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PROSPECTUS SUPPLEMENT NO. 61 Filed Pursuant to Rule 424(b)(3)
To the Prospectus dated January 5, 1998, Registration No.: 333-1926
As Supplemented To Date
Option to Purchase
3,120 Shares
of
Class B Common Stock
This Prospectus Supplement relates to the issuance by
Doctors Health, Inc., a Delaware corporation ("Doctors Health")
of an Option (the "Option") to purchase 9,880 shares of its Class
B Common Stock par value $.01 per share ("the Class B Common
Stock") pursuant to Option Agreement (the "Option Agreement") to
be entered into among A. Roger Wiederhorn ("Physician") and
Doctors Health. This Prospectus Supplement should be read in
conjunction with the Prospectus dated January 5, 1998 and the
Prospectus Supplement No. 62 dated February 13, 1998 which
contains the Company's Quarterly Report on Form 10-Q for the
period ended December 31, 1997; and Prospectus Supplement No. 26
which contains the Shareholders Letter Agreement.
Doctors Health's principal executive office is located at
10451 Mill Run Circle, Tenth Floor, Owings Mills, Maryland 21117,
telephone number (410) 654-5800.
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 FROM ANY PERSON, 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" referred to on page S-2 hereof for
certain information that should be considered in connection with
an investment in securities of Doctors Health.
The date of this Prospectus Supplement is February 17, 1998.
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RISK FACTORS
Financial Performance of Doctors Health
Doctors Health has a limited operating history and for the
fiscal year ended June 30, 1997 and the six months ended December
31, 1997, recorded a net loss of approximately $14.8 million and
$8 million, respectively. Doctors Health is likely to record a
net loss for the fiscal year ending June 30, 1998. There can be
no assurance that Doctors Health will earn operating profits
after completion of this transaction.
Risk Factors set forth in the Prospectus dated January 5, 1998
The Risk Factors set forth in the Prospectus are
incorporated herein by reference and should be read carefully by
investors.
PROPOSED OPTION AGREEMENT AMONG DOCTORS HEALTH AND A. ROGER
WIEDERHORN
The following description of the transactions contemplated
by the Option Agreement does not purport to be complete and is
qualified in its entirety by reference to the Option Agreement, a
copy of which is attached to this Prospectus Supplement as Annex
A and is incorporated herein. Physician is urged to read the
Option Agreement in its entirety.
Vesting
The Option is immediately exercisable unless the Option has
earlier terminated pursuant to the provisions of the Option
Agreement.
General
Pursuant to the Option Agreement, Doctors Health has granted
to Physician an option to purchase 3,120 shares of Doctors Health
Class B Common Stock for an exercise price of $10.00 per share.
Termination
Options granted to Physician shall terminate with respect to
any shares of Class B Common Stock as to which the Option has not
been exercised effective on the date Physician is no longer
employed by Doctors Health or an affiliate of Doctors Health for
any reason other than Physician's death or Disability (as defined
in Physician's employment agreement with Doctors Health dated
February 28, 1997).
Tax Liability Advance
The Physician and Doctors Health understand that issuance of
the Option is not a taxable event. However, because the Internal
Revenue Service may take a different view, the Option Agreement
provides that Doctors Health shall advance the Physician
sufficient funds (the "Advance") to pay any federal income tax
liability (the "Tax") caused by the issuance of the Option if the
Internal Revenue Service determines that the Physician received
taxable income solely because of the grant of the Option with an
Option Price discounted from the fair market value of the Class B
Common Stock. Doctors Health's obligation shall apply only if
such Tax is incurred at a time when Physician's shares of DH
Common Stock are not registered under Section 12 of the
Securities Exchange Act of 1934, as amended. Physician agrees to
cooperate fully with Doctors
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Health to avoid the institution of any tax on the grant of the Option.
Doctors Health shall manage, at its expense, all negotiations, proceedings
or litigation deemed necessary by Doctors Health to avoid such tax liability.
