SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 9, 1996
COASTAL PHYSICIAN GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 001-13460 56-1379244
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) No.)
2828 CROASDAILE DRIVE, DURHAM, NC 27705
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code (919) 383-0355
N/A
(Former name or former address, if changed since last report)<PAGE>
ITEM 5. - OTHER EVENTS
On July 9, 1996, Drs. Steven M. Scott and Bertram E. Walls,
filed, on their own behalf and derivatively on behalf of the
Company, an action in the General Court of Justice of the State
of North Carolina in the County of Durham against the Company and
Dr. Jacque J. Sokolov and Messrs. Joseph G. Piemont and Stephen
D. Corman. The plaintiffs allege, among other things, that
certain members of the Board of Directors breached their
fiduciary duties and wasted corporate assets by removing Dr.
Scott from his position as President and Chief Executive Officer
of the Company and by approving the entry by the Company into an
employment agreement with Mr. Piemont. The plaintiffs allege
that these actions were taken to wrongfully remove Dr. Scott and
to enrich the defendants at the expense of the Company and its
stockholders, and that these and other recent actions of the
Board of Directors, including the approval of efforts to sell
certain corporate assets, were taken in breach of the Board of
Directors' duty of care. The complaint seeks as relief, among
other things, an order of the court enjoining the Board of
Directors from proceeding with potential asset sales, declaring
the Piemont employment agreement unenforceable, declaring the
Board of Directors' conduct in placing Dr. Scott on leave to be
contrary to Delaware law and requiring the Board of Directors to
consider ratifying a contract with Century American Insurance
Company. In addition, the complaint seeks damages in an
unspecified amount in excess of $10,000.00 against the individual
defendants. The Company believes that these allegations are
without merit and intends to defend the actions vigorously.
ITEM 7(C) - EXHIBITS
Exhibit 99 Verified Complaint, filed on July 9, 1996, by
Steven M. Scott and Bertram E. Walls, each on
his own behalf and on behalf of Coastal
Physician Group, Inc., against Jacque J.
Sokolov, Joseph G. Piemont, Stephen D. Corman
and Coastal Physician Group, Inc.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
COASTAL PHYSICIAN GROUP, INC.
(Registrant)
Date: July 19, 1996 By: /s/ Joseph G. Piemont
Joseph G. Piemont
President and Chief Executive
Officer
Exhibit 99
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF DURHAM 96 CvS ______
STEVEN M. SCOTT, M.D., on )
his own behalf and on behalf )
of Coastal Physician Group, )
Inc., and BERTRAM E. WALLS, )
M.D., M.B.A., on his own )
behalf and on behalf of )
Coastal Physician Group, Inc., )
) VERIFIED COMPLAINT
Plaintiffs, )
) JURY TRIAL DEMANDED
vs. )
)
JACQUE JENNING SOKOLOV, )
JOSEPH G. PIEMONT, STEPHEN D. )
CORMAN and COASTAL PHYSICIAN )
GROUP, INC., )
)
Defendants. )
Plaintiffs Steven M. Scott, M.D. and Bertram E. Walls,
M.D., M.B.A., upon knowledge as to themselves and upon
information and belief as to all other matters, complaining of
the defendants, allege and say:
NATURE OF THE ACTION
1. Plaintiffs bring this action for injunctive and other
relief seeking, among other things, to remedy unlawful conduct
by members of the Board of Directors of Coastal Physician
Group, Inc. ("Coastal" or the "Company"). In two hurried
meetings orchestrated by Jacque Jenning Sokolov ("Sokolov"),
Coastal's current Chairman, a majority of Coastal's Board fired
Dr. Steven Scott, Coastal's founder and largest shareholder,<PAGE>
from his position as Coastal's President and Chief Executive
Officer; purported to strip Dr. Scott of his right to communi-
cate with Coastal advisors and employees; replaced him with
Coastal's former general counsel, Joseph G. Piemont
("Piemont"), who has no experience running a highly specialized
company like Coastal; and subsequently approved a lavish and
wasteful "employment agreement" with Piemont with a present
value of millions of dollars that, among other things, purports
to reward Piemont, and to cost Coastal, in the event that a
single new director is added to, or a single director resigns
from, Coastal's Board. In addition, in a hastily called and
conducted meeting last night, July 8, 1996, a Sokolov-sponsored
proposed sale of assets was approved by six (6) members of the
Coastal Board without adequate
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consideration of all financial alternatives to maximizing value
to all Coastal shareholders. The market reaction to the
directors' misconduct has been swift. In the month since the
Sokolov scheme was first implemented, the market value of
Coastal's shares has fallen substantially and average daily
volume during this period has been dramatically reduced.
2. As alleged more fully below, plaintiffs assert certain
claims on behalf of Coastal for waste of corporate assets;
breach of fiduciary duty; and declaratory relief. Plaintiffs
also assert certain claims on their own behalf for breach of
fiduciary duty and for declaratory relief.
THE PARTIES
3. Plaintiff Scott is, and at all times relevant to this
action has been, a licensed physician in this state; the owner
of approximately 30% of the outstanding shares of common stock
of Coastal; and a member of Coastal's Board of Directors (the
"Board") since he founded the Company in 1977.
4. Plaintiff Walls is, and at all times relevant to this
action has been, a licensed physician in this state and has
earned a masters degree in business administration; a member of
the Coastal Board since 1991 and an owner of Coastal common
stock.
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5. Defendant Coastal is a Delaware corporation with its
principal place of business in Durham County, North Carolina
and the successor in interest to Coastal Healthcare Group, Inc.
Coastal is a physician management company that provides a broad
range of health care and administrative services to physicians,
hospitals and other health care organizations, including but
not limited to staffing services. As of April 30, 1996,
Coastal had approximately 23,835,665 shares of common stock
outstanding.
6. Defendant Sokolov is Chairman of the Board. While
Coastal is based in Durham, Sokolov resides and spends most of
his time in Los Angeles or Malibu, California. In November,
1994, Coastal acquired Advanced Health Plans, Inc. and Advanced
Health Plans Development, Inc., two California-based companies
in which Sokolov was the CEO and principal shareholder. Both
of these companies have severely underperformed in relation to
projections made by Sokolov at the time that these companies
were acquired by Coastal.
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7. Defendant Stephen D. Corman ("Corman") became Chief
Financial Officer of Coastal in May 1995 and has been a
director of Coastal since 1991.
8. From August 1993 through May 1995 defendant Piemont
served as general counsel to Coastal. Prior to that time,
Piemont served as in-house counsel to financial services compa-
nies. As alleged more fully below, according to public state-
ments issued by Coastal, defendant Piemont is currently the
President and Chief Executive Officer of Coastal.
