<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
COAST DENTAL SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
--------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
<PAGE> 2
(Logo Coast Dental)
Coast Dental Services, Inc.
2502 North Rocky Point Drive
Suite 1000
Tampa, Florida 33607
April 17, 1998
Dear Shareholder,
You are cordially invited to attend the 1998 Annual Meeting (the "Meeting")
of stockholders of Coast Dental Services, Inc. (the "Company"). The Meeting will
be held May 8, 1998 at 10:00 a.m., Eastern Daylight Savings Time, at the Hyatt
Regency Westshore, located at 6200 Courtney Campbell Causeway, Tampa, Florida
33607.
The Notice of the Meeting and the Proxy Statement on the following pages
cover the formal business of the Meeting, which includes the election of
Directors and a proposal to ratify the appointment of the Company's independent
certified public accountants. We will report on the progress of the Company and
comment on matters of current interest.
It is important that your shares be represented at the Meeting. We ask that
you promptly sign, date and return the enclosed proxy card in the envelope
provided, even if you plan to attend the Meeting. Returning your proxy card to
us will not prevent you from voting in person at the Meeting if you are present
and choose to do so.
If your shares are held in street name by a brokerage firm, your broker
will supply you with a proxy to be returned to the brokerage firm. It is
important that you return the form to the brokerage firm as quickly as possible
so that the brokerage firm may vote your shares. You may not vote your shares in
person at the Meeting unless you obtain a power of attorney or legal proxy from
your broker authorizing you to vote the shares, and you present this power of
attorney or proxy at the Meeting.
Your Board of Directors and management look forward to greeting you
personally at the Meeting.
Sincerely,
/s/ TEREK DIASTI
Terek Diasti
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
(Logo Coast Dental)
COAST DENTAL SERVICES, INC.
2502 NORTH ROCKY POINT DRIVE
SUITE 1000
TAMPA, FLORIDA 33607
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 8, 1998
Notice is hereby given that the Annual Meeting of stockholders of Coast
Dental Services, Inc. (the "Company"), a Delaware corporation, will be held at
the Hyatt Regency Westshore, located at 6200 Courtney Campbell Causeway, Tampa,
Florida 33607, on May 8, 1998, at 10:00 a.m., Eastern Standard Time (the
"Meeting") for the following purposes:
1. To elect one Director to serve until the Annual Meeting in 2001 and
until his successor is elected and qualified or until his earlier
resignation, removal from office or death;
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for fiscal year 1998; and
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete description of the matters to be acted upon at the Meeting.
The 1997 Annual Report of the Company is also enclosed. Stockholders of record
at the close of business on Thursday, April 9, 1998 are entitled to receive
notice of and to vote at the Meeting and any adjournment thereof.
All stockholders are cordially invited to attend the Meeting. Whether or
not you expect to attend, please sign and return the enclosed Proxy promptly in
the envelope provided to assure the presence of a quorum. You may revoke your
Proxy and vote in person at the Meeting, if you desire. If your shares are held
in street name by a brokerage firm, your broker will supply you with a proxy to
be returned to the brokerage firm. It is important that you return the form to
the brokerage firm as quickly as possible so that the brokerage firm may vote
your shares. You may not votes your shares in person at the Meeting unless you
obtain a power of attorney or legal proxy from your broker authorizing you to
vote the shares, and you present this power of attorney or proxy at the Meeting.
Please note that attendance at the Meeting will be limited to stockholders
of the Company as of the record date (or their duly authorized representatives).
If your shares are held by a bank or broker, please bring to the Meeting your
bank or brokerage statement evidencing your beneficial ownership of the Company
stock.
By order of the Board of Directors
/s/ Joseph R. Smith
Joseph R. Smith
Secretary
Tampa, Florida
April 17, 1998
<PAGE> 4
COAST DENTAL SERVICES, INC.
2502 NORTH ROCKY POINT DRIVE
SUITE 1000
TAMPA, FLORIDA 33607
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors and management
of Coast Dental Services, Inc. (the "Company") in connection with the
solicitation of proxies to be voted at the Company's 1998 Annual Meeting of
Stockholders, which will be held at 10:00 a.m., Eastern Standard Time on Friday,
May 8, 1998 at the Hyatt Regency Westshore, 6200 Courtney Campbell Causeway,
Tampa, Florida 33607 (the "Meeting").
