AMERIPATH INC, S-1/A, 1997-01-21

AMERIPATH INC
S-1/A, 1997-01-21
MISC HEALTH & ALLIED SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1997

REGISTRATION NO. 333-17065
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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AMERIPATH, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8099 65-0642485
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

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7289 GARDEN ROAD, SUITE 200
RIVIERA BEACH, FLORIDA 33404
(561) 845-1850
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)

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JAMES C. NEW
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMERIPATH, INC.
7289 GARDEN ROAD, SUITE 200
RIVIERA BEACH, FLORIDA 33404
(561) 845-1850
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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COPIES OF COMMUNICATIONS TO:

<TABLE>
<S> <C>
DANIEL H. ARONSON, ESQ. JOHN J. HUBER, ESQ.
GREENBERG, TRAURIG, HOFFMAN, LATHAM & WATKINS
LIPOFF, ROSEN & QUENTEL, P.A. 1001 PENNSYLVANIA AVENUE
515 E. LAS OLAS BOULEVARD, SUITE 1500 SUITE 1300
FORT LAUDERDALE, FLORIDA 33301 WASHINGTON, DC 20004
(954) 765-0500 (202) 637-2200
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] ______

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION

Dated January 21, 1997

6,200,000 SHARES

AMERIPATH (LOGO)

COMMON STOCK
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Of the 6,200,000 shares of Common Stock offered hereby (the "Shares"), 5,700,000
shares are being offered by AmeriPath, Inc. (the "Company") and 500,000 shares
are being offered by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The net proceeds
received by the Company will be used to repay indebtedness, including amounts
due to Selling Stockholders. The Company will not receive any proceeds from
shares sold by Selling Stockholders. See "Use of Proceeds." Prior to this
offering, there has been no public market for the Common Stock. It is currently
anticipated that the initial public offering price will be between $13.00 and
$15.00 per share. See "Underwriting." The Shares have been approved for
quotation on the Nasdaq National Market under the symbol "PATH" subject to
official notice of issuance.

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SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(3)
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<S> <C> <C> <C> <C>
PER SHARE $ $ $ $
TOTAL(3) $ $ $ $
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</TABLE>

(1) The Company, the Selling Stockholders and certain other stockholders have
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated at $2,500,000.

(3) The Company, the Selling Stockholders and certain other stockholders have
granted the several Underwriters 30-day options to purchase up to an
additional 130,000 shares, 450,000 shares and 350,000 shares, respectively,
of Common Stock to cover over-allotments, if any. If all such shares are
purchased, the total price to public, underwriting discounts and
commissions, proceeds to Company and proceeds to Selling Stockholders, which
will include proceeds to such other stockholders, will be $ ,
$ , $ and $ , respectively. See "Underwriting."

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The Shares are offered by the several Underwriters named herein when, as
and if received and accepted by them, subject to their right to reject any order
in whole or in part and subject to certain other conditions. It is expected that
delivery of the Shares will be made in New York, New York, on or about
, 1997.
---------------------

DEAN WITTER REYNOLDS INC.
HAMBRECHT & QUIST
PIPER JAFFRAY INC.
THE ROBINSON-HUMPHREY
COMPANY, INC.
, 1997
<PAGE> 3

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.

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TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 8
The Company............................ 15
Use of Proceeds........................ 18
Dividend Policy........................ 18
Dilution............................... 19
Capitalization......................... 20
Selected Consolidated Financial Data... 21
Unaudited Pro Forma Consolidated
Financial Data....................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 30

<CAPTION>
PAGE
-----
<S> <C>
Business............................... 41
Management............................. 54
Certain Transactions................... 60
Principal and Selling Stockholders..... 62
Description of Capital Stock........... 63
Shares Eligible for Future Sale........ 65
Underwriting........................... 67
Legal Matters.......................... 68
Experts................................ 68
Additional Information................. 69
Index to Consolidated Financial
Statements........................... F-1
</TABLE>

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UNTIL , 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent public
accountants and with quarterly reports for each of the first three quarters of
each fiscal year containing unaudited consolidated financial information.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including the Consolidated Financial Statements and related notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes no exercise of the Underwriters' over-
allotment option. AmeriPath, Inc. ("AmPath") is structured and operates as a
holding company, with AmPath as the parent of five wholly-owned subsidiaries,
one of which is located in each state in which the Company operates. Three
wholly-owned subsidiaries (the "Direct Subsidiaries") own and operate nine
practices in Florida, Kentucky and Alabama, which subsidiaries directly own the
laboratory facilities, testing equipment and other assets, and which
subsidiaries directly employ 73 pathologists as well as technical and other
personnel, utilized in such practices. Two wholly-owned subsidiaries (the "PA
Contractor Subsidiaries" and, together with the Direct Subsidiaries, the
"Subsidiaries") are parties to long-term management agreements with three
separately organized professional associations or corporations (collectively,
the "PA Contractors") in Ohio and Texas. The PA Contractors directly employ
eight pathologists and directly contract with the Practice's payors and
providers, while the PA Contractor Subsidiaries directly employ all technical
and non-medical personnel, utilized in such practices. Unless the context
otherwise requires, references to: (a) the Company or AmeriPath include
AmeriPath, Inc., its predecessor and the Subsidiaries; (b) Affiliated Physicians
mean physicians employed by the Direct Subsidiaries or the PA Contractors; and
(c) the Practices mean the 12 physician practices, nine of which are owned and
operated by the Direct Subsidiaries and three of which are managed by the
Company, with medical services provided by the Affiliated Physicians employed by
the PA Contractors.