FACTUAL BACKGROUND
DR. SCOTT ESTABLISHES THE COMPANY
9. In 1977, Dr. Scott founded the Company to assist
hospitals in staffing their emergency facilities. Since that
time, Coastal's business has expanded its range of hospital-
based physician contract, as well as physician business manage-
ment services, and became the market leader in emergency ser-
vices business.
DR. SCOTT'S EMPLOYMENT AGREEMENT WITH COASTAL
10. On April 1, 1991, Dr. Scott entered into a five-year
employment agreement with Coastal Healthcare Group, Inc. (now
the Company) (the "Scott Agreement") to serve as its President
and Chief Executive Officer, a position he had held without an
-5-<PAGE>
agreement since 1977. The Scott Agreement, by its terms,
renews automatically each year and does not presently expire
until March 31, 2001.
11. Section 18 of the Scott Agreement provides that Dr.
Scott's employment may be terminated only in the following
limited circumstances:
(a) [Dr. Scott] becomes disabled for a continuous
period of twelve (12) consecutive months or
dies; . . .
(b) Either [Dr. Scott] or Corporation gives forty-
five (45) days written notice to the other of
intention to terminate; provided, however, such
termination shall not affect the rights of [Dr.
Scott] and others under Sections 9 and 10 [of
this Agreement]; . . .
(c) [Dr. Scott] reaches age seventy (70) years while
in the employ of the Corporation.
12. Section 9 of the Scott Agreement provides that if Dr.
Scott is terminated prior to age 70 "for any reason other than
(i) death, (ii) disability, or (iii) for just cause," the
Company must
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pay him his base compensation for the remaining term of the
contract and several other amounts set forth in Section 9.
"Just cause" is defined in this section as "only a final
nonappealable conviction of or a plea of guilty or nolo
contendere by [Dr. Scott] to a felony or misdemeanor involving
fraud, embezzlement, theft or dishonesty or other criminal
conduct against [Coastal]."
13. The Scott Agreement was amended as of April 1, 1994,
because "[Dr. Scott]'s services have constituted a major factor
in the success of the Corporation for many years and the
Corporation desires to continue the employment of [Dr. Scott]
by amending the Employment Agreement previously entered into on
April 1, 1991." This amendment increased Dr. Scott's compensa-
tion but worked no substantive change regarding the Company's
ability to terminate his employment nor did it alter the term
of Dr. Scott's employment.
DR. SCOTT'S EFFORTS TO IMPROVE THE COMPANY AND SOKOLOV'S RE-
SPONSE
14. Between 1991 and 1994, Coastal's net operating
revenue increased by more than fifty percent and net income
over that period increased from $11,394,000 to as high as
$24,303,000. In fiscal year 1995, however, Coastal lost $46.9
million. During the first quarter ending March 31, 1996,
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Coastal's net operating revenue decreased 26.5%, and it in-
curred a net loss of $11,730,000. As a result, Coastal was
forced to increase its bank borrowings significantly.
15. In an effort to refocus the Company's financial and
strategic goals and improve its cash flow, the Company decided
to reorganize its management team and retain financial
advisors. As the Company's largest shareholder, President and
CEO, Dr. Scott cooperated with this turnaround effort. Dr.
Scott's suggestions, however, were repeatedly frustrated and
ignored by Sokolov, who sought to exploit Coastal's financial
position to enhance his own employment and stature.
16. For example, in February, 1996, a special committee
of the Coastal Board intended to be composed of independent
directors was created to review management's actions to improve
the Company's financial results (the "Special Committee").
Despite the Company's need for objective oversight in this
area, Sokolov named himself Chairman of the Special Committee
and repeatedly ignored Dr. Scott's requests that he step down
from the Special Committee in favor of an
-8-<PAGE>
independent director. To date, Sokolov remains the highest
paid executive at Coastal, yet has continued to run a committee
established solely for outside directors. He has done so in
complete disregard for even the most fundamental formalities,
failing to provide minutes of the last fourteen (14) meetings
of the Coastal Board, or committees thereof.
SOKOLOV'S EFFORTS TO ISOLATE DR. SCOTT; THE RESOLUTIONS
17. Following the appointment of the Special Committee,
Dr. Scott and Sokolov continued to differ over Coastal's
management and the direction that Coastal was taking. To quell
this challenge to his authority, Sokolov determined to embark
on a course of action designed to isolate Dr. Scott and limit
his voice in the Company, notwithstanding his critical role in
Coastal's growth and his substantial stock ownership position.
18. First, Sokolov, a Malibu, California resident, caused
the Special Committee to retain supposedly "outside" counsel to
advise it. However, the counsel chosen was a Los Angeles-based
firm that had previously done work for Sokolov personally.
19. Second, Sokolov caused his Los Angeles counsel to
prepare a set of resolutions to be presented to the Board for
adoption which, among other things, would purport to put Dr.
Scott on a "sabbatical leave of absence" for the rest of 1996
as Coastal's President and CEO -- in clear violation of the
-9-<PAGE>
Scott Agreement -- and would place significant and unlawful
restrictions upon Dr. Scott's ability as a director to commu-
nicate with Coastal employees and advisors (the "Resolutions").
(A copy of the Resolutions is attached hereto as Exhibit A.)
These Resolutions were essentially dictated by Sokolov to his
hand picked Los Angeles counsel without input from the outside
members of this Committee.
20. Among other things, the Resolutions purported to
provide that:
Dr. Scott "shall be placed on a sabbatical leave
of absence ("Leave")" commencing on May 29, 1996
and continuing through December 31, 1996;
"for the duration of his Leave, Dr. Scott shall
not hold or exercise any of the powers, author-
ity or duties as President, Chief Executive
Officer or other officer of the Company;"
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"for the duration of his Leave, Dr. Scott shall
not directly or indirectly communicate with the
Company's professional advisers other than the
Company's counsel" and Price Waterhouse LLP,
which had earlier been appointed by the Company
to help improve its financial performance; and
"for the duration of his Leave, Dr. Scott shall
not directly or indirectly communicate with any
employees of the Company or of any of its sub-
sidiaries (except with those employees who are
Directors in their capacity as such or with
those or other employees on a social basis with-
in a social context)."
21. The Resolutions also provided that Piemont would be
appointed "Acting Chief Executive Officer and Acting President"
during Dr. Scott's "sabbatical" and that the Compensation
Committee of the Coastal Board would be directed to "confer
with Mr. Piemont concerning an Employment Agreement with him"
and to report to the Board its recommendations with respect to
such an agreement within thirty days. This was despite
Piemont's lack of any prior experience as a CEO with any com-
pany, let alone one as highly specialized as Coastal; despite
Piemont's startling lack of operating experience, even within
Coastal; and despite the fact that Piemont is not a physician.
