Securities and Exchange Commission
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A)
of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] 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)
Steven M. Scott, M.D
(Name of Person Filing Proxy Statement)
----------------------------
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[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1)
or 14a-6(j)(2).
[ ] $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.
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tion applies: N/A
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applies: N/A
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forth the amount on which the filing fee is calculated
and state how it was determined): N/A
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[X] Fee previously paid 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
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REVISED PRELIMINARY PROXY STATEMENT
SUBJECT TO COMPLETION
____________________
PROXY STATEMENT OF DR. STEVEN M. SCOTT
IN OPPOSITION TO
THE BOARD OF DIRECTORS
OF COASTAL PHYSICIAN GROUP, INC
____________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 27, 1996
_____________________
This Proxy Statement and the enclosed BLUE Proxy Card are
being furnished by Dr. Steven M. Scott, an individual residing at
3711 Stoneybrook Drive, Durham, North Carolina 27705, to holders
of common stock, par value $.01 per share (the "Common Stock"),
of Coastal Physician Group, Inc., a Delaware corporation (the
"Company" or "Coastal"), in connection with the solicitation of
proxies by Dr. Scott for use at the Company's Annual Meeting of
Shareholders, or any other meeting of shareholders held in lieu
thereof, and at any and all adjournments, postponements,
reschedulings or continuations thereof (the "Meeting"). On July
26, 1996, the Board of Directors of Coastal (the "Coastal Board")
scheduled the Meeting to be held on September 27, 1996, at 9:00
a.m., at the Durham Hilton, 3800 Hillsborough Road, Durham, North
Carolina, and set August 21, 1996 as the record date for deter-
mining shareholders entitled to notice of and to vote at such
Meeting (the "Record Date"). The proxy statement furnished by
Coastal to shareholders (the "Management Proxy Statement") will
contain certain information concerning the Meeting and the Record
Date. As of the date of this Proxy Statement, Dr. Scott was the
beneficial owner of 7,146,193 shares of Common Stock, represent-
ing approximately 30% of the shares outstanding.
THIS SOLICITATION IS BEING MADE BY DR. SCOTT, WHO IS THE
FOUNDER AND A DIRECTOR OF THE COMPANY, AND NOT ON BEHALF OF THE
COASTAL BOARD.
At the Meeting, three persons will be elected as directors
of the Company to hold office for a term of three years and until
their successors have been duly elected and qualified. In
opposition to the solicitation of proxies by the Coastal Board,
Dr. Scott is proposing a slate of two independent nominees, Mr.
Mitchell W. Berger and Mr. Henry J. Murphy (the "Scott Nomi-
nees"), for election as directors of the Company. The Scott
Nominees were nominated by Scott Medical Partners, L.P., ("Scott
Medical"), a limited partnership of which Dr. Scott is the sole
general partner. Dr. Scott is also proposing a resolution (the
"Maximize Value Resolution") requesting the Coastal Board to
promptly appoint a new committee (the "Shareholder Value Commit-
tee") consisting of the Company's four independent, non-manage-
ment directors (including, if elected, the two Scott Nominees) to
consider and recommend to the full Coastal Board for approval the
best and most expeditious means by which shareholder value may be
maximized. If the Scott Nominees are elected, Dr. Scott believes
that the directors eligible to serve on the Shareholder Value
Committee, in addition to the Scott Nominees, are Dr. Richard
Janeway and Dr. John P. Mahoney, as well as any other director
who at the time may be an independent, non-management director.
Dr. Scott does not intend that he personally serve on such
Committee and will not serve on such Committee even if requested
to do so by the Coastal Board. The Maximize Value Resolution was
submitted to Coastal by Scott Medical.
Dr. Scott believes that the recent announcement by the
Coastal Board of a plan to dispose of certain non-strategic
assets and to continue the implementation of management's busi-
ness plan will not succeed in maximizing shareholder value. Dr.
Scott expects that the Shareholder Value Committee would promptly
conduct a wide-ranging review of various alternatives to maximize
shareholder value on an expeditious timetable, including a
possible sale of the entire Company.
Dr. Scott believes that the Company's leadership is weak and
ineffective under the management of Dr. Jacque J. Sokolov, the
current Chairman of the Board, and Mr. Joseph G. Piemont, the
Company's current Chief Executive Officer. In the event that the
Coastal Board determines, upon advice from the Shareholder Value
Committee and the Company's financial advisors, that the best
plan to maximize shareholder value is not to sell the Company in
its entirety, Dr. Scott and the two Scott Nominees intend to urge
the Coastal Board to commence a prompt and comprehensive search
for a new Chief Executive Officer to lead the Company. Dr. Scott
does not intend that he personally serve as Chief Executive
Officer of the Company, and will not accept the position of Chief
Executive Officer even if such position should be offered to him
by the Coastal Board.
Dr. Scott is soliciting proxies FOR the election of the two
Scott Nominees as directors and FOR the adoption of the Maximize
Value Resolution.
In contrast to the Maximize Value Resolution, the Coastal
Board is asking shareholders to support its own resolution (the
"Management Resolution") more fully described below (see "PROPOS-
AL THREE - THE MANAGEMENT RESOLUTION"). Dr. Scott is soliciting
proxies AGAINST the Management Resolution.
This Proxy Statement and the BLUE Proxy Card are first being
mailed or furnished to shareholders of the Company on or about
August , 1996.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES
YOU OWN. PLEASE SIGN AND DATE THE ENCLOSED BLUE PROXY CARD AND
RETURN IT IN THE ENCLOSED ENVELOPE PROMPTLY. PROPERLY VOTING THE
ENCLOSED BLUE PROXY CARD AUTOMATICALLY REVOKES ANY PROXY PREVI-
OUSLY SIGNED BY YOU.
DO NOT RETURN ANY PROXY CARD SENT TO YOU BY COASTAL. Even
if you may previously have voted on Coastal's proxy card, you
have every legal right to change your vote by signing, dating and
returning the enclosed BLUE proxy card. ONLY YOUR LATEST DATED
PROXY WILL COUNT AT THE MEETING.
IMPORTANT NOTE: IF YOUR SHARES OF THE COMPANY'S STOCK ARE
REGISTERED IN YOUR OWN NAME, PLEASE SIGN, DATE AND MAIL THE
ENCLOSED BLUE PROXY CARD TO DR. SCOTT, C/O GEORGESON & COMPANY,
INC., THE FIRM ASSISTING DR. SCOTT IN THE SOLICITATION OF PROX-
IES, IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOUR SHARES OF
THE COMPANY'S STOCK ARE HELD IN THE NAME OF A BROKERAGE FIRM,
BANK, NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN A BLUE PROXY
CARD WITH RESPECT TO YOUR SHARES, AND ONLY UPON RECEIPT OF
SPECIFIC INSTRUCTIONS FROM YOU. ACCORDINGLY, YOU SHOULD CONTACT
THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR
A BLUE PROXY CARD TO BE SIGNED REPRESENTING YOUR SHARES OF STOCK.