Any proxy delivered pursuant to this solicitation may be revoked, at the
option of the person executing the proxy, at any time before it is exercised by
delivering a signed revocation to the Company, by submitting a later-dated
proxy, or by attending the Meeting in person and casting a ballot. If proxies
are signed and returned without voting instructions, the shares represented by
the proxies will be voted as recommended by the Board of Directors.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone by
regular employees of the Company. The Company does not expect to pay any
compensation for the solicitation of proxies, but may reimburse brokers and
other persons holding stock in their names, or in the names of nominees, for
their expense in sending proxy materials to their principals and obtaining their
proxies. The approximate date on which this Proxy Statement and enclosed form of
proxy has been first mailed to stockholders is April 17, 1998.
The close of business on Thursday, April 9, 1998, has been designated as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Meeting (the "Stockholders"). As of March 27, 1998
7,623,774 shares of the Company's Common Stock, par value $.001 per share, were
issued and outstanding. Each Stockholder will be entitled to one vote for each
share of Common Stock registered in his or her name on the books of the Company
as of the close of business on Thursday, April 9, 1998, on all matters that come
before the Meeting.
1. ELECTION OF DIRECTORS
There are currently five seats on the Board of Directors of the Company,
with no vacancies. The Board is divided into three classes of Directors serving
staggered three-year terms. Directors hold their positions until the annual
meeting of stockholders in the year in which their term expires and until their
respective successors are elected and qualified or until their earlier
resignation, removal from office or death. The term of office of one of the
Company's current five Directors, Dr. Adam Diasti, will expire at the Meeting.
The Board of Directors recommends that this Director be elected at the Meeting
to hold office until the Company's annual meeting in 2001 and until his
successor shall be duly elected and qualified or until their earlier
resignation, removal from office or death.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
RE-ELECTION OF DR. ADAM DIASTI AS DIRECTOR, TO SERVE THE TERM DESCRIBED ABOVE.
For further information on such nominee see "Management -- Directors and
Executive Officers" and "Security Ownership of Management and Others".
Stockholders may vote for up to three nominees and the affirmative vote of
holders of a majority of the shares represented, in person or by proxy, and
entitled to vote at the Meeting is required to elect each nominee. Abstentions
will be counted toward number of shares represented at the Meeting. Broker
non-votes will be disregarded. Stockholders may not vote cumulatively in the
election of Directors. In the event any of the nominees should be unable to
serve, which is not anticipated, the proxy committee, which consists of Terek
Diasti and Joseph R. Smith, will vote for such other person or persons for the
office of Director as the Board of Directors may recommend.
<PAGE> 5
MANAGEMENT -- DIRECTORS AND EXECUTIVE OFFICERS
INFORMATION REGARDING OUTSIDE DIRECTORS:
JOHN H. KANG, age 35 has been a Director and a member of the Audit and
Compensation Committee since the Company's initial public offering on February
11, 1997. Mr. Kang's term as Director expires during the year 2000. Mr. Kang has
been President and a Director of Medical Manager Corporation, a publicly owned
company, since July 1996. He is the founder of NMS and has served as its
President since its inception in 1994. In 1987, Mr. Kang founded J. Holdsworth
Capital Ltd., a private investment firm, and is currently President. He has been
a Director of Amorphous Technologies International, a company engaged in the
research and development and manufacture of metal alloy, since May 1995. Mr.
Kang also has been a Director of Nutcracker Snacks, Inc., a manufacturer of
snack foods, since December 1988. From June 1988 to September 1996, Mr. Kang was
the Chairman and a director of Clayton Group, Inc., a distributor of waterworks
materials. Mr. Kang received an A.B. in Economics from Harvard College in 1985.
DONALD R. MILLARD, age 48, has been a Director and a member of the Audit
and Compensation Committee of the Company since the Company's initial public
offering on February 11, 1997. Mr. Millard's term as Director expires during the
year 2000. Mr. Millard is currently the Chief Executive Officer of Matria
Healthcare, Inc., a publicly owned company, that is the leading provider of
comprehensive obstetrical home care and maternity management services. Mr.
Millard has also served as Senior Vice President of Finance and Chief Financial
Officer as well as Treasure of Matria Healthcare, Inc. Previously, Mr. Millard
served as Vice President -- Finance and Chief Financial Officer of Healthdyne,
Inc., from 1987 and, in addition, was elected Treasurer in March 1990 and served
in such capacities until Healthdyne, Inc. consummated a merger in 1996 with
Tokos Medical Corporation to form Matria Healthcare, Inc. Prior to joining
Healthdyne, Inc., Mr. Millard served as President of Dental One, Inc., a dental
healthcare provider, from December 1982 to June 1987. Mr. Millard, a Certified
Public Accountant. Received a Bachelor of Business Administration in Accounting
from the University of Georgia in 1969.