In addition, the Resolutions purported to remove the then-
existing members of the Nominating Committee and Executive Com-
mittee of the Coastal Board of Directors and to reconstitute
each of those committees with Sokolov as the chair.
-11-<PAGE>
SIX MEMBERS OF THE COASTAL BOARD ADOPT THE RESOLUTIONS
22. The purported Special Committee discussed the
Resolutions for the first time at approximately 7 p.m. on the
evening of May 29, 1995. Dr. Scott addressed the Special Com-
mittee for ten minutes during their two and one-half hour meet-
ing. At approximately 10:30 p.m. the Board convened telephoni-
cally for a meeting that lasted only forty-five minutes. The
Board then adopted the Resolutions by a vote of 6-3. Dr. Scott
and Dr. Walls represented two of the three dissenting votes.
The Board approved the Resolutions without an adequate oppor-
tunity for the Board to consider them; without adequately eval-
uating the effect of the Resolutions on the Company; without
being informed of the Resolutions' effect upon the Scott Agree-
ment; and without being apprised of the Resolutions' illegality
under Delaware law.
23. For example, the Board was not informed that the
Scott Agreement with Coastal made no provision for any "sab-
batical leave[] of absence"; that Dr. Scott was not given any
written
-12-<PAGE>
notice of termination under that agreement; and that there was
no "just cause" for his termination, as defined in the Scott
Agreement. The Board approved the Resolutions -- which
effectively terminated Dr. Scott -- without any discussion at
all of the Scott Agreement, let alone any discussion of the
Company's potential liability for breach of that agreement.
Indeed, Coastal's outside directors were not even informed that
Dr. Scott was a party to an employment agreement with Coastal,
much less that the Resolutions if adopted would cause Coastal
to violate certain provisions of that agreement.
24. Similarly, with respect to the Resolutions that would
purport to prevent Dr. Scott from communicating with any non-
director employee of Coastal or with Coastal's professional
advisors, at no time was the Board advised of the effect of
such restrictions under Delaware law, much less that such re-
strictions were, in fact, violations of Delaware law.
POST-RESOLUTIONS DEVELOPMENTS
25. Following the May 29, 1996 Board meeting, Sokolov's
campaign to attempt to neutralize Dr. Scott continued. In
fact, it has become quite clear that despite being labeled a
"sabbatical leave," Dr. Scott was, in reality, permanently
terminated. Indeed, the very next day after the Resolutions
were adopted, Sokolov ordered that the belongings of Dr. Scott,
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the Company's founder, be removed from his office so that
Piemont could move into it.
26. Similarly, in a Form 10-K it filed with the
Securities and Exchange Commission on May 31, 1996 (portions
attached hereto as exhibit B), Coastal identified Piemont as
its "President and Chief Executive Officer." The Form 10-K
indicated that Piemont was "appointed President and Chief
Executive Officer on May 29, 1996 . . . ." In addition, in a
news release dated May 30, 1996 (attached hereto as exhibit C),
Coastal "announced that Joseph G. Piemont will assume the re-
sponsibilities of President and Chief Executive Officer, effec-
tive immediately." The Form 10-K also stated that "from 1977
to May 29, 1996, Dr. Scott served as President and Chief Execu-
tive Officer of the Company."
27. In addition, shortly after the Resolutions were
adopted, John Hemingway, one of the Board's dissenting
directors, as well as Vice Chairman of the Board, the Company's
Senior Execu-
-14-<PAGE>
tive Vice President and Secretary and one of the Company's most
knowledgeable employees, had his office removed from corporate
headquarters and his daily responsibilities within the Company
substantially diminished, upon the orders of Sokolov and
Piemont.
28. On June 3, 1996, Dr. Scott met with Piemont to
discuss the Resolutions and his continuing role as director of
Coastal. At this meeting, Dr. Scott expressed his belief that
Coastal's large outside stockholders should be involved in the
process of selecting representatives for Coastal's Board and
requested the opportunity to participate in communicating with
such stockholders on these issues.
29. During the June 3 meeting, Dr. Scott also was advised
that it was the then-present intent of Coastal to hold its
annual shareholder's meeting in July and that it was antici-
pated that proxy materials in connection with that meeting
would be mailed to stockholders in June. Dr. Scott also re-
quested during this meeting that he be provided with a draft of
all proxy materials sufficiently in advance of their being
mailed, to afford him the opportunity to review them and pro-
vide commentary. At that meeting, Piemont and Coastal's coun-
sel assured Dr. Scott that such information would be provided
to him.
-15-<PAGE>
THE BORCHERT MEMORANDUM
30. After this meeting, Piemont provided Dr. Scott with a
memorandum from Robert Borchert, an employee of the Company,
delineating "key comments/recurring themes communicated by
analysts and stockholders" during Borchert's discussions with
them the day after the Resolutions were passed. The memorandum
stated that Coastal had "initiated discussions" with certain
"major stockholders regarding board development, and asked them
to give some thought to potential candidates."
31. Dr. Scott requested that, as a director of Coastal,
he be provided with a summary of the conversations to which
Borchert referred in the memorandum, including the identities
of all persons at Coastal to whom each such stockholder had
spoken and the substance of each such conversation. This
request was memorialized in a June 6, 1996 letter to Coastal's
outside counsel, but no summary was forthcoming.
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THE JUNE 13 LETTER
32. On June 13, 1996 Coastal's newly retained special
counsel informed Dr. Scott via letter that the Company "does
not intend to mail the proxy statement for this year's annual
meeting before the Board meeting on June 20."
33. The June 13 Letter also responded to Dr. Scott's
question regarding whether "the Company is willing to consider
the addition to the Board of an outside director who will rep-
resent the interests of substantial stockholders other than Dr.
Scott." The Letter stated in this regard that Coastal was
willing to meet with Dr. Scott to discuss this "plan," but
warned Scott that should he "seek to change the composition of
the board through unilateral shareholder action, the Company
would face a serious distraction from the urgent business of
recovery and turn-around that is at hand, and would have to
view Dr. Scott as acting other than in the long-term interests
of the Company and all of its stockholders."
