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PROSPECTUS SUPPLEMENT NO. 60 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
9,880 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 Norman Marcus ("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.
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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.
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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 25, 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 NORMAN MARCUS
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 9,880 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 Health to avoid the institution of any tax on
the grant of the Option. Doctors Health shall manage,
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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 Norman
Marcus.
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 Norman Marcus, 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 9,880 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") Nine-Thousand Eight Hundred and Eighty
(9,880) 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: __________________________
Norman Marcus, 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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