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
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(c)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Coastal Physician Group, Inc.
(Name of Registrant as Specified In Its Charter)
Coastal Physician Group, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) 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:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.<PAGE>
[ ] 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>
[LOGO COASTAL PHYSICIAN GROUP, INC.]
2828 Croasdaile Drive
Durham, North Carolina 27705
September 4, 1996
DEAR SHAREHOLDER:
You have recently received a letter from Dr. Steven Scott,
who is seeking your support to elect his hand-picked nominees
to the Coastal Board in opposition to your management's
candidates at Coastal's upcoming Annual Meeting, currently
scheduled for Friday, September 27.
DON'T BE FOOLED. THE REAL ISSUE IS WHO CAN YOU TRUST
TO BEST RESTORE VALUE FOR ALL SHAREHOLDERS.
In our view, Dr. Scott's letter is merely a transparent
ploy to mislead you about Company expenses for consultants
Price Waterhouse and employment contracts for Chairman Jacque
Sokolov, M.D., CEO Joseph Piemont, and CFO Steven Corman. WE
BELIEVE HIS LETTER IS NOTHING MORE THAN A THINLY-VEILED ATTEMPT
TO WIN YOUR VOTE BY DIVERTING YOUR ATTENTION FROM THE REAL
ISSUE IN THIS ELECTION CONTEST. THAT IS: WHO CAN YOU TRUST TO
RESTORE AND DELIVER MAXIMUM SHARE VALUE FOR THE BENEFIT OF ALL
SHAREHOLDERS?
REJECT STEVEN SCOTT WHO LOST MORE THAN HALF A BILLION DOLLARS
IN SHAREHOLDER VALUE -- AN 80% DECREASE FROM COASTAL'S PEAK.
STEVEN SCOTT WAS AT COASTAL'S HELM DURING THE COMPANY'S
PERIOD OF DISMAL FINANCIAL PERFORMANCE IN WHICH YOUR INVESTMENT
LOST ABOUT 80% OF ITS VALUE FROM COASTAL'S PEAK STOCK PRICE OF
$40.25, REPRESENTING APPROXIMATELY $575,000,000 IN LOST
SHAREHOLDER VALUE.
The following graph dramatically shows the Company's
miserable stock price performance from its January 31, 1994
peak until Dr. Scott was placed on leave on May 29, 1996:
January 31, 1994 - May 29, 1996
Coastal Physician Group Stock Price*
(Performance Graph Appears Here)
Date Last Sales Price Date Last Sales Price
1/94 40 1/4 4/95 15 5/8
2/94 36 1/4 5/95 15 5/8
3/94 33 1/2 6/95 12 7/8
4/94 32 5/8 7/95 14 1/8
5/94 35 8/95 15 1/8<PAGE>
6/94 33 3/4 9/95 17 1/2
7/94 34 1/2 10/95 13 1/8
8/94 34 1/2 11/95 14 1/8
9/94 32 3/4 12/95 13 1/2
10/94 31 1/2 1/96 11 7/8
11/94 32 1/4 2/96 13
12/94 27 3/8 3/96 8 7/8
1/95 25 4/96 8 3/8
2/95 26 5/96 7 7/8
3/95 27 1/4
* Each data point represents Coastal's last sale price on
the last trading day of the corresponding month and year,
except for the final point which represents Wednesday, May
29, 1996.
Coastal's stock price decline was so swift and Dr. Scott's
apparent inability to address this deteriorating situation so
shocking that the Board determined it had no choice but to
place Dr. Scott on leave in order to help procure a credit
facility and resolve conflicts at the executive level.
ASK YOURSELF: DO YOU REALLY WANT, BY ELECTING DR. SCOTT'S
HAND-PICKED CANDIDATES, TO RETURN CONTROL OF YOUR COMPANY TO
THE SAME MAN WHO PRESIDED OVER THIS DISASTROUS PLUNGE IN THE
COMPANY'S VALUE? WE THINK THE ANSWER IS CLEARLY NO.
DR. SCOTT NEGLECTS TO TELL YOU THAT HE NEGOTIATED ALL
BUT ONE OF THE AGREEMENTS ABOUT WHICH HE COMPLAINS.
Furthermore, although Dr. Scott's letter complains about
the cost of Price Waterhouse and two senior executives, it
neglects to tell you that, as Chief Executive Officer:
- Steven Scott negotiated and voted to approve the
Price Waterhouse contract.