34. On June 18, 1996, Dr. Scott, in a good faith attempt
to reach an amicable resolution between himself and Coastal on
the issue, among other things, of changes to the Board's compo-
sition to increase outside representation entered into an
agreement with Coastal designed to give Coastal and Dr. Scott
time to negotiate (the "Moratorium"). Among other things, the
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Moratorium provides that so long as that agreement remains in
effect,
Neither party or any affiliate or agent of such party
shall file preliminary proxy or other soliciting or
consent solicitation materials relating to the 1996
Annual Meeting of Shareholders of the Company or any
other meeting of shareholders of the Company . . . ,
or with respect to the taking of any action by
written consent, until the first business day
following receipt by the nonterminating party of a
Termination Notice.
THE JUNE 20 SPECIAL MEETING
35. The trappings of conciliation masked a more sinister
motive by Sokolov to attempt to force through the Coastal Board
a series of agreements designed to exact a significant, poten-
tially multimillion dollar financial penalty from Coastal -- at
a time when it could ill afford such an expense -- in the event
that there was a change in the composition of the Board. On
June 10, 1996, Dr. Scott received a notice dated June 6, 1996
of a special Board meeting to be held for six scheduled hours
on Thursday, June 20, 1996. No further information was
provided.
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36. To ensure that they and all other Coastal directors
were in a position to give fully informed consideration to the
matters to be raised at the Special Meeting, Dr. Scott and Dr.
Walls each wrote to Piemont and requested that he apprise them
of the special meeting agenda and provide them with copies of
all written materials given to any other members of the Board
in connection with items to be addressed at the special
meeting.
37. On June 18 -- fully twelve calendar days after the
notice was sent and less than two business days before the
meeting was scheduled -- Dr. Scott and Dr. Walls were provided
with a purported agenda for the Special Board meeting (the
"Agenda"). The items listed on this Agenda were in the follow-
ing order:
1. Review key metrics of business unit
2. Review of agreement with Dr. Scott
3. Employment agreements (J.J. Sokolov and
J. G. Piemont) - Recommendations
4.. Morgan Stanley asset disposition review
38. According to the Agenda, Piemont was scheduled to
make a presentation regarding "Review of agreement with Dr.
Scott," and director Robert V. Hatcher and Robert Elder, the
head of Coastal's Human Resources Department, were scheduled to
make a presentation about "Employment agreements (J.J. Sokolov
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and J.G. Piemont) - Recommendations." Copies of the Sokolov
and Piemont employment agreements, and the proposals for their
alteration, were neither enclosed with the agenda nor provided
to the Board before the meeting.
39. Attached to the Board meeting agenda was an agenda
for the Plan Management Committee meeting, then scheduled for
9:30 a.m. on June 20. The Committee Agenda was identical to
the Board Agenda; defendant Corman and Coastal's financial
advisors were scheduled to speak at the Board meeting, but not
the Committee meeting.
40. At the commencement of the Board meeting, Sokolov,
accompanied by his Los Angeles counsel, announced that the
order of the Agenda would be changed so that Piemont's proposed
employment agreement (the "Piemont Agreement") would be
discussed first. Sokolov informed the Board that Dr. Scott's
employment agreement would be discussed last, following
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Morgan Stanley's asset disposition review and an unscheduled
discussion of other financial matters. Sokolov withdrew his
employment agreement from discussion at that time.
THE PIEMONT AGREEMENT
41. The full Board then was provided, for the first time,
with the over forty-page document constituting a proposed
employment contract with Piemont, which had been completed late
the previous night, and with a four-page summary. The discus-
sion of the Piemont Agreement immediately commenced, with no
time for the Board to review the distributed materials.
42. Tellingly, the Piemont Agreement was negotiated in
California -- Sokolov's home state -- by Sokolov's California
counsel, despite Piemont's presence in North Carolina; despite
the fact that the Company's corporate headquarters are located
in North Carolina; and despite the fact that Piemont is himself
a North Carolina attorney.
43. The Piemont Agreement granted a set of lavish
benefits to Piemont for his services as the Company's Chief
Executive Officer and President, despite his lack of operating
experience. He would receive a base salary of $350,000 per
year and an annual bonus that could reach as high as 50% of his
base. In addition, upon signing the agreement Piemont would be
granted options exercisable for 10 years to purchase 200,000
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shares of Coastal common stock, vesting at the rate of 5,555
shares per month beginning on July 1, 1996.
44. The Piemont Agreement provided that Piemont's initial
term would run through December 31, 1996 and that Coastal could
extend this term beyond that date for additional terms of one
year. If Piemont's employment were extended beyond December
31, 1996, he would be eligible to receive additional options to
purchase up to 50,000 shares exercisable for ten years at the
closing price on the day preceding the grant date as well as
additional "performance options" that would vest on December
31, 1997 and each December 31 thereafter.
45. The Piemont Agreement also provided that Coastal
would be required to provide additional compensation totaling
approximately $750,000 to Piemont if his term were not extended
beyond December 31, 1996 or if thereafter his agreement were
terminated "Without Cause."
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46. Furthermore, the Piemont Agreement permits Piemont to
terminate his employment for "Good Reason." "Good Reason" is
defined in the Piemont Agreement as occurring when, among other
things,
the members of the Board who were not employed by or
affiliated (except as directors) with the Employer on
April 4, 1996 (the "Current Independent Directors") do not
continue to serve as members of the Board or any new mem-
ber is elected to the Board or appointed to fill a vacancy
on the Board (whether created by a resignation, expansion
of the Board or otherwise) whose election or appointment
is not approved by a majority of the Current Independent
Directors.
47. Under the Piemont Agreement, if Piemont chose to
terminate his employment for "Good Reason," -- if, for example,
an additional, purportedly "unapproved" director were elected
to Coastal's Board or, read literally, if a current director
were to die or resign -- he also is entitled to the immediate
vesting of the 200,000 stock options. This provision exacts a
severe financial tariff of as much as $10 million on Coastal if
its stockholders decide to replace a single Board member and/or
expand the Board, further entenching the Board in office and
unreasonably fettering Coastal stockholders of their right to
exercise their voting power, and inhibiting stockholders and
the Board from acting in the Company's best interests.
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THE PIEMONT AGREEMENT WAS APPROVED
WITHOUT ADEQUATE CONSIDERATION
48. After only 45 minutes of consideration, the Board, by
a vote of 6 to 2 with one abstention, without adequately
considering the cost of the Piemont Agreement or its effect
upon the financial condition of Coastal and in breach of both
its duty of care and of loyalty, voted to adopt the Piemont
Agreement.
49. Among other things, during the meeting, some Board
members, including Dr. Walls, commented that the "amount of
paper" constituting the Piemont Agreement was "overwhelming."
Dr. Scott requested a recess so that Board members could read
the employment agreement proffered by Sokolov, but Sokolov
refused his request.