DR. SCOTT URGES YOU TO CONFIRM IN WRITING YOUR INSTRUCTIONS TO
THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND TO PROVIDE A COPY OF
SUCH INSTRUCTIONS TO DR. SCOTT, C/O GEORGESON & COMPANY, INC. AT
THE ADDRESS INDICATED BELOW SO THAT DR. SCOTT WILL BE AWARE OF
ALL INSTRUCTIONS GIVEN AND CAN ATTEMPT TO ENSURE THAT SUCH
INSTRUCTIONS ARE FOLLOWED.
IF YOU HAVE ANY QUESTIONS ABOUT EXECUTING YOUR PROXY OR
REQUIRE ASSISTANCE, PLEASE CONTACT:
GEORGESON & COMPANY, INC
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
TOLL FREE: (800) 223-2064
Banks and Brokerage Firms please call collect: (212) 440-9800
REASONS FOR THE SOLICITATION
Dr. Scott has determined to solicit proxies for the election
of the two Scott Nominees to serve as directors of the Company
and for the adoption of the Maximize Value Resolution because he
is convinced that maximizing shareholder value as expeditiously
as possible is in the best interests of Coastal and all of its
shareholders. Dr. Scott has been a member of the Coastal Board
since he founded the Company in 1977, and is presently the
largest holder of shares of Common Stock (holding approximately
30% of the shares outstanding as of the date of this Proxy
Statement). As such, Dr. Scott believes that his interests in
seeking to have Coastal maximize shareholder value are aligned
with the interests of Coastal's other shareholders. On July 26,
1996, the closing price of Coastal Common Stock on the New York
Stock Exchange Composite Tape was $4 5/8. Dr. Scott believes that
prompt and decisive action must be taken to increase shareholder
value. Dr. Scott further believes that the Coastal Board's
"management action plan" to dispose of certain non-strategic
assets on a piecemeal basis over what he believes would be a
substantial period of time will not succeed in maximizing share-
holder value and that any benefits to shareholders which might
eventually result from such sales would be too far in the future.
Dr. Scott believes that the election of the two Scott
Nominees as directors of the Company and the adoption of the
Maximize Value Resolution would send a strong message to the
Coastal Board that Coastal shareholders want to maximize the
value of their investment in the Company on an expeditious
timetable, including through a possible sale of the Company in
its entirety, and would make it more likely that such an outcome
will result. However, because Dr. Scott, who currently is a
member of the Coastal Board, and the two Scott Nominees, if such
nominees are elected, will fill only three of the nine seats on
the Coastal Board and because the Maximize Value Resolution is
not binding on the Coastal Board, there can be no assurance that
the Coastal Board will seek to solicit or consider new proposals
for maximizing shareholder value even if the two Scott Nominees
are elected and the Maximize Value Resolution is adopted by
Coastal shareholders. Dr. Bertram Walls, a member of the Coastal
Board whose term as a director expires in 1997, has certain
relationships with Dr. Scott. See "PROPOSAL ONE -- ELECTION OF
DIRECTORS." Dr. Scott believes that Dr. Walls always has exer-
cised, and will continue to exercise, completely independent
judgment in fulfilling his duties as a director of Coastal, and
Dr. Walls is not a participant in Dr. Scott's solicitation of
proxies.
GENERAL
PROXY INFORMATION
As of the date of this Proxy Statement, Dr. Scott was the
beneficial owner of 7,146,193 shares of Common Stock, represent-
ing approximately 30% of the shares outstanding. As of the date
of this Proxy Statement, neither of the Scott Nominees owned any
shares of Common Stock. According to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 31,
1996, as of April 30, 1996, there were 23,835,665 shares of
Common Stock outstanding. For information regarding transactions
in the Common Stock by Dr. Scott during the past two years, see
Appendix I annexed to this Proxy Statement.
The shares of Common Stock represented by each BLUE Proxy
Card which is properly executed and returned will be voted at the
Meeting in accordance with the instructions marked thereon.
Executed but unmarked BLUE Proxy Cards will be voted FOR the
election of the two Scott Nominees as directors, FOR the adoption
of the Maximize Value Resolution, AGAINST the Management Resolu-
tion and FOR the ratification of independent certified public
accountants for the fiscal year ending December 31, 1996.
With the exception of the election of directors, consider-
ation of the Maximize Value Resolution, consideration of the
Management Resolution and management's proposal to ratify the
action of the Coastal Board in selecting KPMG Peat Marwick LLP as
independent certified public accountants of the Company for the
fiscal year ending December 31, 1996, Dr. Scott is not aware at
the present time of any other matter which is scheduled to be
voted upon by shareholders at the Meeting.
If you hold your shares in the name of one or more brokerage
firms, banks or nominees, only they can vote your shares and only
upon receipt of your specific instructions. Accordingly, you
should contact the person responsible for your account and give
instructions to vote the BLUE Proxy Card.
PROXY REVOCATION
Whether or not you plan to attend the Meeting, Dr. Scott
urges you to vote FOR the two Scott Nominees, FOR the Maximize
Value Resolution and AGAINST the Management Resolution by sign-
ing, dating and returning the BLUE Proxy Card in the enclosed
envelope. You can do this even if you have already voted on the
proxy card solicited by the Coastal Board. It is the latest
dated proxy that counts.
Execution of a BLUE Proxy Card will not affect your right to
attend the Meeting and to vote in person. Any shareholder
granting a proxy (including a proxy given to the Company) may
revoke it at any time before it is voted by (a) submitting a duly
executed new proxy bearing a later date, (b) attending and voting
at the Meeting in person, or (c) at any time before a previously
executed proxy is voted, giving written notice of revocation to
either (i) Dr. Scott, c/o Georgeson & Company, Inc., Wall Street
Plaza, New York, New York 10005, or (ii) the Company, 2828
Croasdaile Drive, Durham, North Carolina 27705, Attention:
Corporate Secretary. Dr. Scott requests that a copy of any
revocation sent to the Company also be sent to Dr. Scott, c/o
Georgeson & Company, Inc. at the above address. Merely attending
the Meeting will not revoke any previous proxy which has been
duly executed by you. The BLUE Proxy Card furnished to you by
Dr. Scott, if properly executed and delivered, will revoke all
prior proxies.
DR. SCOTT URGES YOU TO SIGN, DATE AND MAIL THE BLUE PROXY
CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR
MAILING WITHIN THE UNITED STATES.
QUORUM AND VOTING
The Management Proxy Statement is required to provide
information about the number of shares of Coastal's stock out-
standing and entitled to vote on the Record Date for the Meeting,
and reference is made thereto for such information. Only share-
holders of record at the close of business on the Record Date are
entitled to notice of and to vote on matters that come before the
Meeting.
The presence in person or by proxy of the holders of a
majority of the shares of Common Stock issued and outstanding and
entitled to vote thereat are necessary to constitute a quorum at
the Meeting. Each holder of Common Stock is entitled to one vote
for each share held, and there is no cumulative voting in the
election of directors. Directors will be elected by a plurality
of votes cast by shareholders at the Meeting. Votes not cast at
the Meeting because authority to vote for nominees is withheld
and as a result of broker non-votes will not affect the outcome
of the election of directors.