- Steven Scott negotiated and voted to approve Dr.
Sokolov's employment contract.
- Steven Scott negotiated and voted to approve Mr.
Corman's employment contract.
YOU SHOULD KNOW THAT STEVEN SCOTT CONTINUES TO RECEIVE
$400,000 ANNUALLY FROM THE COMPANY EVEN THOUGH HE NEITHER HOLDS
AN EXECUTIVE POSITION NOR PERFORMS ANY SERVICES FOR THE
COMPANY. HE HAS ALSO DEMANDED $2.1 MILLION IN SEVERANCE PAY
FROM THE COMPANY.
Dr. Scott also complains about Mr. Piemont's compensation,
but remember -- it was Dr. Scott who originally recruited Mr.
Piemont to Coastal and later promoted him to Executive Vice<PAGE>
President. Dr. Scott also recommended Mr. Piemont for the
President's position.
Dr. Scott also fails to note that the retention of Price
Waterhouse would not have been necessary if the Company's
financial performance had not failed so rapidly under Dr.
Scott's stewardship. Again, it was our lenders who urged us to
hire such a consultant to provide advice and oversight for
overcoming the Company's problems.
Moreover, Dr. Scott's proxy fight -- which has made the
operational turnaround even more difficult -- has forced the
Company to require Price Waterhouse's services even more.
IN OUR VIEW, STEVEN SCOTT SURELY HAS NO ONE TO BLAME BUT
HIMSELF FOR THE COSTS INCURRED TO CLEAN UP THE FINANCIAL MESS
HE CREATED.
DECIDE FOR YOURSELF HOW INDEPENDENT DR. SCOTT'S NOMINEES ARE.
Steven Scott thinks his two hand-picked candidates, the
two current directors who are his staunch supporters, and he
himself -- who together would comprise a five director majority
on Coastal's nine seat Board -- are best qualified to move
Coastal forward. We sharply disagree and believe you will,
too, once you examine who they are, their conflicts of interest
and the extent of their personal loyalty to Dr. Scott.
- SCOTT NOMINEE MITCHELL W. BERGER IS AN ATTORNEY WHOSE
FIRM HAS REPRESENTED DR. SCOTT ON NUMEROUS PERSONAL
MATTERS, INCLUDING CERTAIN REAL ESTATE MATTERS
AGAINST SUBSIDIARIES OF THE COMPANY. FOR EXAMPLE,
MR. BERGER'S FIRM REPRESENTED AN ENTITY DR. SCOTT
CONTROLLED, CORAL RIDGE PROPERTY LAND TRUST, AS
LANDLORD TO SUBSIDIARIES OF THE COMPANY. IN FACT,
MR. BERGER HAS SERVED AS TRUSTEE TO THIS ENTITY AND
HE IS THEREFORE NAMED AS LANDLORD ON THE EXECUTED
LEASE.
- Current director and Scott supporter Dr. Bertram
Walls was a medical resident at Duke University with
Dr. Scott. Later, Dr. Walls joined Dr. Scott in a
private medical practice. He serves as trustee for
certain trusts for Dr. Scott's children.
- DR. WALLS IS ALSO PRESIDENT OF CENTURY AMERICAN
INSURANCE GROUP, A FIRM 100% OWNED BY DR. SCOTT,
WHICH VIRTUALLY HAS NO OTHER PURPOSE THAN TO ACT AS
COASTAL'S INSURER. CURRENT PREMIUMS PAID BY COASTAL
AND COASTAL PHYSICIANS ARE IN THE AGGREGATE GREATER
THAN $20 MILLION PER YEAR. CURRENTLY, DR. WALLS IS
SEEKING AN UNPRECEDENTED FIVE YEAR CONTRACT FOR
CENTURY WITH COASTAL ON DR. SCOTT'S BEHALF.<PAGE>
- Another Scott nominee, Henry Murphy, is a retired
accountant personally selected by Dr. Scott, but with
no disclosed experience in the health care field.
- Current director John A. Hemingway also has a long-
standing relationship with Dr. Scott. Following his
removal as Secretary of the Company and as President
of Coastal Physician Services -- actions to which Dr.
Scott strongly objected -- Hemingway claimed that he
had in effect been terminated by the Company.