50. Sokolov then informed Dr. Scott and the other Board
members that several members of the Board (including Sokolov)
had to leave the meeting at 3 o'clock. As a result, a rushed
decision-making atmosphere developed. Discussion during the
meeting indicated that one director
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was present by telephone from a pub in Ireland where he was
vacationing, far removed from any physical access to the
hastily prepared Piemont Agreement or its summary.
51. Dr. Scott voiced his opinion that the adoption of the
Piemont Agreement at a time when the Company was facing
financial peril would be a rash and unjustified decision.
Sokolov rebuffed his concerns.
52. Hatcher and Elder, the two persons designated by the
Agenda to make presentations on the topic made no formal
substantive presentation on its merits or shortcomings and con-
tributed next to nothing to the discussion of the Piemont
Agreement.
53. During the course of this discussion, Sokolov spoke
at length on the "reasonableness" of the Piemont Agreement,
which doubled Piemont's base salary -- from $175,000 to
$350,000. This was presented to the Board as an "average"
amount for a "CEO" to accept for the position.
54. Sokolov further represented that the Piemont
Agreement had been reviewed by Towers, Perrin, Forster &
Crosby, Inc. ("Towers, Perrin"), a benefits consulting firm
purportedly retained to review the Piemont Agreement. However,
no one representing Towers, Perrin was present at the meeting;
no materials were made available to the directions reflecting
-25-<PAGE>
Towers, Perrin's views; and no representative participated
telephonically.
55. Dr. Scott questioned the "approval" of Towers, Perrin
and asked to see its written report. Elder stated that he had
not yet received any written documents or analysis from Towers,
Perrin, but that he was "awaiting" a written review "any day
now." Elder said he had not been back to his office that day
to see if a report had arrived.
56. Nonetheless, Sokolov stated Towers, Perrin had
assured Elder that the Piemont Agreement was "fair." The Board
was asked to rely on this verbal, unsubstantiated hearsay in
making its decision regarding the Piemont Agreement. In addi-
tion, in response to Dr. Scott's question concerning the
present value of the Piemont Agreement assuming all benefits
were immediately payable, no one present at the meeting, in-
cluding Chief Financial Officer Corman, was able to quantify
this figure beyond a minimum of $750,000. Dr. Scott attempted
to initiate additional
-26-<PAGE>
discussion of the Piemont Agreement before a vote was taken,
but Sokolov insisted no additional time was necessary, because
there were adequate votes present to adopt the contract.
57. Moreover, prior to approving the Piemont Agreement
the entire Board also had not been informed about significant
reservations which had been expressed by Coastal's two major
clients about the course management was taking, of which both
Piemont and Sokolov had been advised. One customer, a
significant source of revenue for Coastal, indicated it had
grave reservations about Piemont serving as Coastal's CEO be-
cause he did not possess a medical degree or any operating
experience in a medical-business setting. The other client
indicated it would go elsewhere for the services presently
provided by Coastal if Dr. Scott's employment was terminated by
the Company, and in fact, had already begun the bidding process
to solicit another staffing service. Neither of these conver-
sations was brought to the Board's attention during the consid-
eration of the Piemont Agreement, either by Piemont or any one
affiliated with him.
58. After discovering the concerns of the Company's
clients regarding the actions of the Board, Dr. Scott repeat-
edly attempted to contact Piemont to discuss these develop-
ments. His telephone messages went unanswered. Likewise,
counsel for Dr. Scott wrote the Coastal's counsel, bringing
-27-<PAGE>
these customer issues to its attention. No response from the
Company was forthcoming.
59. Despite the foregoing, by a vote of 6-2, with one
abstention, the Board approved the adoption of the Piemont
Agreement. Plaintiffs Dr. Scott and Dr. Walls represented the
only dissenting votes.
60. The meeting was then recessed for lunch, at which
time, one director's telephone connection was terminated.
Following the lunch recess, the Company's financial advisors
made a presentation. Although they had prepared hundreds of
pages of materials for the Board to review, Sokolov informed
these advisors that their presentation would have to be limited
to a mere fifteen minutes.
61. After this presentation, Dr. Scott informed Sokolov
and the Board that he felt unable to render an informed
decision regarding financial issues presently pending before
the Board, due to the Resolutions' constrictions on his in-
ability to communicate with the financial advisors outside
-28-<PAGE>
of the meeting and their abbreviated presentation, and the lack
of opportunity to evaluate the presented matters. The Board
spent even less time on the vital "key metrics" discussion.
After consuming the majority of the Board's limited time on the
Piemont Agreement, Sokolov announced there was no time to
discuss the present financial status of the Company. Defendant
Corman never made his scheduled presentation.
62. From approximately 2:25 to 2:40 p.m., discussion
ensued regarding Dr. Scott, albeit nothing was said regarding
his employment agreement, as delineated on the Agenda. In-
stead, Sokolov distributed copies of the Moratorium agreement
executed between Dr. Scott and the Company on June 17, 1996,
which related only to proxy solicitations and the timing of the
next Stockholders Annual meeting. No discussion ensued regard-
ing the Scott Agreement or the course of the conduct the Board
had undertaken regarding that contract. The meeting concluded
soon after these events occurred.
THE CENTURY CONTRACT
63. During this time period, defendant Piemont also took
steps to guarantee that the Coastal Board did not ratify a
vital insurance contract, executed between Century American
Insurance Company ("Century"), a corporation in which Dr. Walls
is President and CEO and Dr. Scott is the 100% stockholder.
-29-<PAGE>
64. In 1994, Coastal was required by certain of its
customers to provide medical malpractice insurance written by a
carrier holding at least a B+ rating, A.M. Best Co. To ensure
that Century maintained its B+ rating, A.M. Best required Cen-
tury and Coastal to enter into a written contract.
65. Accordingly, on February 29, 1996, Century and
Coastal negotiated a five-year agreement (the "Century Con-
tract"), with Piemont acting as Coastal's general counsel. The
Century Contract was presented to the Coastal Board for ratifi-
cation on March 12, 1996. The Board expressed two minor con-
cerns with the contract, both of which were later addressed via
amendments prepared by Dr. Walls.
-30-<PAGE>
66. Defendant Piemont scheduled meetings with Dr. Walls
on June 14, and June 18 to discuss the Century Contract, but
abruptly canceled them, forcing Dr. Walls to contact A.M. Best
to report that he could not provide them with a definitive
report on the status of the Century Contract.
67. During the Board meeting on June 20, Dr. Walls again
requested that the Century Contract be considered by the Board.
