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STEVEN M. SCOTT, M.D.
3711 STONEYBROOK DRIVE o DURHAM, NORTH CAROLINA
August 28, 1996
Dear Fellow Shareholder:
You may have received proxy soliciting materials from the management of
Coastal Physician Group, Inc. seeking your vote at the September 27, 1996 Annual
Meeting of Shareholders. In its proxy statement, Coastal management talks about
its 'Comprehensive Business Plan,' its 'Strategic and Financial Plan,' its
'Management Action Plan' and its 'Plan Managers.' Instead of all these plans
with fancy names, I think it's obvious that what Coastal needs most is a SIMPLE,
CLEAR-CUT PLAN TO MAXIMIZE SHAREHOLDER VALUE IMMEDIATELY--and the will and
determination to carry that plan to a successful conclusion.
I and my two nominees are committed to take prompt action to maximize
shareholder value, and we have said all along that immediate consideration
should be given to selling the Company in its entirety. By voting FOR the
election of my nominees (Item 1) and FOR approval of the Maximize Value
Resolution (Item 2) on the enclosed BLUE proxy card, you can help ensure that
Coastal's Board will get the message that you want more value for your shares
now.
THREE OFFICERS AND A CONSULTING FIRM--
COST TO COASTAL: $6,000,000 A YEAR
At a time when management's sole focus should be on maximizing shareholder
value, I have become increasingly concerned that management's primary interest
may be in its own extremely lucrative compensation arrangements.
I ask you to take a careful look at the amounts of money Coastal is paying
to an outside consulting firm and to three senior officers--and all three of
these officers sit on Coastal's Board of Directors:
1. PRICE WATERHOUSE--$4,180,800 PER YEAR
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Eight outside consultants from Price Waterhouse are now being paid by
Coastal--AT A COST TO COASTAL OF UP TO $4,180,800 PER YEAR, plus
substantial expenses. This averages out to more than a half million dollars
per year for each of the eight Price Waterhouse consultants.
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2. JACQUE J. SOKOLOV--UP TO $1,000,000 PER YEAR
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Dr. Sokolov is Chairman of Coastal's Board of Directors. His base pay is
$400,000 per year plus incentive compensation of AT LEAST $150,000 per
year. On top of that, if Dr. Sokolov's fees from third parties for outside
speaking and consulting engagements are less than $450,000 per year,
Coastal must pay him an ADDITIONAL AMOUNT to make up the difference between
$450,000 and his outside speaking and consulting fees.
3. JOSEPH G. PIEMONT--UP TO $525,000 PER YEAR
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Mr. Piemont is Coastal's new President and Chief Executive Officer, and
a member of its Board of Directors. He also is a management nominee for
election at the upcoming Annual Meeting. His base salary is $350,000 per
year, and he receives a bonus of up to $175,000 per year. He also has a
lucrative new 'GOLDEN PARACHUTE' that, according to Coastal's proxy
statement, entitles him to approximately $936,000 plus under certain
circumstances substantial additional tax 'gross up' payments if he leaves
Coastal's employ for various reasons. Mr. Piemont could receive 'golden
parachute' payments even if no change in control of Coastal were to occur.
For example, the fact that one Coastal director voluntarily resigned
earlier this month could entitle Mr. Piemont to his full 'golden parachute'
payments, the immediate vesting of options he received only two months ago
to purchase 200,000 shares of Coastal stock, and continued benefits through
May 1999. Dr. Scott vehemently opposed Mr. Piemont's employment agreement
and has brought a lawsuit seeking to have it invalidated.
4. STEPHEN D. CORMAN--AT LEAST $300,000 PER YEAR
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Mr. Corman is Coastal's Executive Vice President and Chief Financial
Officer. He also sits on Coastal's Board of Directors. Mr. Corman's base
salary is $300,000 per year and he is eligible for an additional annual
incentive bonus to be recommended to the Compensation Committee of the
Board by Mr. Piemont.
PUT SHAREHOLDER INTERESTS FIRST
Given these levels of compensation, it's no surprise that Coastal's senior
management and consulting team want to continue to pursue 'all available
strategic alternatives'--instead of unequivocally committing to a course of
action that could very well result in a sale of the entire Company.
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It also is important to keep in mind the following facts:
o These three senior officers and directors of Coastal--Dr. Sokolov, Mr.
Piemont and Mr. Corman--taken together, OWN ONLY ABOUT ONE-THIRD OF 1% OF
COASTAL'S STOCK.
o Two of Coastal's three nominees standing for election to the Board (Mr.
Piemont and Dr. Chenven)--unlike you and me--DO NOT OWN A SINGLE SHARE OF
COASTAL STOCK. Coastal's third nominee (Mr. Hatcher) owns only 3,200
shares of stock.
As shareholders of Coastal, all of us should let management and the Board
of Directors know that we demand that our interests be put first. I urge you to
join with me and my two nominees in helping to move Coastal in the right
direction. Please sign, date and mail the enclosed BLUE proxy card today. Your
vote is important, no matter how many or how few shares you own.
I thank you for your continued consideration and support.
Sincerely,
/s/ Steven M. Scott, M.D.
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Steven M. Scott, M.D.
If your shares of Common Stock are held in the name
of a bank or brokerage firm, only that firm can execute
a proxy card on your behalf. Please contact the person
responsible for your account and give instructions for a
BLUE PROXY CARD TO BE VOTED FOR PROPOSALS 1, 2 AND 4
AND AGAINST PROPOSAL 3.
Do not sign any white proxy card you may receive from Coastal,
even as a protest vote against Coastal's Board and management.
If you have questions or need assistance in voting your shares, please
contact the firm assisting us in the solicitation of proxies:
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
TOLL FREE: 1-800-223-2064
BANKS & BROKERS CALL: 212-440-9800
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