There are two Scott Nominees standing for election to the
Coastal Board. The Coastal Board has nominated three persons
(the "Company Nominees") for the three positions being filled at
the Meeting. Therefore there will be five nominees for three
seats on the Coastal Board, and the three nominees who receive
the greatest number of votes will be elected. Shareholders who
use the BLUE Proxy Card furnished by Dr. Scott will be able to
vote for the two Scott Nominees and one of the Company Nominees.
The two Company Nominees with respect to whom Dr. Scott is not
seeking authority to vote and who may not be voted for on the
BLUE Proxy Card are Mr. Robert V. Hatcher, Jr. and Dr. Norman V.
Chenven. Shareholders cannot vote for one or both of the Scott
Nominees on Dr. Scott's BLUE Proxy Card and also vote for one or
more of the Company's Nominees using Coastal's proxy card. Any
shareholder who wishes to vote for one or more of the Scott
Nominees and for either or both Mr. Hatcher and Dr. Chenven will
be required to vote by ballot at the Meeting. Shareholders
should refer to the Management Proxy Statement for information
concerning the Company Nominees. There is no assurance that any
of the Company Nominees will serve as directors if any of the
Scott Nominees are elected to the Coastal Board.
In addition to Mr. Hatcher and Dr. Chenven, there is a third
Company Nominee. Dr. Scott is not seeking to oppose the election
of such third Company Nominee and intends to use the BLUE Proxy
Card to vote for the election of such third Company Nominee.
However, shareholders will be given the opportunity on Dr.
Scott's BLUE Proxy Card to withhold authority to vote for such
third Company Nominee by writing the name of such nominee in the
indicated space on the BLUE Proxy Card. Shareholders who use
Coastal's proxy card will not be able to vote for either of the
Scott Nominees. Accordingly, any shareholder who wishes to vote
for the Scott Nominees should use the BLUE Proxy Card.
With respect to the voting upon the Maximize Value Resolu-
tion, the Management Resolution and the ratification of the
Board's selection of independent public accountants, each share
of Common Stock entitles the holder thereof to one vote, and
action requires the affirmative vote of a majority of the shares
represented and entitled to vote at the Meeting. Accordingly,
assuming a quorum is present at the Meeting, abstentions will
count as votes cast against the Maximize Value Resolution, the
Management Resolution or the Board's selection of independent
public accountants, as the case may be, and broker non-votes will
have no effect on the outcome of the vote on such proposals.
PROPOSAL ONE - ELECTION OF DIRECTORS
The Company's Certificate of Incorporation has set the total
number of directors at nine and provides that the Coastal Board
shall be divided into three classes, each having a staggered term
of three years. Three directors will be elected for a term of
three years at the Meeting.
The two Scott Nominees are Mr. Mitchell W. Berger and Mr.
Henry J. Murphy. Each of these nominees has consented to serve
as a director if elected, and it is not contemplated that either
of them will be unavailable for election as a director. If
either of the Scott Nominees is unable to serve or is otherwise
unavailable for election and a replacement nominee is required,
the persons named on the enclosed BLUE Proxy Card will vote for a
substitute nominee. Dr. Scott is soliciting proxies for the
election of the two Scott Nominees in opposition to two of the
Company Nominees.
DR. SCOTT RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE TWO
SCOTT NOMINEES ON THE ENCLOSED BLUE PROXY CARD.
The information below is provided with respect to the two
Scott Nominees for directors of the Company. Each of the Scott
Nominees is a United States citizen.
Name, Business Address and Age Principal Occupations/Directorships
Mitchell W. Berger Mitchell W. Berger is an attorney
Suite 400 with Berger & Davis, P.A., a law
100 Northeast Third Avenue firm located in Ft. Lauderdale
Ft. Lauderdale, Florida 33301 and Tallahassee, Florida. Mr. Berger
(Age 40) has been a partner of Berger & Davis
since 1985, and is a member of the
Board of Directors of the Student
Loan Marketing Association
(SALLIE MAE).
Henry J. Murphy Henry J. Murphy served as the manag-
622 Belmont Crest Drive ing director of corporate recovery
Marietta, Georgia 30067 services of Arthur Andersen, from
(Age 60) 1991 until his retirement in 1995.
Prior to 1991, Mr. Murphy served as
managing partner for the worldwide
real estate practice of Arthur
Andersen.
Neither of the Scott Nominees, as of the date of this Proxy
Statement, owns any shares of Common Stock. Mr. Berger is a
member of the law firm Berger & Davis, P.A., which firm has
rendered legal services to Coastal during its last fiscal year
and during the current fiscal year. Mr. Berger's firm also has
rendered legal services to Dr. Scott and certain of his affiliat-
ed entities.
If the Scott Nominees are elected to the Coastal Board, the
Scott Nominees, together with Dr. Scott, will constitute only
three of nine members of the Coastal Board. Since Coastal's By-
Laws provide that action by the Coastal Board requires a majority
vote of the directors present at a meeting at which a quorum is
present, Dr. Scott and the two Scott Nominees, by themselves,
ordinarily will not be able to cause any action to be taken or
not taken by the Coastal Board (unless only five directors,
including Dr. Scott and the two Scott Nominees, are present at a
meeting of the Coastal Board, in which case Dr. Scott and the two
Scott Nominees would constitute a majority of the directors
present at such meeting) unless at least two (assuming all nine
directors are present at such a meeting) other directors agree
with the position of Dr. Scott and the two Scott Nominees.
Nevertheless, the two Scott Nominees may, because of their
different backgrounds and expertise, be able to inform and
persuade other directors sufficiently to cause the Coastal Board
to take or not take various actions.
If elected, the two Scott Nominees, together with Dr. Scott,
intend to seek to persuade the Coastal Board to take action to
maximize shareholder value, including a possible sale of the
entire Company. Dr. Scott and the Scott Nominees believe that
the election of the two Scott Nominees and the adoption of the
Maximize Value Resolution would send a strong message to the
Coastal Board that Coastal shareholders want to maximize the
value of their investment in the Company, and would make it more
likely that such events will occur. However, because Dr. Scott
and the two Scott Nominees, if such nominees are elected, will
fill only three of the nine seats on the Coastal Board and
because the Maximize Value Resolution is not binding on the
Coastal Board, there can be no assurance that the Coastal Board
will seek to further the goals stated in the Maximize Value
Resolution even if the Maximize Value Resolution is adopted and
the two Scott Nominees are elected.
Similarly, in the event that the Coastal Board determines,
upon the advice from the Shareholder Value Committee and its
financial advisors, that the best plan to maximize value is not
to sell the Company in its entirety, there can be no assurance
that the Coastal Board will follow the recommendation of Dr.
Scott and the two Scott Nominees that the Coastal Board seek to
find a new Chief Executive Officer in place of Mr. Piemont.
Dr. Walls, a Coastal director, is the trustee of certain
trusts for the benefit of Dr. Scott's children, is a plaintiff
together with Dr. Scott in a lawsuit against Coastal, Dr.