Physician shall repay the Advance and accrued interest at the
applicable federal rate for mid-term investments, on the earlier
to occur of (i) termination of Physician's employment; (ii) a
sale of all or a portion of such shares to a third party; or
(iii) within thirty days following the completion of a public
offering of DH's securities registered under Section 12 of the
Securities Exchange Act of 1934 which includes Physician's
shares. Physician shall grant Doctors Health a security interest
in the shares to secure repayment of the Advance.
RESALE OF OPTION AND CLASS B COMMON STOCK
The Option and the Shares offered by this Prospectus
Supplement have been registered under the Securities Act. The
shares issuable upon exercise of the Option will be subject to
the Stockholders Agreement attached hereto as Annex B and
therefore, will not be freely transferable. The Option is
nontransferable. In addition, there is no public market for the
Option or the Class B Common Stock.
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.
ANNEXES
Annex A - Option Agreement between Doctors Health, Inc. and
A. Roger Wiederhorn.
Annex B - Shareholders Letter Agreement dated January 31,
1997 (delivered to Physician as Prospectus Supplement No. 26)
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ANNEX A
DOCTORS HEALTH, INC.
OPTION AGREEMENT
This Option Agreement (the "Option Agreement") is
entered into this ____day of February, 1998, by and between
Doctors Health, Inc., a Maryland corporation ("DH"), and A. Roger
Wiederhom, M.D. ("Optionee").
RECITALS:
1. DH has registered certain shares of its Class B
Common Stock, par value $.01 per share ("Class B Common Stock")
and options to acquire Class B Common Stock ("Options") with the
Securities and Exchange Commission ("SEC") and with certain
applicable states.
2. Pursuant to such registration, DH is offering of
some or all of such registered securities (the "Offering"), the
terms of which are set forth in a Prospectus and a Prospectus
Supplement (together referred to herein as the "Prospectus") that
are part of the registration statement on Form S-1 filed with the
SEC (the "Registration Statement").
3. Optionee desires to acquire the securities offered
pursuant to the terms of the Offering and, in connection
therewith has executed an Employment Agreement with DH dated
February 28, 1997 (the "Employment Agreement").
4. Pursuant to the Offering and the Employment
Agreement, the Company has agreed to grant Optionee Options to
purchase 3,120 shares of Class B Common Stock.
AGREEMENTS:
In consideration of the foregoing and of the mutual
agreements herein contained and set forth in the Employment
Agreement, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For the purposes of this Option Agreement, the
definitions set forth in Sections 1.1 through 1.11 shall be
applicable.
Section 1.1 Affiliate. "Affiliate" shall mean any
entity, whether now or hereafter existing, which controls, is
controlled by, is under common control with, or whose medical
practice is affiliated with, the Corporation (including, but not
limited to, joint ventures, limited liability companies, and
partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the total combined voting power of all classes
of stock or interests of the entity.
Section 1. 2 Class B Common Stock. "Class B Common
Stock" shall mean shares of DH's authorized but unissued Class B
common stock, par value of one cent ($0.01) per share.
Section 1. 3 Exercise Date. "Exercise Date" shall
mean the date on which the Compensation Committee of DH (the
"Committee") receives the written notice required under Section
3.2 of this Option Agreement that Optionee has exercised the
Option.
Section 1. 4 Grant Date. "Grant Date" shall mean the
date on which DH issues an Option to Optionee pursuant to this
Option Agreement.
Section 1. 5 Offering. "Offering" shall mean the
offering of securities by DH pursuant to which Optionee is
acquiring the Options, the terms of which are set forth in the
Prospectus.
Section 1. 6 Options. "Options" shall mean those
options to acquire shares of Class B Common Stock of DH granted
to Optionee pursuant to this Option Agreement, each such option,
upon proper exercise, entitling the Optionee to one share of
Class B Common Stock pursuant to the terms set forth in the
Prospectus and this Option Agreement.