- AS A RESULT, MR. HEMINGWAY DEMANDED A LUMP-SUM
PAYMENT OF NEARLY FIVE MONTHS' SALARY, PLUS
CONTINUING COMPENSATION TOTALING $1 MILLION, PAYABLE
IN EQUAL INSTALLMENTS OVER A FIVE YEAR PERIOD. HE
CLAIMED THIS WAS PROMISED TO HIM IN AN ORAL AGREEMENT
WITH DR. SCOTT, BUT WE BELIEVE MR. HEMINGWAY IS NOT
ENTITLED TO THESE PAYMENTS.
- FURTHERMORE, MR. HEMINGWAY IS SEEKING TO BE RELEASED
FROM A NON-COMPETE CLAUSE IN HIS CONTRACT SO THAT HE
-- A COASTAL DIRECTOR WITH A FIDUCIARY OBLIGATION TO
ITS SHAREHOLDERS -- CAN COMPETE DIRECTLY WITH
COASTAL.
DON'T TURN CONTROL OF YOUR COMPANY OVER TO
DR. SCOTT AND HIS NOMINEES.
We believe Dr. Scott's attempts to mislead you about costs
are just a means to obscure his true motive -- to regain
control of the Board. He seeks to replace Mr. Hatcher, a truly
independent director, and Mr. Piemont, your Company's CEO, with
two hand-picked candidates who would join with Dr. Scott and
the two Scott supporters already on the Board to constitute a
five director, Scott-controlled majority.
YOU SHOULD ALSO BE AWARE THAT DR. SCOTT INTENDS TO SEEK
REIMBURSEMENT -- WITHOUT YOUR APPROVAL -- FOR HIS PROXY CONTEST
EXPENSES USING SHAREHOLDER FUNDS, WHICH HE CURRENTLY ESTIMATES
AT $650,000! THIS IS IN ADDITION TO HIS INSTIGATING COSTLY AND
SELF-SERVING LITIGATION AGAINST THE COMPANY AND ITS OFFICERS IN
AN ATTEMPT TO BE REINSTATED AS PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AS WELL AS COMMENCING AN EXPENSIVE AND DISTRACTING
PROXY FIGHT TO TRY TO REGAIN CONTROL OF COASTAL.
YOUR MANAGEMENT'S PLANS FOR MAXIMIZING VALUE FOR SHAREHOLDERS.
Your management is actively exploring a number of
strategic options in the course of maximizing Coastal's share
value. These include:
- selling the entire Company,<PAGE>
- disposing of assets which we had not originally planned to
sell,
- or obtaining an investment from strategic or financial
partners.
WE ASSURE YOU THAT WE WILL CONTINUE TO AGGRESSIVELY PURSUE
ALL REASONABLE AND RESPONSIBLE COURSES OF ACTION ON YOUR
BEHALF. WE ALSO HOPE SHORTLY TO ANNOUNCE AN ASSET SALE FROM
WHICH A SUBSTANTIAL PORTION OF THE PROCEEDS RECEIVED WILL BE
USED TO MEET THE COMPANY'S SHORT-TERM CASH FLOW REQUIREMENTS.
At our September 27 Annual Meeting, we will be pleased to
present in more detail the progress we have made in maximizing
value for the benefit of all Coastal shareholders. We think
the choice between your management's nominees and Dr. Scott's
slate is clear. DR. SCOTT HAS ALREADY HAD HIS CHANCE TO RUN
COASTAL AND HIS PERFORMANCE NEARLY BANKRUPTED THE COMPANY. WHO
COULD POSSIBLY WANT TO GIVE HIM ANOTHER CHANCE IN LIGHT OF HIS
SHOCKINGLY POOR RECORD?
REMEMBER -- ONLY YOUR LATEST DATED PROXY WILL COUNT.
Please sign, date and return the enclosed WHITE proxy in
support of your management's candidates for the Board. Even if
you have already voted a BLUE Scott proxy, you have every legal
right to change your mind and vote a WHITE card.
If you have further questions or need instructions on how
to vote your shares or to change your vote, please contact
MacKenzie Partners, Inc., which is assisting us with this
contest, toll-free at (800) 322-2885.
We appreciate the continuing support and encouragement we
have received from shareholders.
Sincerely yours,
/s/ Jacque J. Sokolov, M.D. /s/ Joseph G. Piemont
JACQUE J. SOKOLOV, M.D. JOSEPH G. PIEMONT
Chairman of the Board President and Chief Executive
Officer
If you have any questions or need assistance in voting
your shares or changing your vote, please contact:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