Sokolov, Mr. Piemont and Stephen D. Corman, a director and Chief
Financial Officer of Coastal, and is the President of Century
American Insurance Company ("Century"), a company owned by Dr.
Scott (see "PRINCIPAL SHAREHOLDER," "CERTAIN LITIGATION" and
"CERTAIN AGREEMENTS -- Other Agreements" below). Dr. Scott
believes that Dr. Walls always has exercised, and will continue
to exercise, completely independent judgment in fulfilling his
duties as a director of Coastal, and Dr. Walls is not a partici-
pant in Dr. Scott's solicitation of proxies. Even if Dr. Walls
were to vote together with Dr. Scott and the two Scott Nominees,
such votes would constitute only four votes on Coastal's none-
member Board of Directors.
PROPOSAL TWO - THE MAXIMIZE VALUE RESOLUTION
The text of the Maximize Value Resolution is as follows:
RESOLVED, that the shareholders of Coastal Physician
Group, Inc. ("Coastal"), believing that the value of their
investment in Coastal can be further maximized, hereby
request that the Board of Directors of Coastal promptly
proceed to effect such maximization by establishing a new
committee consisting entirely of independent non-management
directors to consider and recommend to the full Coastal
Board of Directors for approval the best available means by
which shareholder value may be maximized; provided, however,
that such committee shall be comprised of four persons and
that any Scott Nominees (as such term is defined in the
proxy statement furnished by Dr. Steven M. Scott to share-
holders of Coastal) elected to the Board shall be appointed
as members of such committee.
DR. SCOTT RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
MAXIMIZE VALUE RESOLUTION.
The Maximize Value Resolution sets forth a request of the
Coastal Board on the part of shareholders. Even if approved by a
majority of the shares of Common Stock represented and entitled
to vote at the Meeting, the Maximize Value Resolution will not be
binding on the Coastal Board. Dr. Scott believes, however, that
if the Maximize Value Resolution receives substantial support
from shareholders, the Coastal Board may choose to carry out the
requests set forth in the Maximize Value Resolution.
The Maximize Value Resolution requests that the Coastal
Board establish the Shareholder Value Committee, consisting of
the Company's four directors who are independent, non-management
directors, including any Scott Nominee elected to the Coastal
Board, to consider and recommend to the full Coastal Board for
approval the best and most expeditious means by which shareholder
value may be maximized. If the Scott Nominees are elected, Dr.
Scott believes that the directors eligible to serve on the
Shareholder Value Committee, in addition to the Scott Nominees,
are Dr. Janeway and Dr. Mahoney, as well as any other director
who at the time may be an independent, non-management director.
Dr. Scott also believes that directors who are officers or
employees of the Company may have potential conflicts of interest
in considering strategic alternatives for the Company, and should
not serve on the Shareholder Value Committee. Dr. Scott does not
intend that he personally serve on the Shareholder Value Commit-
tee, and will not serve on such Committee even if requested to do
so by the Coastal Board.
Dr. Scott believes it is important that the Shareholder
Value Committee promptly conduct a wide-ranging review of alter-
natives to maximize shareholder value, including a possible sale
of the Company. He also believes that given the current market
price of the Company's Common Stock (which closed at $4 5/8 on July
26, 1996), it is important that steps to maximize shareholder
value be taken promptly. Neither Dr. Scott nor the Scott Nomi-
nees, nor any of their respective affiliates, have any current
plans or intentions to engage in any transaction with the Company
or any of its affiliates in connection with their efforts to
maximize shareholder value. However, in the event that the
Shareholder Value Committee recommends, and the full Board
approves, a sale of the Company in its entirety, Dr. Scott
reserves the right to participate as a potential buyer in any
auction or other sale process implemented by the Company.
Dr. Scott and the Scott Nominees intend to recommend that
the Shareholder Value Committee promptly engage a financial
advisor (which may or may not be the Company's current financial
advisor), in order to assist the Shareholder Value Committee in
determining the most appropriate means to maximize shareholder
value. Such means could include a sale of the Company in its
entirety through an auction or other sale process.
Dr. Scott, based on his considerable familiarity with
Coastal since he founded it in 1977, believes that management's
current plan to dispose of certain non-strategic assets on a
piecemeal basis over what Dr. Scott believes would be a substan-
tial period of time, will not succeed in maximizing shareholder
value and that any benefits to shareholders which might eventual-
ly result from such sales would occur too far in the future. Dr.
Scott has become increasingly concerned about the market value of
the shares of the Company's Common Stock, which has significantly
declined in value since Coastal publicly announced its plan to
dispose of certain non-strategic assets. On July 9, 1996, the
date on which such announcement was made after the close of the
stock market, Coastal shares closed at $6 7/8. On July 26, 1996,
Coastal shares closed at $4 5/8, a decline of 33%. Dr. Scott also
believes that Coastal is currently operating under a significant
overhead burden which is too great given the Company's size and
results of operations. He is concerned that the continuation of
overhead expenses at current levels while the Company engages in
its efforts to dispose of certain non-strategic assets over what
he believes would be a substantial period of time would serve to
further weaken the Company's financial results. Dr. Scott also
is concerned that the piecemeal sale of assets will harm employee
morale, and that Coastal faces a significant risk that key
employees may seek other employment opportunities as a more
attractive alternative than awaiting the possible sale of their
business units.
Dr. Scott believes that approval of the Maximize Value
Resolution, together with the election of the two Scott Nominees,
would send a strong message to the Coastal Board that Coastal
shareholders want to maximize the value of their investment in
the Company on an expeditious timetable, and would make it more
likely that such an outcome will result. Dr. Scott further
believes that if the Maximize Value Resolution is adopted, the
Coastal Board and Coastal's management will interpret such
adoption as a message from the Company's shareholders that it is
no longer acceptable for the Coastal Board to continue with its
current management business plans and strategies.
If shareholders desire to send a strong message to the
Coastal Board that they want to maximize the value of their
investment, Coastal shareholders should vote FOR the Maximize
Value Resolution (Proposal 2).
PROPOSAL THREE - THE MANAGEMENT RESOLUTION
According to a revised preliminary proxy statement filed by
Coastal with the Securities and Exchange Commission (the "SEC"),
the Coastal Board intends to present the Management Resolution
set forth below for a vote at the Meeting.
SCOTT RECOMMENDS THAT SHAREHOLDERS VOTE "AGAINST"
THE MANAGEMENT RESOLUTION.
The text of the Management Resolution is as follows:
"RESOLVED, that the shareholders of Coastal Physician Group,
Inc. ("Coastal"), believing that the most effective way to
restore the profitability of, and maximize the value of their
investment in, Coastal is to follow the Comprehensive Business
Plan approved and adopted by the Board of Directors, hereby
approve the continued implementation of the Comprehensive Busi-
ness Plan."
By presenting the Management Resolution for a shareholder
vote, the Coastal Board is requesting shareholders to endorse its
proposed sales of certain non-strategic assets on a piecemeal
basis over what Dr. Scott believes would be a substantial period
of time. For the reasons set forth under the caption "Proposal
Two--The Maximize Value Resolution" above, Dr. Scott believes
that the sale of such assets on a piecemeal basis will not
maximize shareholder value, will not result in any benefits for
shareholders in the foreseeable future and, in certain respects,
could be detrimental to Coastal. Dr. Scott also believes that
given the current level of the Coastal's stock price, action must
be taken promptly to maximize shareholder value.