INFORMATION REGARDING INSIDE DIRECTORS AND EXECUTIVE OFFICERS:
TEREK DIASTI, DVM, CHIEF EXECUTIVE OFFICER, CHAIRMAN OF THE BOARD AND
DIRECTOR, age 39. Dr. Diasti is a founder of the Company and has served as
Chairman of the Board of the Company since 1992. Dr. Diasti's term as Director
expires during the year 2000. From 1989 to 1993, Dr. Diasti operated and managed
Lakeside Animal Hospital, Avalon Animal Hospital, Country Oaks Animal Hospital
and Northdale Animal Hospital, all of which are veterinary hospitals in Tampa,
Florida. While at the veterinary hospitals, Dr. Diasti was engaged in the
development, internal managerial and operational programs. Dr. Diasti received
his Doctorate of Veterinary Medicine from Purdue University.
ADAM DIASTI, DDS, PRESIDENT, CHIEF OPERATING OFFICER, DENTAL DIRECTOR AND
DIRECTOR, age 37. Dr. Diasti is a founder of the Company and has served as the
President of the company since its inception. Dr. Diasti's term as Director
expires this year and is a nominee listed for re-election at the 1998 Annual
Stockholders Meeting. Dr. Diasti is also the founder, President, director and
sole shareholder of Coast Florida, P.A. and Coast Dental Services of Georgia,
P.C. (collectively, the "Coast P.A.") From May 1991 to May 1992, he managed and
operated the Sarasota Walk in Dental Clinic, a group practice of three dentists
and denture laboratory in Sarasota, Florida. Prior to May 1991, Dr. Diasti
worked as a dentist in a large group practice of 18 offices known as Quality
Dental in Newman Grove, Nebraska. He served as the Dental Operations Manager of
Quality Dental. Dr. Diasti has a Doctorate of Dental Surgery from Creighton
University in 1990 and is a member of the American Dental Association.
JOSEPH R. SMITH, CHIEF FINANCIAL OFFICER, SECRETARY, TREASURER AND
DIRECTOR, age 45. Mr. Smith, a Certified Public Accountant, joined the Company
in February 1996. He was elected as a director of the Company in September 1996.
Mr. Smith's term as Director expires during the year 1999. Prior to joining the
Company and since 1985, he was a partner with Deloitte and Touch LLP, in the
Central Florida practice where he most recently served as the partner in charge
of middle market services for Central Florida and the partner in charge of
services to the Retail Industry of the Florida Region. Mr. Smith graduated with
a
2
<PAGE> 6
Bachelor of Science in Accounting in 1975 from the University of Florida and is
a Certified Public Accountant.
INFORMATION REGARDING CERTAIN SIGNIFICANT EMPLOYEES:
TIM DIASTI, VICE PRESIDENT OF DEVELOPMENT, age 29. Mr. Diasti is a founder
of the Company and until October 1997 has served as Vice President of Operations
of the Company since its inception. Mr. Diasti graduated with a Bachelor of Arts
from the University of Nebraska's School of Business in 1992.
THOMAS H. WIRKUS, CHIEF OPERATING OFFICER, age 46. Mr. Wirkus joined the
Company in October 1997. Prior to joining the Company, he served as President
and Chief Operating Officer of Sports & Recreation, Inc. He was employed by
Sports & Recreation, Inc. from 1983 to 1996. From 1971 to 1983, Mr. Wirkus was
employed by Brunswick Corp. Mr. Wirkus has a Bachelors of Arts in Sociology from
the University of Wisconsin-Oshkosh.
CHRIS SALEMI, DIRECTOR OF REAL ESTATE ADMINISTRATION, age 37. Mr. Salemi
joined the Company in September 1997. Prior to joining the Company, he served as
Director of Real Estate Administration and Property Management for Eckerd
Corporation, an operator of approximately 2,800 drug stores in 26 states. Mr.
Salemi has a Bachelor of Arts in Accounting from the University of South Florida
and is a Certified Public Accountant.
WILLIAM H. GEARY, CONTROLLER, age 35. Mr. Geary joined the Company in
October 1997. Prior to joining the Company, he served as Divisional Vice
President and Controller for Beall's, Inc., an operator of approximately 200
department and outlet stores in three states. He was employed by Beall's, Inc.
from 1991 to 1997. From 1984 to 1991, Mr. Geary served in the audit department
of Deloitte & Touche LLP. Mr. Geary has a Bachelor of Arts in Accounting from
the University of South Florida and is a Certified Public Accountant.
