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Coastal Physician Group, Inc.
(Name of Registrant as Specified In Its Charter)
Coastal Physician Group, Inc.
(Name of Person(s) Filing Proxy Statement)
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NEWS RELEASE COASTAL
PHYSICIAN
GROUP, INC.
Its Subsidiaries and
Affiliates
FOR IMMEDIATE RELEASE CONTACT: Robert P. Borchert
Senior Vice President
919-383-0355
COASTAL PHYSICIAN GROUP, INC. ANNOUNCES DATE
OF ITS 1996 ANNUAL MEETING OF SHAREHOLDERS
- Company Files Response and Counterclaim Against Former CEO Steven
Scott -
- Scott Rejected Offer to Expand Board by Adding Two Truly Independent
Directors -
DURHAM, NC, JULY 26, 1996 -- The Board of Directors of Coastal
Physician Group, Inc. (NYSE: DR) today announced that the 1996
Annual Meeting of Shareholders will be held on Friday, Septem-
ber 27, 1996, at 9:00 a.m. local time, at the Durham Hilton,
located at 3800 Hillsborough Road, Durham, North Carolina. The
Board of Directors has fixed the close of business on August
21, 1996 as the record date for determining those shareholders
entitled to notice of, and to vote at, the 1996 Annual Meeting.
Coastal announced in early July a comprehensive business plan
designed to re-focus the Company's core business units, restore
its profitability and thereby build shareholder value. Commenting
on this plan, Joseph G. Piemont, President and Chief Executive
Officer of Coastal Physician Group, said: "Through the diligent
efforts of our managers, employees and advisors, we have begun to
achieve meaningful, measurable improvements in our operations,
including the development and implementation of improved cash flow
management practices. In addition, Morgan Stanley and other
investment banking firms have begun actively marketing our non-core
assets, including our clinical operations in Florida, Maryland, New
Jersey and North Carolina, our Preferred Provider Organization (PPO) in
North Carolina, and our New York-based prepaid health services plan
for Medicaid recipients.
"The strategic and orderly sale of selected non-core assets, in
combination with the operational improvements currently under
way, will enable Coastal to satisfy its near-term debt require-
ments and position us for the future. This process will also
allow the Company to concentrate on the effective management of
its core operations, where we have historically demonstrated
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expertise and can deliver added value for customers. The Board
believes that this is the best strategy to restore profitabil-
ity and truly maximize shareholder value," Mr. Piemont con-
cluded.
Separately, Coastal announced that it has responded to a law-
suit brought by Steven Scott and Bertram Walls, directors and
shareholders of the Company, and commenced counterclaims
against Dr. Scott. The counterclaims, which were served today,
allege that Dr. Scott breached his fiduciary duties to the Com-
pany and engaged in a scheme to tortiously interfere with and
damage Coastal's business.
Specifically, the counterclaims allege that Dr. Scott caused
the Company to pursue a series of acquisitions which, given
Dr. Scott's lack of attention to both the successful integra-
tion of these businesses and the implementation of measures to
effectively control pre-existing operations, led to a drop of
more than 80% in the value of the Company's stock from its peak
of $40.25 in February 1994 to approximately $8 when the Board
of Directors placed him on sabbatical leave in May 1996. The
counterclaims further allege that, after the Board (including
Dr. Scott) unanimously approved the engagement of Price
Waterhouse LLP (PW) and the Management Action Plan developed by
the Company with PW, Dr. Scott sought to frustrate the effec-
tive implementation of the Management Action Plan, refused to
cooperate with PW, and undermined the efforts of PW and the
Company's management to successfully execute the Management
Action Plan.
The counterclaims further allege that Dr. Scott has long prof-
ited from Coastal through his personal financial stake in his
100%-owned Century American Insurance Company, which receives
in excess of $19 million per year in premiums from Coastal-
related business. Moreover, the counterclaims allege that Dr.
Scott caused Coastal to lease real estate properties in which
Dr. Scott has significant ownership interests.