Dr. Scott believes that if shareholders desire to send a
strong message to the Coastal Board that they want to maximize
the value of their investment, Coastal shareholders should vote
FOR the Maximize Value Resolution (Proposal 2) and AGAINST the
Management Resolution (Proposal 3).
PROPOSAL FOUR - RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP, independent certified
public accountants, has been the Company's auditor since 1987.
The Board, of which Dr. Scott is a member, on the recommendation
of Coastal's Audit Committee, has selected KPMG Peat Marwick LLP
as the Company's independent certified public accountants for the
year ending December 31, 1996, subject to the approval of the
Company's shareholders.
DR. SCOTT RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER MATTERS TO BE CONSIDERED AT THE MEETING
Dr. Scott is not presently aware of any matters to be
presented for a vote of shareholders at the Meeting other than
the election of directors, the Maximize Value Resolution, the
Management Resolution and the ratification of the Board's selec-
tion of KPMG Peat Marwick LLP as the Company's independent
certified public accountants for the fiscal year ending December
31, 1996. If any other matter properly comes before the Meeting,
the persons named as proxies on the enclosed BLUE Proxy Card will
have discretionary authority to vote all shares covered by such
proxies in accordance with their best judgment with respect to
such matter, unless they are directed by a proxy to do otherwise.
PRINCIPAL SHAREHOLDER
The following table sets forth, as of the date of this
Proxy Statement, the number and percent of outstanding shares of
Common Stock beneficially owned by Dr. Scott:
Name and Address Number of Shares Percentage of Shares
of Shareholder Beneficially Owned Beneficially Owned
Steven M. Scott 7,146,193 (1) 29.98%
(1) Includes 6,369,120 shares held by Scott Medical, a limited
partnership, of which Dr. Scott is the sole general partner.
Also includes 582,863 shares held by two partnerships, the
partners of which are Dr. Scott and certain trusts established
for the benefit of Dr. Scott's children. Dr. Scott has sole
investment power with respect to these shares, but has sole
voting power with respect to only 410,961 of such shares. Voting
power with respect to the remaining 145,100 shares is held by Dr.
Bertram Walls, as trustee of the trusts. Dr. Walls is currently
a director of the Company and is a plaintiff, together with Dr.
Scott, in a lawsuit against the Company and certain of its
directors and officers described under "CERTAIN LITIGATION."
Also includes 74,110 shares held by a foundation with respect to
which Dr. Scott shares voting and investment power. Also in-
cludes 120,000 shares held by Century American Insurance Company
("Century") over which Dr. Scott may be deemed to share voting
and investment power. Dr. Scott disclaims beneficial ownership
of the shares held by Century. The remaining 100 shares are held
directly by Dr. Scott. Dr. Scott's address is 3711 Stoneybrook
Drive, Durham, North Carolina 27705.
The Management Proxy Statement is required to set forth
information as to the number and percentage of outstanding shares
beneficially owned by (i) each person known by Coastal to own
more than 5% of the outstanding Common Stock, (ii) each director
of Coastal, (iii) each of the five most highly paid executive
officers of Coastal, and (iv) all executive officers and direc-
tors of Coastal as a group, and reference is made thereto for
such information.
INFORMATION ABOUT PARTICIPANTS IN DR. SCOTT'S
PROXY SOLICITATION
The proxies solicited hereby are solicited by Dr. Scott. In
addition to Dr. Scott, the two Scott Nominees, Mr. Mitchell W.
Berger and Mr. Henry J. Murphy, may be deemed "participants" in
this solicitation, as that term is defined in Schedule 14A under
the Securities Exchange Act of 1934, as amended. The present
principal occupations of Dr. Scott and the two Scott Nominees are
set forth in "PROPOSAL ONE - ELECTION OF DIRECTORS" and "BACK-
GROUND OF THE SOLICITATION" herein. Scott Medical is a limited
partnership and its business address is Two Market Street, Suite
208, Chattanooga, Tennessee 37401. Dr. Scott is the sole general
partner of Scott Medical, and its limited partners, in addition
to Dr. Scott, are Dr. Scott's wife, Mrs. Rebecca Scott, and The
Steven M. Scott Tennessee IV Grantor Retained Annuity Trust, of
which Dr. Scott and his children are beneficiaries.
As described above, as of the date of this Proxy Statement,
Dr. Scott was the beneficial owner of 7,146,193 shares of Common
Stock, representing approximately 30% of the shares outstanding.
The shares of Common Stock acquired by Dr. Scott during the past
two years were acquired as set forth in Appendix I hereto.
BACKGROUND OF THE SOLICITATION
Dr. Scott is the founder the Company, and served as Chairman
of the Coastal Board from the Company's formation in 1977 until
1994. In addition, Dr. Scott served as President and Chief
Executive Officer of the Company from 1977 until May 1996. Dr.
Scott is currently a member of the Coastal Board with a term of
office expiring in 1998, and he is not standing for election as a
director at the Meeting. As the Company's founder and largest
shareholder, Dr. Scott has an abiding interest in maximizing the
value of the Company for all shareholders.
As a result of certain disagreements between Dr. Scott and
Coastal's management concerning various operational and strategic
issues, on May 29, 1996, the Coastal Board by a 6-3 vote, adopted
certain resolutions (the "Resolutions") which, among other
things, purported to place Dr. Scott on an involuntary "sabbati-
cal leave of absence" from his position as President and Chief
Executive Officer of the Company. The Resolutions also purported
to preclude Dr. Scott from communicating with professional
advisors and personnel of the Company. Dr. Scott believes that
such Resolutions not only breach the terms of his Employment
Agreement with the Company (see "CERTAIN AGREEMENTS - Dr. Scott's
Employment Agreement" below), but have improperly impeded his
ability to carry out his fiduciary duties as a member of the
Coastal Board. Immediately following its approval of the Resolu-
tions, the Coastal Board appointed Mr. Piemont as President and
Chief Executive Officer, and on June 20, 1996, the Board awarded
Mr. Piemont an employment/golden parachute agreement that Dr.
Scott opposed and is challenging in court as excessive and
inappropriate (see "CERTAIN LITIGATION" below).
On July 8, 1996, the Coastal Board approved a plan to divest
certain non-strategic assets. Dr. Scott, Dr. Walls and one other
director did not vote in favor of this plan. Dr. Scott does not
believe that management's plan to dispose of certain non-strate-
gic assets on a piecemeal basis over what he believes would be a
substantial period of time adequately addresses the issue of
maximizing shareholder value. Dr. Scott also believes that the
Coastal Board acted hastily in approving this divestiture plan,
and did not give adequate consideration to other more desirable
means of maximizing shareholder value.