KEY RELATIONSHIPS
A family relationship exists between Terek, Adam and Tim Diasti, who are
brothers and executive officers of the Company. Terek and Adam Diasti are also
Directors. Adam Diasti is a nominee listed for re-election as a Director at the
1998 Annual Meeting of Stockholders.
BOARD OF DIRECTORS
The Board of Directors of the Company held two formal meetings, with 100%
Director attendance, during 1997. The entire Board of Directors functions as a
Nominating Committee for recommending to stockholders candidates for positions
on the Board of Directors and the Board will consider written recommendations
from stockholders for nominations to the Board of Directors in accordance with
the procedures set forth in the By-Laws of the Company.
AUDIT COMMITTEE
The Audit Committee, consisting of Messrs. Joseph R. Smith, John H. Kang
and Donald R. Millard, is authorized to recommend to the Board independent
certified public accounting firms for selection as auditors of the Company;
recommendations to the Board on auditing matters; examine and make
recommendations to the Board concerning the scope of audits; and review and
approve the terms of transactions between the Company and related party
entities. During 1997, the Audit Committee met two times with 100% member
attendance. The Company retained Deloitte & Touche LLP to conduct the audit for
the year ended December 31, 1997.
COMPENSATION COMMITTEE
The Compensation Committee, consisting of Messrs. Terek Diasti, John H.
Kang and Donald R. Millard, is authorized to exercise all of the powers of the
Board of Directors with respect to matters pertaining to compensation and
benefits, including, but not limited to, salary matters, incentive/bonus plans,
stock option
3
<PAGE> 7
plans, investment programs and insurance plans, and the Committee is authorized
to exercise all of the powers of the Board in matters pertaining to employee
promotions and the designation and/or revision of employee positions and job
titles. The Compensation/Benefits Committee met once during 1997 with 100%
member attendance.
EXECUTIVE COMMITTEE
The Executive Committee, consisting of Messrs. Terek Diasti and Joseph R.
Smith, has all of the power and authority of the Board of Directors, except
those powers specifically reserved to the Board of Directors by Delaware Law and
the By-Laws of the Company, in the management of the business and affairs of the
Company during intervals between meetings of the Board of Directors.
See "Certain Transactions" for additional information on certain members of
management.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and stockholders of more than 10% of the Company's Common
Stock to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock and any other
equity securities of the Company. The Company was not subject to the reporting
requirements of Section 16(a) for the year ended December 31, 1996 and did not
become subject to such requirements until February 11, 1997, the date of the
initial public offering. To the Company's knowledge, based solely upon a review
of forms, reports and certificates furnished to the Company by such persons, all
such reports were filed on a timely basis.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of March 27, 1998, information as to the
beneficial ownership of the Company's Common Stock by (i) each person known to
the Company as having beneficial ownership of more than 5% of the Company's
Common Stock, (ii) each person serving the Company as Director on such date and
each nominee for Director, (iii) each person serving the Company as executive
officer on such date who qualifies as a "named executive officer" as defined in
Item 402(a)(3) of Regulation S-K under the Securities Exchange Act of 1934 and
(iv) all of the Directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF SHARES
BENEFICIALLY PERCENT OF
STOCKHOLDERS(1) OWNED CLASS(2)
- --------------- ---------------- ----------
<S> <C> <C>
Diasti Nevada Family Limited Partnership(3)................. 2,555,000 33.5%
Terek Diasti(3)............................................. 2,555,000 33.5
Adam Diasti(3).............................................. 2,555,000 33.5
Tim Diasti(3)............................................... 2,555,000 33.5
John H. Kang(4)............................................. 2,666 *
Donald R. Millard(4)........................................ 2,666 *
Joseph R. Smith(5).......................................... 78,333 1.0
All directors and executive officers as a group (6
persons).................................................. 2,635,999 34.5
OTHER 5% STOCKHOLDERS
- ---------------------
Provident Investment Counsel, Inc.(6)....................... 423,400 5.6
Kauffmann Fund, Inc.(7)..................................... 719,500 9.4
</TABLE>
- ---------------------
* Less than one percent(6)
(1) The address of each of the beneficial owners identified is 2502 North Rocky
Point Drive, Suite 1000, Tampa, Florida 33607.
(2) Based on 7,623,774 shares of Common Stock outstanding. Pursuant to the rules
of the Securities Exchange Commission, certain shares of Common Stock which
a person has the right to acquire within
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<PAGE> 8
60 days of the date hereof pursuant to the exercise of stock options are
deemed to be outstanding for the purpose of computing the percentage
ownership of such person but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Shares are owned by the Diasti Nevada Family Limited Partnership, 1325
Airmotive Way, Suite 130, Reno Nevada 89502, in which Dr. Terek Diasti, Dr.
Adam Diasti and Tim Diasti exercise equal investment and voting powers as
the general partners.