Section 1.7 Fair Market Value. "Fair Market Value" of
a share of the Corporation's Common Stock for any purpose on a
particular date shall be determined in a manner such as the
Committee shall in good faith determine to be appropriate;
provided, however, that if the Common Stock is publicly traded,
then Fair Market Value shall mean the last reported sale price
per share of Common Stock, regular way, on such date or, in case
no such sale takes place on such date, the average of the closing
bid and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on a national
securities
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exchange or included for quotation on the Nasdaq-National Market,
or if the Common Stock is not so listed or admitted to trading or
included for quotation, the last quoted price, or if the Common
Stock is not so quoted, the average of the high bid and low asked
prices, regular way, in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the
principal other automated quotations system that may then be in
use or, if the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices,
regular way, as furnished by a professional market maker making a
market in the Common Stock as selected in good faith by the
Committee or by such other source or sources as shall be selected
in good faith by the Committee. If, as the case may be, the
relevant date is not a trading day, the determination shall be
made as of the next preceding trading day. As used herein, the
term "trading day" shall mean a day on which public trading of
securities occurs and is reported in the principal consolidated
reporting system referred to above, or if the Common Stock is not
listed or admitted to trading on a national securities exchange
or included for quotation on the Nasdaq-National Market, any
business day.
Section 1. 8 Option Price. "Option Price" shall mean
the price per share of Common Stock at which the Option may be
exercised. "Aggregate Option Price" shall mean the Option Price
multiplied by the number of Options to be exercised pursuant to a
notice of exercise.
Section 1. 9 Prospectus. "Prospectus" shall mean the
Prospectus and any Prospectus Supplements that are part of the
Registration Statement filed on Form S-1 by DH and which set
forth the terms of the Offering.
Section 1. 10 Registration Statement. "Registration
Statement" shall mean the registration statement filed by DH with
the SEC with respect to the registration of the securities of DH,
some or all of which are the subject of the Offering.
Section 1. 11 Change in Control. "Change in Control"
shall mean (i) a liquidating distribution to DH shareholders (or
similar event); (ii) a combination, consolidation or merger where
DH is not the survivor; (iii) any sale, exchange or other
disposition of all or substantially all of DH's assets; or (iv)
any public offering of DH's Securities at a company value of at
least $25,000,000 with proceeds to DH of at least $15,000,000.
ARTICLE 2
ISSUANCE OF OPTIONS
Section 2.1 Issuance of Options. DH hereby grants to
Optionee, as of the date hereof (the "Grant Date") Three-Thousand
One Hundred and Twenty (3,120) Options to purchase shares of
Class B Common Stock at an exercise price of Ten Dollars ($10.00)
per share (the "Option Price"), or such adjusted number of
Options at such adjusted Option Price as may be established from
time to time pursuant to the provisions of Article 5 hereof. Each
Option, upon proper exercise thereof in accordance with this
Option Agreement, entitles Optionee to purchase one share of DH
Class B Common Stock.
ARTICLE 3
EXERCISE OF OPTIONS
Section 3.1 Exercisability of Options. The Options
shall be exercisable, in whole or in part, at any time on or
after the date hereof unless the Options have earlier terminated
pursuant to the provisions of this Option Agreement. The Option
may not be exercised unless such action or consent as may be
required by federal or state law relating to the issuance or
distribution of securities shall have been taken or obtained.
Section 3.2 Manner of Exercise. The Options may be
exercised, in whole or in part, by delivering written notice of
exercise to DH in such form as DH may require from time to time.