The Board refused to discuss the contract, for the sole or
primary purpose of attempting to pressure Dr. Scott and Dr.
Walls in furtherance of the Sokolov scheme.
68. June 21, 1996, Dr. Walls met with Piemont and others
to review the Century Contract. Piemont stated that he would
not recommend that the Board enter into the five-year contract
with Century, even though Piemont himself had previously
negotiated the contract on behalf of Coastal. In addition, he
stated he would make no decision by July 1, 1996, even though
the Board had requested Piemont submit his "recommendation" by
that date.
69. Piemont also told Dr. Walls that Coastal had no
obligation to Century and that Coastal did not want to take any
action that would enhance the value of Century or do anything
that would assist Dr. Scott, regardless of the best interests
of the Company, its stockholders, or its customers.
-31-<PAGE>
70. Despite the desperate need for the Board's rati-
fication of the Century Contract, and the potential loss of
Coastal clients such lack of ratification would cause, Piemont
has consistently delayed the presentation of the Century Con-
tract to the Board in whole or in part due to his desire to
oust Dr. Scott, and all things even peripherally related to Dr.
Scott, from Coastal.
THE NEXT PHASE OF SOKOLOV'S PLAN
71. Sokolov's efforts to manage Coastal as his personal
fiefdom without regard to the best interests of Coastal and its
shareholders continued. Specifically, rather than explore in a
deliberate, fully informed manner, ways of maximizing value for
all Coastal shareholders, Sokolov engineered a scheme to sell
Coastal assets in a piecemeal fashion.
-32-<PAGE>
72. To that end, by notice dated July 3, 1996, a
telephonic Board conference call was scheduled for July 8,
1996, commencing at 6:30 p.m. In an effort to hinder, rather
than foster informed decision-making, a series of resolutions
were distributed to some, but not all, Board members which
would approve a recommendation that Coastal "begin marketing
for sale any or all of the assets, stock or businesses of the
business units of the Corporation designated on Exhibit A [of
the resolutions]." (hereinafter referred to as the "Asset Sale
Resolutions") Significantly, only three subsidiaries were ex-
cluded from the proposed assets to be sold, including the
underperforming businesses sold by Sokolov to Coastal.
73. Dr. Scott and director John A. Hemingway never
received a copy of the Asset Sale Resolutions prior to the
Board meeting and Dr. Walls received a copy by hand delivery
only minutes before the meeting. Unbeknownst to them, however,
the result was preordained. After an earlier meeting of the
Special Committee, that Committee voted to approve the Asset
Sale Resolutions without any consideration of all alternatives.
Moreover, at the full Board meeting Dr. Scott requested an
opportunity more fully to consider this matter and was told by
Sokolov that he could only take a three-minute recess. The
Board was also told that the exhibit to the Asset Sale Resolu-
tions was wrong but that the Asset Sale Resolutions should be
approved.
-33-<PAGE>
74. The Asset Sale Resolutions were approved by a vote of
6-2, with Dr. Scott abstaining from casting his vote due to his
lack of information. Dr. Walls was one of the two dissenting
votes.
THE DETERMINATION TO SOLICIT SHAREHOLDER SUPPORT
75. Following the Board meeting on June 20, counsel for
Dr. Scott met with Coastal's attorneys, but they were unable to
reach a consensus on moving forward. In light of the devel-
opments alleged above, and the prior actions of the Board, Dr.
Scott had no alternative options in the best interests of the
Company. Accordingly, Dr. Scott is today terminating the
Moratorium and intends to take steps to solicit proxies for the
replacement of certain Board members.
-34-<PAGE>
EXCUSE OF DEMAND IN RELATION TO
CLAIMS BROUGHT ON COASTAL'S BEHALF
76. Dr. Scott and Dr. Walls have not made a demand on the
Board of Coastal to initiate this litigation insofar as it
seeks relief on behalf of Coastal. Any demand would be a
futile gesture for the following reasons:
(a) The actions complained of herein constitute a
waste or misappropriation of corporate assets or
otherwise constitute conduct approved in breach
of the individual directors' duties of loyalty
and care, and the Board's approval of or acqui-
escence in these action is beyond the protection
of the business judgment rule in that, among
other things:
(1) The Resolutions violate the Scott Agree-
ment, exposing the Company to liability for
breach of contract;
(2) The Resolutions were adopted without
adequate time for the Board to consider and
evaluate them;
(3) The Piemont Agreement was adopted despite
the considerable financial strain it could
place on the Company, and no written report
was obtained for review by the Board as it
is alleged "reasonableness."
(4) The Piemont Agreement was adopted despite
the fact that Board members requested time
to review written materials distributed in
conjunction with this contract and that at
least one Board member was not able to
review the written agreement due to his
physical locale at the time of the June 20
meeting;
(5) Coastal and its stockholders receive no
benefit from the Piemont Agreement, and in
fact are financially penalized if the
agreement is terminated, either by the
return of Dr. Scott to his employment or by
-35-<PAGE>
the expansion of the Board or change in
Board members;
(6) The Piemont Agreement was adopted despite
the known but, at least at the time, undis-
closed fact that Coastal's major clients
would not continue to do business with the
Company if Scott were not President or CEO
or if the CEO did not possess a medical
degree, as Piemont does not;
(7) The ratification of the Century Contract
has been delayed with no economic justifi-
cation; and
(8) The Asset Sale Resolutions were adopted
without adequate time for the Board to con-
sider and evaluate them.
-36-<PAGE>
(b) Plaintiffs seek to recover in this action sig-
nificant damages from the individual defendants
as a result of their participation or acquies-
cence in the waste of the Company's assets
alleged in the complaint;
(c) The individual director defendants are each
jointly and severally liable for the amounts of
the misappropriated or wasted corporate assets;
(d) The known principal wrongdoers and beneficiaries
of the wrongdoing complained of are in a
position to, and do, dominate and control the
Board. Thus, the Board could neither exercise
independent objective judgment in deciding
whether to bring this action nor vigorously
prosecute this action;
(e) The acts complained of herein are wrongful and
the expenditure of funds complained of consti-
tute a waste of the Company's assets, and thus
are incapable of ratification.
COUNT I
(FOR BREACH OF FIDUCIARY DUTY AND DECLARATORY RELIEF
WITH RESPECT TO THE RESOLUTIONS)
77. Plaintiff Dr. Scott repeats each of the foregoing
allegations above, as if fully set forth herein.
78. The six members of the Coastal Board who approved the
Resolutions, including Sokolov and Corman, owe a fiduciary duty
to exercise their positions of trust and confidence with due
care, loyalty, and fair dealing.