(4) Represents shares issuable upon the exercise of stock options which have
vested and excludes 1,334 shares issuable upon the exercise of stock options
which will vest July 1998.
(5) Includes 3,333 shares issuable upon the exercise of stock options which have
vested and are exercisable.
(6) Provident Investment Counsel, Inc.'s address is 300 North Lake Avenue,
Penthouse Suite, Pasadena, California 91101.
(7) Kaufmann Fund, Inc.'s address is 140 East 45th Street, 43rd floor, New York,
New York 10017.
EXECUTIVE COMPENSATION
COMPENSATION TO OUTSIDE DIRECTORS
The Company pays each director who is not an employee of the Company
("outside director") $1,000 for each Board of Directors meeting attended, plus
reimbursement for all reasonable expenses incurred by such director in
connection with such attendance at any meeting of the Board of Directors.
The Company also granted options to purchase 4,000 shares of Common Stock
to each of the outside directors during 1997. These options are exercisable at
the fair market value on the date of grant.
EXECUTIVE COMPENSATION TABLES
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets fourth the annual and long-term compensation for
services to the Company for the years ended December 31, 1995, 1996 and 1997 of
those persons who were, at December 31, 1997, (i) the Chief Executive Officer of
the Company and (ii) the other four most highly compensated officers of the
Company whose compensation exceeded $100,000 for fiscal year 1997 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
----------------------- STOCK STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS
- --------------------------- ---- -------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Terek Diasti, Chief Executive Officer........... 1995 $ 26,833 -- -- --
1996 63,442 -- -- --
1997 100,000 -- -- --
Joseph R. Smith, Chief Financial Officer........ 1996 115,000 -- $27,674(1) --
1997 165,000 -- -- 13,279
</TABLE>
- ---------------
(1) Represents the dollar amount of compensation expense to the Company
resulting from the issuance of 105,000 shares of restricted Common Stock
granted by the Company to Mr. Smith in conjunction with his initial
employment with the Company. Based upon the initial public offering price of
$8.00 per share, such shares had a total aggregate value of $840,000 at the
time of the initial public offering. A total of 26,250 of these shares are
forfeitable through February 12, 1999 subject to Mr. Smith's continued
employment on such date. Dividends will not be paid on shares which are
subject to such restriction.
5
<PAGE> 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR 1997
The following table shows all grants of stock options to the Company's
Named Executive Officers during 1997. The options were granted under the
Company's Employee Stock Option Plan. In addition, no grants of stock
appreciation rights (SARS) were made by the Company in fiscal year 1997. Each
option granted may be exercised with respect to one-third of the aggregate
number of shares subject to the grant each year, commencing one year after the
date of grant. Pursuant to the Securities Exchange Commission rules, the table
also shows the value of the options granted at the end of the option terms (ten
years) if the stock price were to appreciate annually by 5% and 10%,
respectively. There is no assurance that the stock price will appreciate at the
rates shown in the table. The table also indicates that if the stock price does
not appreciate, the potential realizable value of the options granted will be
zero.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN PRICE EXPIRATION -------------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
- ---- ---------- ----------- -------- ---------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph R. Smith................. 10,000 .10 8.00 2/10/07 -- $259,607 $407,693
3,279 .03 15.25 7/01/07 -- 48,725 78,120
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information as to options exercised by each of
the named executive officers of the Company during 1997. The table sets forth
the value of options held by such officers at year end measured in terms of the
closing price of the Company's Common Stock on December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph R. Smith................ -- $-- -- 13,279 $-- $195,331
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with Dr. Terek Diasti (the
"Employment Agreement"), pursuant to which he has agreed to serve as the
Company's Chief Executive Officer. The Employment Agreement is for a term of
five years ending September 31, 2001 and is renewable for subsequent one year
terms by the parties mutual agreement. Pursuant to his Employment Agreement, Dr.