Dr. Scott believes that the Company's leadership is weak and
ineffective under the management of Dr. Sokolov, the current
Chairman of the Board, and Mr. Piemont, the current Chief Execu-
tive Officer. In the event that the Coastal Board determines,
upon advice from the Shareholder Value Committee and the
Company's financial advisors, that the best plan to maximize
shareholder value is not to sell the Company in its entirety, Dr.
Scott and the two Scott Nominees intend to urge the Coastal Board
to commence a prompt and comprehensive search for a new Chief
Executive Officer to lead the Company. Dr. Scott does not intend
that he personally serve as Chief Executive Officer of the
Company, and will not accept the position of Chief Executive
Officer even if such position should be offered to him by the
Coastal Board.
In the event that Mr. Piemont's employment as Chief Execu-
tive Officer is terminated prior to certain dates, he is entitled
to various "golden parachute" severance payments and other
benefits under the terms of his employment agreement with Coastal
dated and effective as of June 1, 1996. Dr. Scott believes that
Mr. Piemont's employment agreement provides for excess payments
and benefits, and has challenged such employment agreement in a
lawsuit (see "CERTAIN LITIGATION" below).
Under the terms of his employment agreement, Mr. Piemont's
annual base salary is currently $350,000. Such salary may be
increased (but not decreased without Mr. Piemont's consent) at
any time in an amount substantially consistent with base salary
increases awarded in the ordinary course of business to other
peer executives of Coastal and its affiliates. In addition, Mr.
Piemont's employment agreement awards him incentive compensation
at the end of each fiscal year, which amount, if any, may not
exceed more than 50% of Mr. Piemont's base salary for the fiscal
year just ended. Upon execution of his employment agreement, Mr.
Piemont was also granted options to purchase 200,000 shares of
Coastal Common Stock at the then fair market value of such stock.
Such options are exercisable for ten years, and vest at the rate
of options to purchase 5,555 shares a month for 36 months. Mr.
Piemont was also permitted to retain the options to purchase
71,751 shares he already held at the time his employment agree-
ment was executed. Any extension of Mr. Piemont's employment
agreement by Coastal will result in the granting of additional
options, the exact amount of which will be determined by
Coastal's Compensation Committee. Finally, Mr. Piemont is
entitled to all benefits (e.g., medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans) applicable
generally to other peer executives of Coastal and its affiliates.
Mr. Piemont's employment agreement further provides that if
the Company terminates his employment without "cause" or if Mr.
Piemont terminates his employment for "good reason" or if the
Company fails to renew the agreement so that it continues in
effect through May 31, 1999, then Mr. Piemont will receive a lump
sum payment equal to (i) in the event of termination on or before
May 31, 1997, an amount equal to his then current base salary and
last incentive compensation, payable for the period from the date
of termination through May 31, 1999, and (ii) in the event of
termination after May 31, 1997, an amount equal to two times his
then current base salary and incentive compensation paid in the
prior year. In addition, all unvested options (71,751 plus any
portion of the 200,000 granted to him under his employment
agreement) would become fully vested and exercisable and Mr.
Piemont would continue to receive all benefits until May 31,
1999. Assuming Mr. Piemont's current base salary of $350,000
remains in effect, and assuming he received the maximum incentive
compensation possible of fifty percent of such salary, any
termination of Mr. Piemont as Chief Executive Officer prior to
May 31, 1997 could result in a lump sum payment to Mr. Piemont
equal to $525,000 multiplied by the number of years and portions
of years remaining until May 31, 1999. For example, if Mr.
Piemont's employment terminated on November 30, 1996, two and
one-half years prior to May 31, 1999, Mr. Piemont could receive a
lump sum severance payment of $1,312,500. Any termination after
May 31, 1997 could result in a lump sum payment to Mr. Piemont of
$1,050,000 payable for the period through May 31, 1999.
For purposes of Mr. Piemont's employment agreement, "cause"
includes fraud, dishonesty, substantial and continuing nonperfor-
mance by Mr. Piemont of assigned duties, certain criminal conduct
and a material breach of the employment agreement. "Good reason"
includes the assignment of duties inconsistent with his position
or the reduction in his duties or positions, relocation, a breach
or noncompliance of the agreement by the Company not immediately
remedied and certain changes in the composition of the Coastal
Board such that independent directors as of April 4, 1996 do not
continue to serve as members of the Coastal Board or any new
member is elected or appointed to be a director who was not
approved by a majority of such independent directors.
Following the determination of the Coastal Board on July 8,
1996 to pursue its plan to dispose of certain non-strategic
assets on a piecemeal basis, Dr. Scott determined to solicit
proxies for the election of the two Scott Nominees as directors
of the Company and for the adoption of the Maximize Value Resolu-
tion. Dr. Scott believes that the election of the Scott Nominees
as directors of the Company and the adoption of the Maximize
Value Resolution would send a strong message to the Coastal Board
that Coastal shareholders want to maximize the value of their
investment in the Company and would make it more likely that such
an outcome will result.
CERTAIN LITIGATION
On July 9, 1996, Dr. Scott and Dr. Walls filed a
complaint in the General Court of Justice, Superior Court Divi-
sion, of North Carolina, Durham County, asserting claims on their
own behalf and asserting other claims on behalf of Coastal,
against certain other members of the Coastal Board for breach of
their fiduciary duties in connection with, among other things,
the adoption of a series of resolutions authorizing management to
pursue the disposition of certain non-strategic assets and the
adoption of a "lavish and wasteful" employment agreement with Mr.
Piemont, which designates Mr. Piemont as the Company's Chief
Executive Officer and President. In addition, the complaint,
among other things, asserts a claim that the Resolutions, which
purport to limit Dr. Scott's ability to communicate with Coastal
advisors and employees in the exercise of his fiduciary duty as a
director (as described under "BACKGROUND OF THE SOLICITATION"),
are contrary to public policy, are invalid under Delaware law and
should be declared unenforceable.
In addition, Dr. Scott and Dr. Walls assert a claim on
behalf of Coastal for the failure to bring before the Board an
insurance contract with Century. Dr. Scott and Dr. Walls allege
that the failure to ratify the contract with Century will result
in the potential loss of Coastal clients and such failure to act
is not in the best interests of Coastal.
Mr. Piemont has been sued in his individual capacity for
aiding and abetting the alleged breach of fiduciary duties by Mr.
Sokolov and Mr. Corman.
On July 26, 1996, Coastal filed its answer to the complaint
and filed a countersuit against Dr. Scott for the alleged breach
of his fiduciary duty. Coastal has denied the allegations
contained in the complaint and has asserted various defenses,
including lack of subject matter jurisdiction and improper venue,
and challenges Dr. Walls' and Dr. Scott's capacity to bring their
complaint on behalf of Coastal.
In its counterclaims, Coastal seeks declaratory relief,
money damages in an unspecified amount, and an injunction pre-
venting Dr. Scott from "further interfering, or attempting to
interfere, with the implementation of the Action Plan, the
restructuring of Coastal, and/or efforts to sell non-core busi-
nesses owned by Coastal." Under North Carolina law, Dr. Scott's
answer to the counterclaims is not due until August 26, 1996.
The parties are now engaged in the early stages of discov-
ery.