79. By failing to render informed decisions at the May
29, 1996 meeting and by adopting the Resolutions for the sole
or primary purpose of frustrating fully informed decision-
making by all Coastal directors without any legitimate business
-37-<PAGE>
purpose, the six members of the Coastal Board who approved the
Resolutions, including Sokolov and Corman, breached their fidu-
ciary duties.
80. Because the Resolutions impede Dr. Scott's ability to
gather information and to exercise his own best judgment on
matters before the Board, they are also contrary to public
policy.
81. The conduct of the six members of the Coastal Board
who approved the Resolutions, including Sokolov and Corman, in
connection with the Resolutions is, and, unless corrected, will
continue to be, wrongful, unfair and harmful to Dr. Scott.
82. Plaintiff has no adequate remedy at law.
-38-<PAGE>
COUNT II
(FOR BREACH OF FIDUCIARY DUTY AND DECLARATORY RELIEF
WITH RESPECT TO THE PIEMONT AGREEMENT)
83. Plaintiffs Dr. Scott and Dr. Walls repeat each of the
foregoing allegations above, as if fully set forth herein.
84. The six members of the Coastal Board who approved the
Piemont Agreement, including Sokolov and Corman, owe fiduciary
duties to exercise their positions with due care, loyalty, and
fair dealing.
85. By failing to render informed decisions at the June
20, 1996 meeting and adopting the Piemont Agreement, the six
members of the Coastal Board who approved the Piemont
Agreement, including Sokolov and Corman, breached their fidu-
ciary duties by diluting Plaintiffs' voting power, entrenching
the Board in office and exacting a financial tariff upon them
as stockholders for the exercise of shareholder suffrage.
86. Because the Piemont Agreement impedes plaintiffs'
ability to exercise their own best judgment in the best
interests of Coastal and the stockholders without the imposi-
tion of a financial penalty upon the Company, it also is con-
trary to public policy.
87. The conduct of the six members of the Coastal Board
who approved the Piemont Agreement, including Sokolov and
Corman, in connection with the Piemont Agreement is, and,
-39-<PAGE>
unless corrected, will continue to be, wrongful, unfair and
harmful to Dr. Scott and Dr. Walls as stockholders of Coastal.
88. Plaintiffs have no adequate remedy at law.
COUNT III
(FOR BREACH OF FIDUCIARY DUTY BY DEFENDANTS SOKOLOV AND
CORMAN WITH RESPECT TO THE RESOLUTIONS)
89. Plaintiffs repeat each of the allegations above, as
if fully set forth herein.
90. The six members of the Coastal Board who approved the
Resolutions, including Defendants Sokolov and Corman, as
directors of Coastal, owe both the Company and its stockholders
a fiduciary duty to exercise their positions of trust and
confidence with due care, loyalty, and fair dealing.
-40-<PAGE>
91. By failing to render informed decisions at the May
29, 1996 meeting in approving the Resolutions, the six members
of the Coastal Board who approved the Resolutions, including
Sokolov and Corman, breached their fiduciary duties of due care
to Coastal and its stockholders.
92. Furthermore, by adopting the Resolutions that purport
to prohibit Dr. Scott from communicating with employees and
advisors of the Company, the six members of the Coastal Board
who approved the Resolutions, including defendants Sokolov and
Corman, inhibited his ability to exercise his own best judgment
to make decisions in the best interest of the Company and
therefore have breached their fiduciary duties of loyalty to
Coastal and its stockholders by constricting the judgment exer-
cised by one of its directors without any legitimate business
purpose and for the sole and primary purpose of entrenching
Sokolov, Corman, and Piemont including informed decision making
by the Coastal Board as a whole.
93. Plaintiffs have no adequate remedy at law.
COUNT IV
(FOR BREACH OF FIDUCIARY DUTY BY DEFENDANTS SOKOLOV AND
CORMAN WITH RESPECT TO THE PIEMONT AGREEMENT)
94. Plaintiffs repeat each of the foregoing allegations
above, as if fully set forth herein.
-41-<PAGE>
95. The six members of the Coastal Board who approved the
Piemont Agreement, including defendants Sokolov and Corman, as
directors of Coastal owe both the Company and its stockholders
a fiduciary duty to exercise their positions of trust and
confidence with due care, loyalty, and fair dealing.
96. By failing to render informed decisions at the June
20, 1996 meeting in approving the Piemont Agreement as alleged
more fully above, defendants Sokolov and Corman, as well as the
other directors who voted in favor of the Piemont Agreement,
breached their fiduciary duties of due care to Coastal and its
stockholders.
97. Moreover, the adoption of the Piemont Agreement has
no economic justification and does not serve any legitimate
business purpose, in breach of their fiduciary duties to
Coastal stockholders under Delaware law.
98. Plaintiffs have no adequate remedy at law.
-42-<PAGE>
COUNT V
(FOR BREACH OF FIDUCIARY DUTY BY SOKOLOV AND CORMAN
WITH RESPECT TO THE ASSET SALE RESOLUTIONS)
99. Plaintiffs repeat each of the foregoing allegations
above, as if fully set forth herein.
100. The six members of the Coastal Board who approved
the Asset Sale Resolutions including defendants Sokolov and
Corman, as directors of Coastal owe both the Company and its
stockholders a fiduciary duty to exercise their positions of
trust and confidence with due care, loyalty, and fair dealing.
101. By failing to render informed decisions at the July
8, 1996 meeting and in approving the Asset Sale Resolutions, as
alleged more fully above, defendants Sokolov and Corman, as
well as the other directors who voted in favor of the Asset
Sale Resolutions, breached their fiduciary duties of due care
to Coastal and its stockholders.
102. Plaintiffs have no adequate remedy at law.
COUNT VI
(FOR BREACH OF FIDUCIARY DUTY BY DEFENDANTS SOKOLOV, PIEMONT
AND CORMAN WITH RESPECT TO THE CENTURY CONTRACT)
103. Plaintiffs repeat each of the allegations above, as
if fully set forth herein.
104. Defendants Sokolov and Corman, as directors and
officers of Coastal, owe both the Company and its stockholders
-43-<PAGE>
a fiduciary duty to exercise their positions of trusts and con-
fidence with due care, loyalty, and fair dealing.
105. By failing to present the Century Contract to the
Coastal Board for ratification, defendants Sokolov, Piemont and
Corman breached their fiduciary duties of loyalty to Coastal
and its stockholders by jeopardizing the financial well-being
of the Company and threatening its standing with its customers.
