Exhibit 3.3
AGREEMENT
This Agreement is entered into this 15th day of July, 1997, in connection with
the purchase by The Beacon Group III - Focus Value Fund, L.P. ("Beacon") of
3,000,000 shares of Doctors Health, Inc. (the "Company") Series D Preferred
Stock (the "Series D Preferred Stock") and related amendments and modifications
to existing rights and obligations of the Company's shareholders and managers
(the "Transaction").
The current documents relating to the Transaction (the "Transaction Documents")
incorporate a certain "MLR Side Letter" that adjusts the "Conversion Price" of
the Series D Preferred Stock at the end of FY 1998, if and to the extent the
Company achieves, or fails to achieve, certain benchmarks.
It has come to the attention of Beacon that:
1) the Finance Committee of the United States Senate completed its
Medicare budget proposals during the week of June 16, 1997 , and the House
Commerce Committee of the United States House of Representatives passed its
version of Medicare budget proposals on June 11, 1997,
2) Congress intends to have a final xxxx for the President's signature
by August 1, 1997, and
3) the Senate version contains changes to the Medicare's managed care
payment methodology that would reduce payments for new Medicare HMO enrollees by
5% below the current 95% of historic reimbursement level in the enrollee's first
year of enrollment, and then adjust the reimbursement for each of the 4 years
thereafter (the "Proposed Senate Risk Adjustment").
Beacon and the Company believe that while passage as law of the Proposed Senate
Risk Adjustment provisions, or substantially similar provisions that reduce
payments to Medicare HMOs for enrollees below the current 95% of historic
reimbursement level, is not likely, the risk that the Proposed Senate Risk
Adjustment, or substantially similar provisions, is a risk fairly borne by the
Company and not by Beacon.
The Company and Beacon therefore wish amend, and hereby amend, the Transaction
Documents to provide that if the Proposed Senate Risk Adjustment provisions (or
substantially similar provisions that reduce payments to Medicare HMOs for
enrollees below the current 95% of historic reimbursement) are passed as law
during the 000xx Xxxxxxxx xx xxx Xxxxxx Xxxxxx and such reduced payments become
effective during FY 1998, and are applicable to the Company's reimbursement,
then Exhibit A to the MLR Letter will be replaced by the "Revised Exhibit A"
attached as Exhibit A.
The foregoing obligations of the Company to replace Exhibit A of the MLR Letter
with the Revised MLR Letter are subject to ratification and adoption by the
Company's Executive Committee and/or Board of Directors as soon as practicable
after closing, but in no event later than July 31, 1997. To this end, each of
Xxxxxxx Gold, Xxxx Xxxxxx and Xxxx Xxxxx agree to use his best efforts to cause
the Executive Committee of Board to ratify and approve the Revised MLR Letter,
and hereby unconditionally, jointly and severally, agree to hold Beacon harmless
from and against any loss, costs (including reasonable attorneys fees) or
damages incurred by Beacon as a result of the Executive and/or the Board failing
to so ratify and adopt.
DOCTORS HEALTH SYSTEM, INC.
By: /s/ Stewart B. Gold
________________________________
Name: Stewart B. Gold
Title: President and
Chief Executive Officer
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
By: Beacon Focus Value Investors, L.L.C.
By: Focus Value GP, Inc.
By: /s/ Xxxx X. Xxxxxxxxx
________________________________
Xxxx X. Xxxxxxxxx
Managing Director
/s/ Stewart B. Gold
____________________________________
Stewart B. Gold
/s/ Xxxx X. Xxxxxx
____________________________________
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxx
____________________________________
Xxxx X. Xxxxx
DOCTORS HEALTH, INC. EXHIBIT A
Reset Mechanism
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Medicare Enrollees (as of 6/30/98)
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greater
Average Medicare than
MLR for FY98 28,000 27,999 to 23,500 23,499 to 19,000 18,999 to 17,000 16,999 to 15,000
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Price Price Price Price Price
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less than 72.5% $ 11.00 $10.50 $10.00 $9.00 $8.00
72.5% to 76.9% $ 10.00 $ 9.50 $ 9.00 $8.00 $7.00
77.0% to 79.9% $ 9.00 $ 8.50 $ 8.00 $7.00 $6.00
80.0% to 81.9% $ 8.00 $ 7.50 $ 7.00 $6.00 $5.00
82.0% to 83.9% $ 7.00 $ 6.50 $ 6.00 $5.00 $4.00
84.0% to 84.9% $ 6.00 $ 5.50 $ 5.00 $4.00 $4.00
85.0% to 85.9% $ 5.00 $ 4.50 $ 4.00 $4.00 $4.00
greater than 86.0% $ 4.00 $ 4.00 $ 4.00 $4.00 $4.00
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