Terek Diasti receives an annual base salary and has agreed to devote
substantially all of his time and attention to the business and affairs of the
Company. Dr. Terek Diasti is eligible for annual incentive bonuses, up to 100%
of his annual base salary, in an amount to be determined by the Compensation
Committee. His Employment Agreement provides that in the event of a termination
of employment by the Company other than (i) for cause, (ii) upon death or
disability or (iii) upon voluntary termination by him, he shall be entitled to
receive from the Company a series of monthly payments equal to one-twelfth of
the his annual base salary for each month during the remaining term of the
Employment Agreement, but not less than 24 months, plus a payment for accrued
but unpaid wages and expense reimbursements. The Employment Agreement provides
that in the event his employment terminates other than for cause within twelve
months following a change in control (as defined in such Employment Agreement)
of the Company, the Company shall pay him a series of 36 monthly payments of
one-twelfth of the sum of his base salary plus his previous years' bonus. The
Employment Agreement contains a non-competition covenant with the Company for a
period of two years following
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<PAGE> 10
termination of employment. The Company's President, Dr. Adam Diasti is
principally employed by the Coast P.A. To the extent, however, Dr. Adam Diasti
devotes his time and attention, as is reasonably necessary, to fulfill his
obligations to the Company, he is paid by the Company. Pursuant to his
employment arrangement with the Coast P.A. Dr. Adam Diasti was paid $89,900 for
the year ended December 31, 1997. During 1997, Dr. Adam Diasti devoted
approximately 30% of his time to the Company and accordingly the Company
incurred 30% of his annual compensation.
The Company and Joseph R. Smith are parties to an Employment Agreement (the
"Employment Agreement"), pursuant to which Mr. Smith has agreed to serve as
Chief Financial Officer of the Company. The term of the Employment Agreement is
for three years ending on February 12, 1999, and is renewable for subsequent one
year terms by mutual agreement of parties. The Employment Agreement also
provides that Mr. Smith will be employed for at least two years after any public
offering of the Company which occurs during the initial term of the Employment
Agreement. In the event Mr. Smith terminates the Employment Agreement without
cause during the two year period after any public offering, the Employment
Agreement requires Mr. Smith to pay liquidated damages to the Company of
$200,000 for each complete year or portion of a year remaining. The Employment
Agreement provides that Mr. Smith will devote his full time to the business and
affairs of the Company and will receive an annual base salary at a rate equal to
$125,000 during the first six months of employment and $150,000 during the
second six months, $165,000 in the second year and $180,000 in the third year.
In addition, Mr. Smith received, under the Employment Agreement, 105,000 shares
of restricted Company Common Stock of which one-half of the shares ceased to be
forfeitable on the initial public offering date, one-quarter ceased to be
forfeitable in February 1998 and the remaining one-quarter will cease to be
forfeitable in February 1999. Mr. Smith is also eligible for inclusion, at the
Company's expense, in any health, medical, disability, insurance or pension plan
made available by the Company to its employees. The Employment Agreement
terminates automatically upon death or disability of Mr. Smith and is terminable
by the Company "for cause" as defined in the Employment Agreement. The
Employment Agreement provides that during the period ending one year after
termination, Mr. Smith will not compete with the Company in the dental
management business.
The information contained in the following sections entitled "Report of the
Compensation Committee" and "Performance Graph" are not deemed to be "soliciting
material" or to be "filed" with the Securities Exchange Commission or subject to
Regulation A under the Securities Act of 1933, or to the liabilities of Section
18 of the Securities Exchange Act of 1934.
REPORT OF THE COMPENSATION COMMITTEE
The following report was prepared as of the date of this proxy statement by
Directors Terek Diasti, John H. Kang and Donald R. Millard, as members of the
Company's Compensation Committee.
Annual compensation for all the executive officers of the Company will be
determined by the Compensation Committee of the Company, where applicable, in
accordance with the terms of any applicable employment agreement negotiated
between an officer and the Company.
In 1997, at the request of the Chief Executive Officer, the Company
compensated such officer less than what the Compensation Committee believed was
warranted based upon his personal performance, his value to the Company and the
norm for a Company reflecting such success and growth. The Chief Executive's
request in 1997 was based largely upon the size of the Company and the amount of
his beneficial ownership of Company common stock. In 1998, the Compensation
Committee has moved to increase the fixed salary for the Chief Executive Officer
in a manner that, while still relatively low based upon the Committee's
perception of the officer's value and responsibility, is more closely aligned
with that of a similarly situated officer in a company of comparable size and
growth initiatives.
The Committee expects that over the near term compensation for all officers
will continue to be largely discretionary and fixed based upon individual
performance, growth of the Company, earnings of the Company and increases in the
cost of living. The Committee has not given particular weight to a specific
factor or to the use of a formula in determining compensation. The Committee did
not provide any incentive based compensation to the Chief Executive Officer,
largely as a result of his beneficial ownership of common stock.
7
<PAGE> 11
However, the Committee and Board have and may continue in the future to grant
officers of the Company stock options when such grants are deemed appropriate.
Although the Compensation Committee may set the exercise price of stock options
granted pursuant to the Company's incentive Stock Option Plan at less than fair
market value, the Compensation Committee expects that further stock options
granted will be at exercise prices based upon the fair market value of the
Company's Common Stock on the date of grant.