The Company is seeking to enjoin Dr. Scott from further inter-
ference with the implementation of the Management Action Plan
and will seek monetary damages in excess of $25 million.
"The Company regrets that Dr. Scott rejected our offer to
expand the Board by adding two mutually agreeable and truly
independent directors, " said Jacque J. Sokolov, M.D.,
Coastal's Chairman of the Board. "Instead, Dr. Scott has com-
menced a proxy fight in which he seeks to regain effective con-
trol of the Company, including the election of his own lawyer
to the board. Coastal and its shareholders would have been
much better served if Dr. Scott had not elected to pursue this
costly and distracting course of action. Nevertheless, we have
absolutely no intention of letting Dr. Scott's actions impede
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our progress in successfully executing the comprehensive
business plan and achieving our objectives of continuing to
deliver superior service for our customers and enhancing share-
holder value."
Coastal Physician Group, Inc. is a diversified physician man-
agement company providing a broad range of health care and ad-
ministrative services to physicians, hospitals, employers, man-
aged care programs and other health care providers.
Forward-looking Information or Statements: Except for state-
ments of historical fact, statements made herein are forward-
looking in nature, and are inherently subject to uncertainties.
The actual results of the company may differ materially from
those reflected by the forward-looking statements based on a
number of important risk factors, including, but not limited
to: receipt of sufficient proceeds from divested assets and
the timing of any divestitures; the level and timing of im-
provements in the operational efforts; the possibility of poor
accounts receivable collection and/or reimbursement experience;
the possibility of increased medical expenses due to increased
utilization; the possibility that the Company is not able to
improve operations or execute its divestiture strategy as
planned; and other important factors disclosed from time to
time in the Company's Form 10-K, Form 10-Q and other Securities
and Exchange Commission filings.
Certain Additional Information: Coastal Physician Group, Inc.
will be soliciting proxies to elect directors at its 1996
Annual Meeting of Stockholders. The following individuals may
be deemed to be participants in such solicitations of proxies:
Jacque J. Sokolov, M.D.; Robert V. Hatcher, Jr.; Stephen D.
Corman; John P. Mahoney, M.D.; Richard Janeway, M.D.; Norman H.
Chenven, M.D.; Joseph G. Piemont; Robert P. Borchert; Dennis I.
Simon; and Bettina M. Whyte. As of May 31, 1996, Dr. Sokolov
is the beneficial owner of 263,423 shares of the Company's com-
mon stock; Mr. Hatcher is the beneficial owner of 16,808 shares
of the Company's common stock; Mr. Corman is the beneficial
owner of 10,138 shares of the Company's common stock; Dr.
Mahoney is the beneficial owner of 4,090 shares of the Com-
pany's common stock; Dr. Janeway is the beneficial owner of
11,451 shares of the Company's common stock; and Mr. Borchert
is the beneficial owner of less than 100 shares of the Com-
pany's common stock. Mr. Simon and Ms. Whyte are employees of
Price Waterhouse LLP and have been appointed by agreement of
Price Waterhouse and Coastal to be Plan Managers of the Com-
pany's revitalization plan. In connection with such agreement,
the Company has agreed to pay Price Waterhouse $70,000 per
month for the services of the Plan Managers, and $46,400 per
month for any additional Price Waterhouse personnel that may
provide services under the agreement. The Company also granted
Price Waterhouse an option to purchase 50,000 shares of Company
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common stock at a price of $7 7/8, which has not yet vested,
and a separate option to purchase up to 50,000 shares of Com-
pany common stock, which will vest at a rate of 10,000 shares
each month for five months commencing May 15, 1996, at a strike
price equal to the average closing price of the common stock on
the New York Stock Exchange for the first ten trading days of
each month prior to the vesting date.
Steven M. Scott, M.D., Bertram E. Walls, M.D., and John A.
Hemingway are also directors of Coastal, but are not expected
to solicit proxies on behalf of the Company.
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