CERTAIN AGREEMENTS
DR. SCOTT'S EMPLOYMENT AGREEMENT
In April 1991, Dr. Scott and the Company entered into a
five-year employment agreement which renews automatically each
year, unless either party gives notice of non-renewal, and
terminates in any event when Dr. Scott reaches age 70. The
employment agreement provides for an annual base salary of
$400,000, which is to be reviewed annually by, and can be in-
creased at the discretion of, the Compensation Committee. Dr.
Scott is also entitled to incentive compensation in an amount
determined at the discretion of the Compensation Committee, based
on its consideration of the Company's financial results, the
development, implementation and attainment of strategic business
planning goals and objectives, increases in the Company's reve-
nues and operating profits, and other factors deemed relevant by
the Compensation Committee in evaluating Dr. Scott's performance.
Although not a requirement, the target for Dr. Scott's incentive
compensation is two percent of the Company's earnings before
interest and taxes, not to exceed his annual base salary. In
addition, the Compensation Committee may grant Dr. Scott discre-
tionary bonuses from time to time.
In its discretion, the Compensation Committee may award any
incentive or discretionary bonus compensation payable to Dr.
Scott as an immediately payable cash payment, a deferred cash
payment or in nonqualified stock options. A range of valuation
for any such options will be established by the Compensation
Committee using the Black-Scholes or binomial pricing model, or
other recognized pricing model, or using the assumptions and
specifications adopted by the SEC which govern the disclosure of
executive compensation in proxy statements and other SEC filings.
Any such options will expire after the earlier to occur of the
tenth anniversary of the termination of Dr. Scott's employment,
the date of Dr. Scott's 70th birthday or the expiration of the
maximum term of such options set forth in the stock option plan
pursuant to which such options are granted.
In the event of Dr. Scott's disability prior to the age of
70, he would be entitled to base compensation, incentive compen-
sation and bonus compensation for twelve months. The bonus
compensation would equal the average of the bonus compensation
paid or payable to Dr. Scott during the thirty-six months preced-
ing the disability. The incentive compensation would equal the
greater of (i) the average of the incentive compensation paid or
payable to Dr. Scott during the thirty-six months preceding the
disability or (ii) an amount equal to (x) 50% of Dr. Scott's base
salary for any year in which the Company's revenues and operating
profits increased 12% over the prior year, (y) 75% of Dr. Scott's
base salary if the Company's annual revenues and operating
profits increased 17% over the prior year or (z) 100% of Dr.
Scott's base salary if the Company's annual revenues and operat-
ing profits increased 22% over the prior year. If the disability
is continuous for a period of twelve consecutive months, Dr.
Scott would be entitled to receive 75% of his base salary and the
averages of both incentive compensation and bonus compensation
paid or payable during the thirty-six months preceding the
disability, which amount shall be increased by five percent
annually. In the event of Dr. Scott's death prior to age 70, his
surviving spouse (or his estate in the event of her death or
remarriage) would be entitled to receive for ten years an amount
equal to Dr. Scott's base salary and the average of both incen-
tive compensation and bonus compensation paid or payable during
the thirty-six month period preceding death, which amount shall
be increased by five percent annually.
If the Company terminates Dr. Scott without cause, Dr. Scott
would be entitled to receive for the remainder of the then
existing five-year term of the agreement his base salary and the
averages of both incentive compensation and bonus compensation
paid or payable during the thirty-six months preceding termina-
tion, which amount shall be increased by five percent annually.
In the event that Dr. Scott terminates his employment agreement
as a result of the Company's material breach thereof, which
breach remains uncured for 60 days after written notice, Dr.
Scott would be entitled to receive compensation equal to that
payable to him upon termination by the Company without cause.
OTHER AGREEMENTS
Dr. Scott is the beneficial owner of all of the outstanding
shares of common stock of American Alliance Holding Company
("Alliance"). The Company has entered into various transactions
and has continuing relationships with Alliance and its affili-
ates, Century (as defined above) and Medical Risk Prevention
Consultants, Inc. ("MRPC") and other affiliates thereof. These
transactions and relationships, all of which have been approved
by the Company's outside Audit Committee and have been publicly
disclosed, are described below.
Coastal and certain of its subsidiaries sublease office
space in Durham, North Carolina from Alliance under sublease
agreements which are renewed annually. The building is owned by
Century, which leases the building to Alliance. During the
fiscal year ended December 31, 1995, the Company paid Alliance
approximately $745,000 under those subleases. Under the sublease
agreements, the Company is contingently liable to the holder of a
first mortgage on the property for the total rentals specified in
the prime lease. The prime lease commenced in August 1988 and
has a fifteen-year term requiring minimum lease payments of
approximately $788,000 per year for years one through five,
$959,000 for years six through ten and $1,166,000 per year for
years eleven through fifteen.
Coastal paid approximately $2,330,000 in insurance premiums
to Century for professional liability insurance for itself and
its subsidiaries for the fiscal year ended December 31, 1995.
The Company paid MRPC approximately $387,000 for consulting
services related to risk management assistance provided by the
Company to certain of its hospital clients for the fiscal year
ended December 31, 1995. The Company received approximately
$1,222,000 for certain computer, financial, statistical and other
advice and services provided to Alliance and its subsidiaries for
the fiscal year ended December 31, 1995.
The Company leases an office facility in Durham, North
Carolina from Chateau LLC, which is controlled by Dr. Scott. The
Company paid approximately $258,000 to Chateau LLC for the fiscal
year ended December 31, 1995. The Company also leases space in
Rocky Mount, North Carolina from Durham Investment Corp., and in
Ft. Lauderdale, Florida from Coral Ridge LP, which entities are
controlled by Dr. Scott. For the fiscal year ended December 31,
1995, the Company paid approximately $90,000 to Durham Investment
Corp. and $157,000 to Coral Ridge LP. In addition, the Company
leases a clinical facility in Fayetteville, North Carolina from
Sunco Properties, a general partnership in which Dr. Scott and
Dr. Walls each have a 50% interest. For the fiscal year ended
December 31, 1995, the Company paid Sunco Properties approximate-
ly $68,000.
From time to time during the fiscal year ended December 31,
1995, the Company chartered two airplanes that are owned by
Alliance Aviation, Inc. ("Alliance Aviation"), a wholly owned
subsidiary of Alliance. Charter fees paid by the Company to
Alliance Aviation during the fiscal ended December 31, 1995
totaled approximately $848,000. On March 31, 1995, the Company
purchased one of the airplanes from Alliance Aviation for
$6,600,000 (which purchase price was based upon a third-party
appraisal). The Coastal Board authorized the purchase of the
airplane on March 28, 1995. The Company subsequently sold the
airplane approximately thirteen months later to an unrelated
third party for $6,200,000.
Except as aforesaid or in Appendix I hereto, none of Dr.