Respectively submitted,
The Compensation Committee
Terek Diasti
John H. Kang
Donald R. Millard
8
<PAGE> 12
PERFORMANCE GRAPH
Rules promulgated by the SEC require that the Company include in this Proxy
Statement a line graph which compares the yearly percentage change over the past
five years in cumulative total stockholder return on the Common Stock with (i)
the performance of a broad equity market index, and (ii) the performance of a
published industry index or peer group index. As the Company did not consummate
its initial public offering until February 11, 1997, there was no active public
market for the Company's Common Stock prior to that time. On February 11, 1997,
the opening price per share of the Company's Common Stock was $8.00 and on such
date the price closed at $10.50 per share. Accordingly, the following graph
compares the percentage change in the return on the Common Stock for the period
from February 11, 1997 to December 31, 1997 with the cumulative total return on
the Center for Research in Security Prices ("CRSP") Index for the Nasdaq Stock
market (U.S. Companies) and the CRSP Index for Health Services for the same
period. The graph assumes the investment of $100 on February 11, 1997 and the
reinvestment of any dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD FEBRUARY 11, 1997 TO DECEMBER 31, 1997
AMONG COAST DENTAL SERVICES, INC., CRSP NASDAQ U.S. INDEX AND
CRSP HEALTH SERVICES INDEX
Prepared by the Center for Research in Security Prices
Produced on 03/09/98 including data to 01/30/98
<TABLE>
<CAPTION>
Measurement Period Coast Dental Nasdaq Stock Nasdaq Health
(Fiscal Year Covered) Services, Inc. Market Services Stocks
<S> <C> <C> <C>
02/11/97 100.000 100.000 100.000
02/28/97 123.810 98.100 99.995
03/31/97 119.048 91.696 93.116
04/30/97 133.333 94.563 88.220
05/30/97 150.000 105.283 99.225
06/30/97 145.238 108.503 103.934
07/31/97 222.619 119.958 105.943
08/29/97 204.762 119.775 104.277
09/30/97 283.333 126.859 113.082
10/31/97 251.191 120.268 105.694
11/28/97 230.952 120.862 101.063
12/31/97 228.572 118.969 101.634
01/30/98 258.333 122.824 98.867
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.0 on 02/11/97.
Note: The stock price performance graph shown on the graph above is not
necessarily indicative of future price performance.
9
<PAGE> 13
CERTAIN TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth herein briefly describes certain relationships
and related transactions over the past three years between the Company and its
Directors, officers and stockholders owning 5% or more of the Company's Common
Stock. Prior to the initial public offering, these relationships and
transactions have been approved by the Company's Board of Directors.
Relationships and transactions after the initial public offering with affiliated
parties have been and will continue to be approved by majority of the Company's
independent Directors of the Audit Committee and will be on terms no less
favorable to the Company than those that could be obtained from unaffiliated
parties.
AGREEMENT WITH COAST P.A.
The Company has agreements to provide dental management, services and
support to the Coast P.A. Dr. Adam Diasti, a Director and the President of the
Company, is the sole owner of the Coast P.A. Payments made by the Coast P.A. to
the Company for management services were approximately $20.0 million for the
year ended December 31, 1997. The Company and the Coast P.A. have services and
support agreements pursuant to which the Company will provide dental management
services to the Coast P.A. for management fees ranging between 76.0% and 74.0%
of the gross revenue, less refunds and discounts, of the managed Dental Centers.
Effective June 1997, the Company agreed to pay the Coast P.A. the sum of $50,000
in connection with each internally developed Dental Center it commits to open,
in consideration for the Coast P.A.'s agreement to expand the Services and
Support Agreement to include the new internally developed Dental Centers. The
Coast P.A. hires and supervises all of its Dentists and hygienists.
AGREEMENT WITH DR. ADAM DIASTI
The Company has an agreement with Dr. Adam Diasti, pursuant to which Dr.
Diasti has agreed to sell all of his shares of Coast P.A. stock to a licensed
dentist designated by the Company if certain events occur. Dr. Diasti is a
Director and President of the Company. The purchase price under the agreement,
if the certain event should occur, will be the fair market value of Dr. Diasti's
shares of the Coast P.A.'s stock.
LOANS TO COAST P.A.
The Coast P.A. is indebted to the Company in the aggregate amount as of
December 31, 1997 of approximately $2.4 million which represents services and
support fees payable to the Company in accordance with the Services and Support
Agreements. The Company may, from time to time, advance funds under the Services
and Support Agreements for purposes of funding the payment of expenses or for
the Coast P.A.'s acquisitions of existing dental practices.
