Doctors Health has delivered to the
Physician the following (which shall constitute the "Purchase Price"):
(a) A check in the amount of $76,400.00; and
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(b) 10,719 shares of Class B Common Stock of Doctors
Health (the "Shares").
2.4. Closing Documents. The parties shall execute and deliver the
following closing documents which shall be effective as of June 18, 1997:
(i) Employment Agreement between the Physician and the Medical Group (the
"Employment Agreement"); (ii) Stockholders Agreement; (iii) Amendment to the
Operating Agreement of the Medical Group admitting the physician as a member
of the Medical Group; (iv) any other documents executed in connection with
this Agreement (the "Closing Documents"). Doctors Health has delivered to
the Physician a Prospectus dated January 24,1997 and certain Prospectus
Supplements (Numbers 2, 3 and 14) prepared pursuant to Doctors Health's
Registration Statement as defined below (collectively, the "Prospectus").
2.5. Employees. Effective on the date hereof, the Physician's
non-physician employees listed on Schedule 2.5 shall become employees of
Doctors Health or the Medical Group, as specified in such Schedule.
3. Representations and Warranties of Doctors Health. Doctors Health
represents and warrants to the Physician as of the Closing Date as follows:
3.1. Organization and Power. Doctors Health is a corporation duly
incorporated and organized, validly existing and in good standing under the
laws of the State of Maryland. Doctors Health has full power and authority
(corporate and other) to own and hold its properties and to conduct its
business as currently conducted.
3.2. Authorization of Agreement. The execution, delivery and
performance of this Agreement and the other Closing Documents to which it is
a party have been duly and validly authorized by Doctors Health and executed
on behalf of Doctors Health, and no other proceedings are necessary to
authorize this Agreement.
3.3. Class B Common Stock. The Board of Directors of Doctors Health
has authorized the issuance of the Shares to the physician, and upon issuance
to the Physician of the Shares, the Shares shall constitute fully paid and
nonassessable shares of the Class B Common Stock of Doctors Health.
3.4. Registration Statement. The 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.
4. Representations and Warranties of the Physician. The Physician
hereby represents and warrants to the other parties hereto as of the Closing
Date as follows:
4.1. Ownership of Practice; Title to and Condition of Assets.
Except as listed on Schedule 4.1, the Physician owns and has good and
marketable title to all of the assets, rights, franchises and privileges used
or usable in his or her 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. The Physician does not hold fee
title to any real property related to the Medical Practice.
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4.2. No Conflicts. The execution, delivery and performance by the
Physician 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 the
Physician is subject.
4.3. Compliance With Laws. The Physician 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 the Assets or the Physician's Medical Practice.
4.4. Litigation. There are no lawsuits, proceedings or
investigations pending or threatened against the Physician or the Physician's
Medical Practice.
4.5. Contracts. Schedule 4.5 is a true and complete list of all
material contracts or agreements of 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 the
Physician has agreed to do any material act or thing beyond the requirements
of the Contracts.
4.6. Taxes. 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.
4.7. Financial Statements;. Attached as Schedule 4.7 is a true and
complete copy of an internally prepared or audited accrual basis financial
statement of the Medical Practice dated as of
[a date not more than thirty days prior to the Closing Date]. 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 4.7.
4.8 Receipt of Prospectus. The Physician acknowledges that he has
received the Prospectus.
5. Additional Covenants and Agreements of the Physician.
5.1. Information. The Physician agrees to provide to the Medical Group
or to Doctors Health promptly upon request all information necessary to allow
the Medical Group or Doctors Health to comply with applicable law, including,
without limitation, information relating to employees of the Physicians 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.
5.2. Reformation of Group Practice. If the Employment Agreement
between the Physician and the Medical Group 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 Medical Group, the Physician agrees to (a) cooperate with
Doctors Health, the Medical Group and each other Member of the Medical Group
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
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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 Medical Group.
6. 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 Medical Group or other
Medical Groups organized by Doctors Health, and (b) negotiate the withdrawal
of physicians from the Medical Group. Each party agrees to use its best
efforts to permit the addition and withdrawal of physicians as members of the
Medical Group.
6.1. Appointment as Agent; Specific Performance; Release. The
Physician irrevocably appoints Doctors Health and the Chairman of the Medical
Group (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 Medical Group,
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 Medical Group and their directors, officers,
employees or shareholders from any claims arising in connection with the
performance of their duties under this Section 6.
