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)
----------------------------
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1)
or 14a-6(j)(2).
[X] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which transac-
tion applies: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of trans-
action computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calculated
and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid: N/A
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement Number:
(3) Filing Party:
(4) Date Filed:
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 , 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 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 contin-
uations thereof (the "Meeting"). According to Coastal's Proxy
Statement dated , 1996 (the "Management Proxy State-
ment"), the Meeting is scheduled to be held on ,
1996, at .m., at
, and the record date for determining shareholders entitled to
notice of and to vote at such Meeting is (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, representing 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
BOARD OF DIRECTORS OF THE COMPANY.
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 Board of Direc-
tors of Coastal (the "Coastal Board"), Dr. Scott is proposing a
slate of two independent nominees for election as directors of
the Company (the "Scott Nominees"). Dr. Scott is also proposing
a resolution (the "Maximize Value Resolution") requesting the
Coastal Board to promptly appoint a new committee (the "Share-
holder Value Committee") consisting of the Company's four inde-
pendent 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. Dr. Scott does not intend that he personally
serve on such Committee.
Dr. Scott believes that the recent announcement by the
Coastal Board of a plan to dispose of various non-core assets
fails to address the issue of maximizing shareholder value. Dr.
Scott would expect that the Shareholder Value Committee would
promptly conduct a wide-ranging review of various alternatives to
maximize value, 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 fill such position.
Dr. Scott is soliciting proxies FOR the election of the two
Scott Nominees as directors and FOR the adoption of the Maximize
Value Resolution.
This Proxy Statement and the BLUE Proxy Card are first being
mailed or furnished to shareholders of the Company on or about
July , 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) 233-2064
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 persons nominated by him to serve as directors of the
Company and for the adoption of the Maximize Value Resolution
because he is convinced that maximizing shareholder value 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 are aligned with those of the other
shareholders of Coastal. Dr. Scott has been repeatedly rebuffed
in his attempts to persuade Coastal's current management to take
all appropriate actions in order to maximize the value of the
Company for the benefit of all shareholders.
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, 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.
GENERAL
PROXY INFORMATION
The enclosed BLUE Proxy Card may be executed only by holders
of record at the close of business on , 1996, which
is 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. 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 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 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 Scott Nominees and FOR the Maximize
Value Resolution by signing, 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 and the Record Date for the Meet-
ing, and reference is made thereto for such information. Only
shareholders 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 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 of abstentions or broker non-votes are not
considered in connection with determining the outcome of the
election of directors.
Dr. Scott has nominated two candidates for election to the
Coastal Board and 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 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 on the
BLUE Proxy Card. Shareholders who use Coastal's proxy card will
not be able to vote for either of the Scott Nominees. According-
ly, 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 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 Maxi-
mize Value 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 either such proposal.
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 at the time of election 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 selected by Dr. Scott.
Dr. Scott is proposing 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 two Scott Nominees, as of the date of this
Proxy Statement, owns any shares of Common Stock.
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.
PROPOSAL TWO - THE MAXIMIZE VALUE RESOLUTION
Dr. Scott intends to present the Maximize Value Resolution
set forth below for a vote at the Meeting.
DR. SCOTT RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" 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 persons nominated for election to the Board by Dr.
Steven M. Scott and so elected shall be appointed as members
of such committee.
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 not officers or employees of
the Company, including any Scott Nominee elected to the Coastal
Board, to consider and recommend to the full Coastal Board for
approval the best available means by which shareholder value may
be maximized. Dr. Scott believes that directors who are officers
or employees of the Company may have a potential conflict of
interest in considering strategic alternatives for the Company.
Dr. Scott believes that the Coastal Board's recent announcement
of a plan to dispose of certain non-core assets over time does
not begin to address the issue of maximizing shareholder value.
Accordingly, Dr. Scott believes that the Shareholder Value
Committee should be composed of only non-management directors,
and that the Committee should promptly conduct a wide-ranging
review of alternatives to maximize shareholder value, including a
possible sale of the Company. Dr. Scott does not intend that he
personally serve on such Committee.
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, 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 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 - 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 and Compensation 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 and the
ratification of the Board's selection 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.
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 6,342,318 shares held by Scott Medical Partners,
L.P., of which Dr. Scott is the sole general partner. Also
includes 556,061 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 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 66,000
shares held by a foundation and 61,714 shares held by two chari-
table remainder unitrusts with respect to which Dr. Scott shares
voting and investment power. Also includes 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 sought 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.
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 Board member,
Dr. Scott has offered numerous alternatives and suggestions to
the Coastal Board and to the management of the Company which he
believes would further enhance shareholder value. Dr. Scott
believes that his proposals have been repeatedly ignored.
Dr. Scott has specifically objected, among other things, to
the following: (i) that certain Coastal Board members may have
abdicated their fiduciary responsibilities by permitting Price
Waterhouse LLP, an outside consulting firm hired to improve cash
flows of the Company, to perform governing and managerial func-
tions of the Company without adequate management and Board
oversight, (ii) that the extremely broad discretion afforded by
the Company to Price Waterhouse has impeded the efforts of other
financial advisors retained to advise the Company, (iii) that
certain members of the Board and management have paid insuffi-
cient attention to valuable and longstanding customer relation-
ships, and (iv) that the Coastal Board on July 8, 1996 approved
an ill-conceived plan to dispose of certain non-core assets of
the Company while failing to adequately consider various alterna-
tives to maximize shareholder value.