CANCELLATION OF PERSONAL GUARANTYS
Terek Diasti and Adam Diasti personally guaranteed certain notes payable by
the Company, under which $4.4 million was outstanding as of the time of the
Company's initial public offering. The Company repaid these notes out of the net
proceeds of the initial public offering, whereupon those individuals were
released from the respective guarantys related to such debt.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP was appointed as the Company's independent auditors
for the year 1997. The Board of Directors of the Company, upon the
recommendation of the Audit Committee, recommended that Deloitte & Touche LLP be
retained as the Company's auditors for the year 1998. A representative of
Deloitte & Touche LLP is expected to be present at the Meeting and will be
available to respond to questions and may make a statement if the representative
so desires.
10
<PAGE> 14
3. OTHER BUSINESS
The Board of Directors knows of no other matters which are likely to be
brought before the Meeting. If any matter not described herein should be
presented for Stockholder action at the Meeting, the persons named in the
enclosed Proxy will vote the shares represented thereby in accordance with their
best judgment.
11
<PAGE> 15
STOCKHOLDER PROPOSALS FOR
PRESENTATION AT THE 1999 ANNUAL MEETING
The Board of Directors requests that any stockholder proposals intended for
presentation at the 1999 Annual Meeting of Stockholders be submitted to Joseph
R. Smith, Secretary, in writing no later than December 18, 1998, for
consideration for inclusion in the Company's proxy materials for such meeting.
A Company's By-Laws require certain advance notice to the Company of any
nominations by stockholders of persons to stand for election as directors at
stockholders' meetings. Notice of director nominations must be timely given in
writing to the Secretary of the Company prior to the meeting at which the
directors are to be elected. To be timely, notice must be received at the
principal executive offices of the Company not less than 60 days nor more than
90 days prior to the meeting of stockholders; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to the stockholders. Notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever first occurs.
A stockholder's notice with respect to a director nomination must set forth
(i) certain information about the nominee, (ii) consent of the nominee to serve
as a director if elected, (iii) the name and record address of the nominating
stockholder, (iv) the class or series and number of shares of the Company which
are beneficially owned by such stockholder, (v) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person pursuant to which the nominations are to be made,
(vi) a representation that such stockholder intends to appear in person or by
proxy at the meeting to nominate the persons named, and (vii) certain other
information.
The complete By-Law provisions governing these requirements are available
to any stockholder without charge upon request from the Secretary of the
Company.
By order of the Board of Directors
/s/ Joseph R. Smith
Joseph R. Smith
Secretary
Dated: April 17, 1998
12
<PAGE> 16
APPENDIX
COAST DENTAL SERVICES, INC.
2502 ROCKY POINT DRIVE
SUITE 1000
TAMPA, FLORIDA 33607
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1998
The undersigned, having received notice of the Annual Meeting of Coast Dental
Services, Inc. (the "Company") to be held at 10:00 a.m. (Eastern Time), on
Friday, May 8, 1998 (the "Meeting"), hereby designates and appoints Terek
Diasti, DVM and Joseph R. Smith, and either of them with authority to act
without the other, or _____________________________________, as proxies for the
undersigned, with full power of substitution and resubstitution, to vote all of
the shares of Common Stock which the undersigned is entitled to vote at the
Meeting and at any adjournment thereof, such proxies being directed to vote as
specified on the reverse side.
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the Meeting or any adjournment thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY AND WILL
BE VOTED AS SPECIFIED. IF NOT OTHERWISE SPECIFIED, THE ABOVE NAMED PROXIES WILL
BE VOTED "FOR" PROPOSALS 1 AND 2 AND IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENT THEREOF, PROVIDED THAT THIS PROXY WILL NOT BE
VOTED TO ELECT MORE THAN ONE DIRECTOR.
(Continued on the reverse side)
<PAGE> 17
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING MATTERS. PLEASE
MAKE AN "X" IN ONE SPACE. TO BE EFFECTIVE, THIS PROXY MUST BE DEPOSITED AT THE
COMPANY'S REGISTRARS NOT LATER THAN 48 HOURS BEFORE THE TIME APPOINTED FOR THE
MEETING. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
1. Proposal to elect the following Director: Dr. Adam Diasti, D.D.S.
FOR WITHHELD
[ ] [ ]
2. Proposal to ratify Deloitte & Touche LLP as the Company's independent
auditors until the conclusion of the 1999 Annual Meeting
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
Dated:_____________________________________
Signature__________________________________
Signature if held jointly__________________
IMPORTANT: Please sign exactly as your name
appears on this proxy and mail promptly in
the enclosed envelope. If you sign as agent
or in any other capacity, please state the
capacity in which you sign.