6.2. Acquisitions and Withdrawals Other Than Through The Medical
Group. If Doctors Health decides to acquire physician practices or services
through one or more additional medical groups or other entities and not
through the Medical Group, the foregoing provisions of this Section 6 shall
apply with appropriate modifications to reflect the substitution of such
additional medical groups or other entities.
7. Litigation. The parties hereby submit to the jurisdiction and venue
of the courts of the State of Maryland. NO PARTY SHALL ELECT A TRIAL BY JURY
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT.
8. Miscellaneous.
8.1. Notices. Any notices given with respect to this Agreement
shall be deemed given on the date of delivery if in writing and delivered or
mailed by registered or certified mail, postage prepaid, return receipt
requested, reliable overnight courier service, hand delivery or other
delivery service providing written evidence of delivery. When giving any
notices hereunder, the addresses shall be as follows:
If to Doctors Health or the Medical
Group:
Doctors Health System, Inc.
10451 Mill Run Circle
10th Floor
Owings Mills, Maryland 21117
Attention: Legal Services
Department
If to the Physician:
Dr. Michael Dobridge
13975 Connecticut Ave., #308
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Silver Spring, MD 20906
8.2 Entire Agreement. This Agreement and the other Closing
Documents contain the entire understanding among the parties with respect to
the subject matters contained in this Agreement and supersede any prior
understanding and agreements between or among them respecting such subject
matters.
8.3 Severability. If any provision of this Agreement, or the
application thereof to any person or circumstances shall, for any reason and
to any extent, be invalid or unenforceable, the remainder of this Agreement
and the application of such provision to other persons or circumstances shall
not be affected thereby, but rather shall be enforced to the greatest extent
permitted by law.
8.4 Assignment. No party to this Agreement shall have any right to
transfer, convey or assign its rights or obligations under this Agreement to
any person or entity, except that Doctors Health may make such transfer
conveyances or assignments to any of its affiliates. Each party to this
Agreement reserves the right to change its name to any other name that it
believes desirable or appropriate to the operation of its business or
otherwise.
8.5 Additional Documents And Acts. Each party agrees to execute
and deliver such additional documents and instruments (including a
stockholders agreement with each other Doctors Health stockholder) and to
perform such additional acts as may be reasonably necessary or appropriate to
effectuate, carry out and perform all of the terms, provisions and conditions
of this Agreement, and the transactions contemplated by this Agreement.
8.6 Interpretation. This Agreement shall be governed by the laws
of the State of Maryland, without regard to principles of conflicts of laws.
8.7 Amendment. This Agreement, including the Exhibits, Appendices
and Schedules hereto, may not be amended, altered or modified except by
instrument in writing executed by each party hereto, including through its
duly authorized attorney-in-fact.
8.8 Survival. All warranties, representations, covenants,
undertakings and indemnifications of each party contained herein shall
survive closing and the execution and delivery of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal as of the day and year first above written.
ATTEST/WITNESS: DOCTORS HEALTH MONTGOMERY,
LLC
_______________________ By:__________________________ (SEAL)
Jeffrey P. Indrisano, M.D.
By: Thomas F. Mapp, Attorney-in-
Fact for Jeffrey P. Indrisano
ATTEST: DOCTORS HEALTH SYSTEM, INC.
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_________________________ By:________________________(SEAL)
Stewart B. Gold, President
WITNESS: PHYSICIAN
__________________________ __________________________(SEAL)
Dr. Michael Dobridge
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SCHEDULE 2.1(a)
ASSETS
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<PAGE>
SCHEDULE 2.1(b)
ASSETS USED TO PROVIDE LABORATORY
AND OTHER ANCILLARY SERVICES
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SCHEDULE 2.2(a)
LIABILITIES
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SCHEDULE 2.2(b)
LIABILITIES ASSOCIATED WITH ASSETS USED TO PROVIDE LABORATORY AND OTHER
ANCILLARY SERVICES
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SCHEDULE 2.5
EMPLOYEES
Medical Group:
Doctors Health:
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SCHEDULE 4.1
OWNERSHIP OF PRACTICE
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SCHEDULE 4.5
CONTRACTS
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<PAGE>
SCHEDULE 4.7
FINANCIAL STATEMENTS
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