Such notice shall specify the number of Options being exercised,
and shall be accompanied by full payment of the Aggregate Option
Price. In addition, such notice shall be accompanied by (i) a
written acknowledgment of the restrictions on the transferability
of the shares of Class B Common Stock executed in the form of the
letter attached hereto and marked Exhibit A and (ii) a signed
copy of a Stockholders Agreement in such form as DH may
prescribe. Notwithstanding anything herein to the contrary, all
Class B Common Stock issued pursuant to the Options shall be
subject to the terms and conditions of said Stockholders
Agreement. Payment of the Aggregate Option Price may be made (i)
in cash, (ii) in a number of shares of Class B Common Stock
(including shares of Class B Common Stock acquired upon the
exercise of an option) having a total Fair Market Value on the
Exercise Date equal to the Aggregate Option Price, or (iii) by a
combination of the foregoing. Notwithstanding the foregoing, if
the Common Stock is registered under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, unless the Committee
determines otherwise in its discretion, payment of the Option
Price also may be satisfied, in whole or in part, by delivery of
a properly executed exercise notice, together with irrevocable
instructions; (i) to a brokerage firm approved by the Committee
to deliver promptly to DH the aggregate amount of sale or loan
proceeds to pay the Option Price and any withholding tax
obligations that may arise in connection with the exercise, and
(ii) to DH to deliver the certificates for such purchased shares
directly to such brokerage firm. The Options may be exercised
only in multiples of whole shares of Class B Common Stock and no
partial shares shall be issued.
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Section 3.3 Issuance of Shares and Payment of Cash
upon Exercise. Upon exercise of the Options, in whole or in
part, in accordance with the terms of this Option Agreement and
upon payment of the Aggregate Option Price, DH shall issue to
Optionee the number of shares of Class B Common Stock equal to
the number of Options being exercised and for which payment was
received, in the form of fully paid and non-assessable Class B
Common Stock.
Section 3.4 Reservation of Shares. DH shall at all
times reserve and keep available for issuance upon the exercise
of Options a number of its authorized but unissued shares of
Class B Common Stock that will be sufficient to permit the
exercise in full of all outstanding Options.
ARTICLE 4
TERMINATION OF OPTIONS
Section 4.1 Upon Optionee's Death. Unless such
Options are earlier terminated pursuant to the provisions of this
Option Agreement, upon Optionee's death Optionee's executor,
personal representative or the person to whom the Options shall
have been transferred by will or the laws of descent and
distribution, as the case may be, may exercise all or any part of
the Options not previously exercised, provided such exercise
occurs within twelve (12) months after the date Optionee dies,
but not later than the end of the stated term of the Option and,
provided further, that such person executes a Stockholders
Agreement in such form as DH may prescribe.
Section 4.2 Termination of Employment For Reason Other
Than Death or Disability. Unless earlier terminated pursuant to
the provisions of this Option Agreement, Options granted to
Optionee shall terminate with respect to any shares of Class B
Common Stock as to which the Option has not been exercised, as of
the date Optionee is no longer employed by either DH or an
Affiliate for any reason other than Optionee's death or
Disability (as such term is defined in the Employment Agreement).
Section 4.3 Termination of Employment By Reason of
Disability. Unless the Options have earlier terminated pursuant
to the provisions of this Option Agreement, in the event that
Optionee ceases to be an employee of DH or an Affiliate by reason
of Disability, Options that have not yet been exercised may be
exercised in whole or in part at any time on or after the date of
Disability, but not later than the end of the stated term of the
Option or as otherwise provided by the provisions of Section 4.1
of this Option Agreement.
ARTICLE 5
ADJUSTMENTS
Section 5.1 Adjustment of Number of Options; Option
Price. Subject to the provisions of this Article 5, the Option
Price shall be subject to adjustment as follows:
(a) In the event any change is made to the Class
B Common Stock (whether by reason of (i) a merger, consolidation,
reorganization or recapitalization of DH or (ii) a stock
dividend, stock split, combination of shares, exchange of shares
or other change in capital structure of DH effected without
receipt of consideration), then, appropriate adjustments shall be
made to the number of shares and Option Price of the Class B
Common Stock subject to the Options.
(b) If DH is the surviving entity in any merger
or other business combination then the Options outstanding
immediately after such merger or other business combination,
shall be appropriately adjusted to apply and pertain to the
number and class of securities that would be issuable to the
Optionee in the consummation of such merger or business
combination if the Options were exercised immediately prior to
such merger or business combination, and appropriate adjustments
shall also be made to the Option Price.