106. Plaintiffs have no adequate remedy at law.
COUNT VII
(FOR WASTE OF CORPORATE ASSETS BY DEFENDANTS SOKOLOV AND
CORMAN WITH RESPECT TO THE PIEMONT AGREEMENT)
107. Plaintiffs repeat each of the foregoing allegations
above as if set forth fully herein.
-44-<PAGE>
108. As of result of the foregoing conduct, defendants
Sokolov and Corman have wasted or misappropriated the valuable
assets belonging to Coastal.
109. The actions of the six directors who voted to
approve the Piemont Agreement, including those taken by Sokolov
and Corman, are beyond the protection of the business judgment
rule. Defendants Sokolov and Corman are personally liable,
jointly and severally, for the full amounts of the wasted or
misappropriated corporate assets, with interest.
110. By reason of the foregoing, Coastal has been damaged
and has sustained, and will continue to sustain, irreparable
injury for which the Company has no adequate remedy at law.
COUNT VIII
(FOR AIDING AND ABETTING BREACH OF FIDUCIARY DUTY BY
DEFENDANT PIEMONT WITH RESPECT TO THE PIEMONT AGREEMENT)
111. Plaintiff Scott repeats each of the foregoing
allegations above, as if fully set forth herein.
112. Defendant Piemont, as former general counsel of the
Company, knew that the six members of the Coastal Board who
approved the Piemont Agreement, including defendants Sokolov
and Corman, as directors of Coastal owe both the Company and
its stockholders a fiduciary duty to exercise their positions
of trust and confidence with due care, loyalty, and fair deal-
ing.
-45-<PAGE>
113. Defendant Piemont knew that defendants Sokolov and
Corman, as well as the other directors who voted in favor of
the Piemont Agreement, breached the fiduciary duties of due
care to Coastal and its stockholders by failing to render in-
formed decisions at the June 20, 1996 meeting in approving the
Piemont Agreement as alleged more fully above.
114. By entering into the Piemont Agreement, and by
failing to inform the Board of significant misgivings by sub-
stantial clients concerning Dr. Scott's removal as President
and CEO and the assumption by Piemont of those responsibili-
ties, defendant Piemont knowingly induced, participated in,
assisted and encouraged defendants Sokolov and Corman, as well
as the
-46-<PAGE>
other members of the Board who approved of the Piemont
Agreement, in the acts by which they breached their fiduciary
duties to Coastal and its stockholders.
115. Plaintiffs have no adequate remedy at law.
WHEREFORE, Plaintiffs pray the Court:
1. To declare that Sokolov and Corman have breached their
fiduciary obligations to Coastal and its stockholders under
Delaware law by, among other reasons, adopting the Resolutions,
approving the Piemont Agreement, approving the Asset Sale
Resolutions, and failing to present the Century Contract to the
Board for ratification;
2. To declare the Resolutions and the Piemont Agreement
contrary to Delaware public policy;
3. To enjoin the Company, Sokolov and Corman or those
acting in concert with either or both of them, from enforcing
the provisions of the Resolutions which bar Dr. Scott's access
to Company personnel and financial advisors;
4. To enjoin the Company, Sokolov and Corman, or those
acting in concert with either or both of them, from enforcing
the terms of the Piemont Agreement;
-47-<PAGE>
5. To enjoin defendants Sokolov, Corman and Piemont
interfering with the presentation of the Century Contract to
the Coastal Board for ratification;
6. To enjoin the Company, Sokolov and Corman or those
acting in concert with either or both of them, from enforcing
the provisions of the Asset Sales Resolutions;
7. That Coastal recover judgment against Sokolov, Corman
and Piemont, jointly and severally, and be awarded damages in
an amount in excess of $10,000.00 for actual damages, together
with pre-judgment and post-judgment interest;
8. That Coastal recover judgment against Piemont in an
amount in excess of $10,000.00 in actual damages together with
pre-judgment and post-judgment interest, as derived from the
Piemont Agreement by Piemont;
9. That Plaintiffs recover the costs and expenses
incurred in this action, including reasonable attorneys',
accountants', and experts' fees;
-48-<PAGE>
10. That Plaintiffs recover such other and further relief
as this Court deem just and proper; and
11. That a jury trial be awarded on all issues so
triable.
This the 9th day of July, 1996.
/s/ James T. Williams, Jr.
James T. Williams, Jr.
Mack Sperling
James C. Adams, II
BROOKS, PIERCE, MCLENDON,
HUMPHREY & LEONARD, L.L.P.
2000 Renaissance Plaza
230 North Elm Street
Post Office Box 26000
Greensboro, North Carolina 27420
Telephone: (910) 373-8850
/s/ Richard M. Hutson, II
Richard M. Hutson, II
James H. Hughes
HUTSON HUGHES & POWELL, P.A.
300 West Morgan Street
Peoples Security Building
Suite 1500
P.O. Drawer 2252-A
Durham, North Carolina 27702
Telephone: (919) 683-1561
Counsel for Plaintiff
Steven M. Scott, M.D.
OF COUNSEL:
Jay B. Kasner
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
-49-<PAGE>
/s/ John R. Jolly, Jr.
John R. Jolly, Jr.
David Dreifus
POYNER & SPRUILL
3600 Glenwood Avenue
Raleigh, North Carolina 27605
Telephone: (919) 783-6400
Counsel for Plaintiff
Bertram E. Walls, M.D., M.B.A.
-50-<PAGE>
Exhibit 99
NORTH CAROLINA
VERIFICATION
DURHAM COUNTY
Steven M. Scott, M.D. first being duly sworn, deposes and
says:
That he is one of the Plaintiffs in the above-entitled
action, that he has read the foregoing Complaint and that the
allegations contained therein are true of his own knowledge
except as to those matters stated on information and belief and
as to those matters he believes them to be true.
This 9th day of July, 1996.
/s/ Steven M. Scott, M.D.
Steven M. Scott, M.D.
Sworn to and subscribed
before me this the
9th day of July, 1996.
/s/ Alice F. Crawley
Notary Public
My Commission Expires:
10/4/98 <PAGE>
NORTH CAROLINA
VERIFICATION
DURHAM COUNTY
Bertram E. Walls, M.D., M.B.A. first being duly sworn,
deposes and says:
That he is one of the Plaintiffs in the above-entitled
action, that he has read the foregoing Complaint and that the
allegations contained herein are true of his own knowledge
except as to those matters stated on information and belief and
as to those matters he believes them to be true.
This 9th day of July, 1996.
/s/ Bertram E. Walls
Bertram E. Walls, M.D., M.B.A.
Sworn to and subscribed
before me this the
9th day of July, 1996.
/s/ Sandra J. Massengill
Notary Public
My Commission Expires:
November 10, 1999