As a result of Dr. Scott's vigorous disagreements with
certain other members of the Board, on May 29, 1996, the Board
adopted certain resolutions (the "Resolutions"), by a 6-3 vote
which, among other things, placed Dr. Scott on an involuntary
"sabbatical 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 profes-
sional 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 operating units. Dr. Scott, Dr. Walls and one other
director did not vote in favor of this plan. Dr. Scott does not
believe that the piecemeal sale of certain non-core assets over
what he believes would be an extended 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 fill such position.
Dr. Scott has 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 Resolution because he is convinced
that maximizing shareholder value, including through a possible
sale of the Company, is in the best interests of the Company's
shareholders. 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. Bertram E. Walls, a
Coastal shareholder and a member of the Coastal Board, 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 a sale of certain Coastal 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.
CERTAIN AGREEMENTS
DR. SCOTT'S EMPLOYMENT AGREEMENT
Dr. Scott is party to an employment agreement with the
Company (the "Employment Agreement"). The following description
of such Employment Agreement is taken from the Company's Proxy
Statement furnished to shareholders in connection with the
Company's 1995 Annual Meeting of Shareholders (the "Company's
1995 Proxy Statement"). There have been no changes, modifica-
tions or amendments to Dr. Scott's Employment Agreement since the
date of the Company's 1995 Proxy Statement.
Dr. Scott has an employment agreement with the Company for
an initial five-year term (expiring on April 1, 1996), which
renews automatically each year (unless either party gives notice
of non-renewal) and terminates in any event when he reaches age
70. Under the agreement as in effect prior to April 1, 1994, Dr.
Scott was entitled to receive a base annual salary of $360,000,
subject to annual cost of living adjustments, and incentive
compensation equal to 2% of annual earnings before interest and
taxes if the Company has net interest income, or 2% of annual
earnings before taxes if the Company has set interest expense.
In addition, pursuant to the agreement as in effect prior to
April 1, 1994, the Board of Directors could grant Dr. Scott
discretionary bonuses from time to time.
Effective as of April 1, 1994, Dr. Scott's employment
agreement was amended to provide 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.
Pursuant to this agreement as amended, Dr. Scott is also entitled
to incentive compensation in an amount determined at the discre-
tion 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 objec-
tives, increases in the Company's revenues and operating profits,
and other factors deemed relevant by the Compensation Committee
in evaluating Dr. Scott's performance. Although not a require-
ment, the target for Dr. Scott's incentive compensation is 2% 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 discretionary bonuses from time to time.
In its discretion, the Compensation Committee may award any
incentive or discretionary bonus compensation payable to Dr.
Scott under the agreement 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 explanation of the unknown term of such options set forth in
the Company's nonqualified stock option plan pursuant to which
such options were 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 month period
preceding the twelve-month period of disability. The incentive
compensation would equal the greater of (i) the average of the
incentive paid or payable to Dr. Scott during the thirty-six
month period preceding the twelve-month period of 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 operating 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. 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 incentive compensation and bonus compensation
paid or payable during the thirty-six month period preceding
death, which amount shall be increased by 5% 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 his base salary and the averages of both
incentive compensation and bonus compensation paid or payable
during the thirty-six month period preceding termination, which
amount shall be increased by 5% 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 termina-
tion 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 American Insurance Company ("Century") 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 subleases its headquarters and 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 approxi-
mately $788,000 per year for years one through five, $959,000 for
years six through ten and $1,166,000 per year for years ten
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 subsidiary 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 Company subsequently sold the airplane approxi-
mately 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, 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 relation-
ship with the Company in any capacity other than as a sharehold-
er, 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 transactions to which the Company or any
of its affiliates will or may be a party. Other than the agree-
ments by the two Scott Nominees to serve as directors of the
Company if elected, or as described above, there are no con-
tracts, arrangements or understandings by Dr. Scott, any Scott
Nominee or any of their respective affiliates 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 $ 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 ____ persons will be utilized by Georgeson
in its solicitation efforts, which may be made by telephone,
facsimile, 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) 233-2064
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}
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 ,
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 ITEMS 1, 2 AND 3.
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.
Company nominees with respect to whom Dr. Scott is NOT
seeking authority to vote for and WILL NOT exercise any such
authority:
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.
2. Adoption of Maximize Value Resolution: Adoption of Dr.
Scott's Maximize Value Resolution as set forth in Dr. Scott's
Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
3. Selection of Independent Accountants: Ratification of the
Appointment of KPMG Peat Marwick LLP as the Company's Independent
Certified Public Accountants for the Fiscal Year Ending December
31, 1996.
/ / 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, FOR THE RATIFICATION OF INDEPENDENT ACCOUNTANTS
DESCRIBED IN ITEM 3, AND IN THE DISCRETION OF THE
PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENTS, POSTPONEMENTS,
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.