ARTICLE 6
MISCELLANEOUS
Section 6.1 No Rights of Stockholder. Optionee shall
not have any of the rights of a stockholder with respect to the
shares of Class B Common Stock that may be issued upon the
exercise of the Options until such shares of Class B Common Stock
have been issued to Optionee upon the due exercise of the
Options.
Section 6.2 Nontransferability of Option. The Option
shall be nontransferable otherwise than by will or the laws of
descent and distribution. During the lifetime of Optionee, the
Options may be exercised only by Optionee or, during the period
Optionee is under a legal disability, by Optionee's guardian or
legal representative.
Section 6.3 Non-Guarantee of Employment. Nothing in
the Offering, the Employment Agreement or this Option Agreement
shall be construed as a contract of employment between DH (or an
Affiliate) and Optionee, or as a contractual right of Optionee to
continue in the employ of DH or an Affiliate, or as a limitation
of the right of DH or an Affiliate to discharge Optionee at any
time.
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Section 6.4 Withholding Taxes. DH or any Affiliate
shall have the right to deduct from any compensation or any other
payment of any kind (including withholding the issuance of shares
of Class B Common Stock) due Optionee the amount of any federal,
state or local taxes required by law to be withheld as the result
of the exercise of the Option or the disposition of shares of
Class B Common Stock acquired pursuant to the exercise of the
Option. In lieu of such deduction, DH may require Optionee to
make a cash payment to DH or an Affiliate equal to the amount
required to be withheld. If Optionee does not make such payment
when requested, DH may refuse to issue any Class B Common Stock
certificate until arrangements satisfactory to the Company for
such payment have been made.
Section 6.5 Agreement Subject to Charter and By-Laws.
This Agreement is subject to the Charter and By-Laws of DH, and
any applicable federal or state laws, rules or regulations.
Section 6.6 Headings. The headings in this Option
Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Option Agreement.
Section 6.7 Notices. All notices and other
communications made or given pursuant to this Option Agreement
shall be in writing and shall be sufficiently made or given if
hand delivered or mailed by certified mail, addressed to Optionee
at the address contained in the records of DH or an Affiliate, or
to DH for the attention of its Secretary at its principal office.
Section 6.8 Entire Agreement; Modification. This
Option Agreement contains the entire agreement between the
parties with respect to the subject matter contained herein and
may not be modified, except in a written document signed by each
of the parties hereto.
Section 6.9 Counterparts. This Option Agreement may
be executed simultaneously in one or more counterparts, each of
which shall be deemed to be an original and all of which together
shall constitute one and the same instrument.
Section 6.10 Governing Law. This Option Agreement
shall be governed by and construed under the laws of the State of
Maryland without regard to conflicts of law.
IN WITNESS WHEREOF, the parties have executed this
Option Agreement as of the date first above written.
DOCTORS HEALTH, INC.
By: _________________________
Stewart B. Gold, President
OPTIONEE
By: _________________________
A. Roger Wiederhorn, M.D.
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EXHIBIT A
Doctors Health, Inc.
10451 Mill Run Circle, 10th Floor
Owings Mills, Maryland 21117
Gentlemen:
I hereby exercise _________ Options granted to me on
February ____, 1998, by Doctors Health, Inc. (the "Company"),
subject to all the terms and provisions of the Option Agreement
dated February ____, 1998 and notify you of my desire to purchase
____________ shares of Class B Common Stock of DH at a price of
$10.00 per share pursuant to the exercise of said Options, for a
total purchase price of $_________.
I hereby confirm that I am a party to a Shareholders Letter
Agreement with DH (or will be upon DH's execution of the
Shareholders Letter Agreement executed by me and attached hereto)
pursuant to which I have agreed to certain restrictions on the
transferability of the shares of Class B Common Stock issued to
me upon exercise of the Options and other matters relating
thereto, and the certificates for the Shares to be issued to me
shall contain a legend to that effect.
Total Amount Enclosed: $__________
Date:___________________________
________________________________
(Optionee)
Received by Doctors Health, Inc. on
______________________________, 19____
By: ________________________________
Name:
Title:
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