Scott, the two Scott Nominees, nor any of their respective
affiliates or associates (including Scott Medical), directly or
indirectly, beneficially owns any shares of Common Stock of the
Company or any securities of any parent or subsidiary of the
Company, has had any relationship with the Company in any capaci-
ty other than as a shareholder, or, in the case of Dr. Scott, as
a director, nor is a party to any transactions, or series of
similar transactions, since January 1, 1995, nor is any currently
proposed transaction known to any of them, or series of similar
transactions, to which the Company or any of its subsidiaries was
or is to be a party, in which the amount involved exceeds $60,000
and in which any of them or their respective affiliates or
associates had, or will have, a direct or indirect material
interest, nor has Dr. Scott, nor any Scott Nominee, nor any of
their respective affiliates or associates, entered into any
agreement or understanding with any person respecting any future
employment by the Company or its affiliates or any future trans-
actions to which the Company or any of its affiliates will or may
be a party. Other than the agreements by the two Scott Nominees
to serve as directors of the Company if elected, or as described
above, there are no contracts, arrangements or understandings by
Dr. Scott, any Scott Nominee or any of their respective affili-
ates or associates within the past year with any person with
respect to the Company's securities.
PROXY SOLICITATION; EXPENSES
Dr. Scott and the two Scott Nominees may solicit proxies by
mail, telephone, in person or by other means.
The total cost of this proxy solicitation (including fees of
attorneys, solicitors and advertising and printing expenses) will
be paid by Dr. Scott, and is estimated to be approximately
$ . Approximately $ of such costs have been paid to
date. To the extent legally permissible and consistent with the
Company's loan agreements, Dr. Scott intends to seek reimburse-
ment from the Company for the costs of this solicitation. Dr.
Scott does not currently intend to submit approval of such
reimbursement to a vote of shareholders of the Company unless
required by law.
Dr. Scott has retained Georgeson & Company, Inc.
("Georgeson") to assist in the solicitation of proxies for a fee
of $35,000 and will reimburse Georgeson for reasonable out-of-
pocket expenses. Dr. Scott will indemnify Georgeson against
certain liabilities and expenses in connection with the solicita-
tion. Approximately 20 persons will be utilized by Georgeson in
its solicitation efforts, which may be made by telephone, facsim-
ile, telegram and in person.
ADDITIONAL INFORMATION
Reference is made to the Management Proxy Statement for
information concerning the Common Stock, the beneficial ownership
of such stock, other information concerning the Company's manage-
ment, the procedures for submitting proposals for consideration
at the next Annual Meeting of Shareholders of the Company and
certain other matters regarding the Company and the Meeting. The
Company also is required to provide to shareholders its Annual
Report to Shareholders for the year ended December 31, 1995,
which contains certain information as to the Company's financial
condition and other matters.
STEVEN M. SCOTT, M.D.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ASSISTANCE, PLEASE CONTACT:
GEORGESON & COMPANY, INC
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
TOLL FREE: (800) 223-2064
APPENDIX I
PURCHASES AND SALES OF SECURITIES OF THE COMPANY
The following table sets forth all purchases and sales of
the Company's Common Stock during the past two years by Dr.
Scott:
Date Type of Transaction Number of Shares
11/30/94 Purchase 100
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
FORM OF PROXY CARD
REVISED PRELIMINARY PROXY MATERIALS SUBJECT
TO COMPLETION
PROXY
CARD PROXY SOLICITED BY DR. STEVEN M. SCOTT
IN OPPOSITION TO THE BOARD OF DIRECTORS
OF COASTAL PHYSICIAN GROUP, INC
The undersigned hereby appoints Dr. Steven M. Scott and
Mr. David Plyler, and each of them, the proxy or proxies of the
undersigned, with full power of substitution, to vote all shares
of Common Stock, par value $.01 per share, of Coastal Physician
Group, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of
Shareholders of the Company scheduled to be held on September 27,
1996, or any other shareholders' meeting held in lieu thereof,
and at any and all adjournments, postponements, rescheduling or
continuations thereof.
DR. SCOTT RECOMMENDS A VOTE FOR ITEM 1.
1. Election of Directors:
a. Scott Nominees:
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed below: to vote for all
nominees listed
below:
Mitchell W. Berger
-------------------
Henry J. Murphy
-------------------
(To withhold authority to vote for any individual nominee listed
above, check the "FOR" box above and write that nominee's name on
the line provided below.)
------------------
b. Company Nominees:
The Company is nominating three people to serve as
directors. Dr. Scott intends to use this proxy to vote FOR one
of the individuals nominated by the Company, and AGAINST the
other two Company nominees whose names are listed below. You may
withhold authority to vote for the one Company nominee not listed
on this proxy, by writing the name of such nominee below. You
should refer to the Proxy Statement distributed by the Company
for the names, backgrounds, qualifications and other information
concerning the Company's nominees.
There is no assurance that any of the Company's nomi-
nees will serve as directors if any of Dr. Scott's nominees are
elected to the Company Board.
The Company nominees with respect to whom Dr. Scott is
NOT seeking authority to vote for and WILL NOT exercise any such
authority are:
Norman V. Chenven and Robert V. Hatcher, Jr.
In order to withhold authority to vote for the election
of the Company nominee whose name is not listed above, write such
Company nominee's name on the line provided below.
---------------------
DR. SCOTT RECOMMENDS A VOTE FOR ITEM 2.
2. Dr. Scott's Maximize Value Resolution as more fully de-
scribed in Dr. Scott's Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
DR. SCOTT RECOMMENDS A VOTE AGAINST ITEM 3.
3. Coastal's Management Resolution as more fully described in
Dr. Scott's Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
DR. SCOTT RECOMMENDS A VOTE FOR ITEM 4.
4. Ratification of the Appointment of KPMG Peat Marwick LLP.
/ / FOR / / AGAINST / / ABSTAIN
The proxies are hereby authorized to vote in their discretion
upon all other matters which may properly come before the Meeting
or any adjournments, postponements, reschedulings or continua-
tions thereof.
-----------------------------------------------------------
{REVERSE} THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIREC-
TION IS INDICATED, IT WILL BE VOTED FOR THE ELECTION OF
THE NOMINEES LISTED IN ITEM 1A AND FOR THE ELECTION OF
THE COMPANY NOMINEE WHOSE NAME IS NOT LISTED IN ITEM
1B, FOR THE ADOPTION OF THE RESOLUTION DESCRIBED IN
ITEM 2, AGAINST THE ADOPTION OF THE RESOLUTION DE-
SCRIBED IN ITEM 3, FOR THE RATIFICATION OF INDEPENDENT
ACCOUNTANTS DESCRIBED IN ITEM 4, AND IN THE DISCRETION
OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENTS, POSTPONE-
MENTS, RESCHEDULINGS OR CONTINUATIONS THEREOF.
The undersigned hereby acknowledges receipt of the
Proxy Statement of Dr. Scott dated ______________, 1996.
DATED: __________________, 1996
Signature: ________________________
Signature, if held jointly:
___________________________________
Title or Authority: _______________
Please sign exactly as your name appears
on this proxy. Joint owners should each
sign personally. If signing as attor-
ney, executor, administrator, trustee or
guardian, please include your full ti-
tle. Corporate proxies should be signed
by an authorized officer.
PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE EN
CLOSED ENVELOPE