AmeriPath is the leading physician practice management company focused on
anatomic pathology services. The Company owns or is affiliated with 12 Practices
located in five states which, as of December 31, 1996, employed a total of 81
pathologists. The pathologists provide medical services in 12 outpatient
pathology laboratories owned and operated by the Company, 46 hospital inpatient
laboratories and 17 outpatient surgery centers. Of these pathologists, 77 are
board certified and four are board eligible in anatomic pathology. Thirty-nine
of the pathologists are also board certified in a subspecialty of anatomic
pathology, including dermatopathology (diseases of the skin), hematopathology
(diseases of the blood) and cytopathology (diseases of the cells).

laboratories and managed care organizations and other payors; (v) providing
financial reporting and administration, clerical, purchasing, payroll, billing
and collection, information systems, sales and marketing, risk management,
employee benefits, legal, tax and accounting services to the Practices; (vi)
complying with applicable laws and regulations; and (vii) with respect to the
Company's ownership and operation of anatomic pathology laboratories, providing
slide preparation and other technical services. The Company is not licensed to
practice medicine. The practice of medicine is conducted solely by Affiliated
Physicians employed by either the Direct Subsidiaries or the PA Contractors.

The practice of pathology includes anatomic pathology, which involves the
diagnosis of diseases through examination of tissues and cells, and clinical
pathology, which involves the chemical testing and analysis of body fluids, such
as blood and urine. Clinical pathology involves an interpretation of
standardized laboratory test results, a process which is frequently automated,
while anatomic pathology typically requires the involvement of a pathologist in
making a specific diagnosis. Anatomic pathologists do not treat patients but
rather assist physicians by establishing a definitive diagnosis. In addition,
anatomic pathologists may consult with attending physicians regarding treatment
plans. In these capacities, the anatomic pathologist serves as the "physician's
physician," creating what is often a long-term relationship. Based on
information published by the American Medical Association, there are 14,000
practicing pathologists in the United States. According to the American Society
of Dermatopathology, in 1994, approximately 900 practicing pathologists
specialized in dermatopathology. The Company expects the provision of anatomic
pathology services to continue to grow primarily due to the aging of the United
States population, increased incidence of cancer and medical advancements that
allow for earlier diagnosis and treatment of diseases.

During 1996, the Company acquired or affiliated with 11 anatomic pathology
Practices (the "Recent Acquisitions") in five states: six practices in Florida,
two practices in Ohio and one practice in each of Alabama, Kentucky and Texas.
The Company provides physician practice management services and the Affiliated
Physicians provide medical services in the Company's outpatient laboratories and
in inpatient laboratories owned by hospitals. Eight Practices owned by the
Direct Subsidiaries have exclusive contracts

3
<PAGE> 5

with a total of 46 hospitals to manage their inpatient laboratories and provide
professional pathology services. Four of these eight Practices also have
established outpatient laboratories that focus on outpatient referral sources.
Generally under a hospital contract, the Practice provides the medical director
for the hospital's laboratory who is responsible for the laboratory's anatomic
and clinical pathology operations. Through their relationships with the medical
staff of the hospitals and the local medical community, inpatient based
Practices also provide anatomic pathology services to office based physicians,
thereby capitalizing on the trend towards more procedures being performed in an
outpatient setting. The four other Practices (three of which are PA Contractors)
operate exclusively in outpatient laboratories and provide services to attending
physicians, national clinical laboratories and managed care organizations. The
outpatient pathology services provided by the Practices are focused primarily on
dermatopathology, which relates to the examination of skin biopsies.

The Company's objective is to enhance its position as the leading provider
of physician practice management services to anatomic pathology practices
through the following strategies:

- Focus on Anatomic Pathology. The Company believes that its focus on
providing management services to anatomic pathology practices provides it
with a competitive advantage in the acquisition of such practices. As a
result of this focus, Affiliated Physicians are able to form an internal
network for consultations and to offer specialized services to their
clients. The Company believes that this focus allows it to develop
expertise in managing both inpatient and outpatient pathology practices.

- Acquire Leading Practices. The Company expects to increase its presence
in existing markets and enter into new markets through acquisitions of
and affiliations with leading practices. The Company intends to continue
to source acquisitions and affiliations by capitalizing on the
professional reputations of the Practices and the Affiliated Physicians,
the Company's management experience and the benefits of being part of a
public company, including increased resources and improved access to
capital.

- Expand Sales and Marketing Efforts. The Company focuses on generating
internal growth for the Practices by augmenting their existing physician
and contractual relationships with a professional sales and marketing
program. Since specimens can be transported, the Company's sales and
marketing efforts focus on expanding the geographic scope of the
Practices. The Company is seeking to extend existing contracts with
national clinical laboratories that subcontract for anatomic pathology
services to include multiple Practices that cover a broad geographic
area. The Company believes that its regional business model can offer
national clinical laboratories and managed care organizations a
convenient single source for anatomic pathology services.

- Increase Contracts with Hospitals. The Company seeks to gain additional
exclusive hospital contracts for the Practices through the acquisition of
or affiliation with anatomic pathology practices, as well as through
expansion of the Company's existing relationships with multi-hospital
systems. The Company believes that multi-hospital systems will benefit
from contracting with a single provider of pathology services in a
geographic region. The Company's management of inpatient laboratories can
also facilitate the growth of the Practices' outpatient services in the
same region.

- Achieve Operational Efficiencies. The Company intends to achieve
operational efficiencies by centralizing certain functions, enhancing
Practice efficiency and utilizing its size to negotiate discounts on
equipment, supplies and services. The Company intends to centralize
financial reporting, payroll and benefits administration and regulatory
compliance. The Company plans to introduce "bench-marking" programs to
enhance the efficiency of the Practices.

Through the implementation of these strategies, the Company intends to
develop integrated networks of anatomic pathology practices on a regional basis.
The Company is currently developing a regional business model in Florida, where
it owns and manages seven anatomic pathology practices that extend from Miami to
Orlando and from Fort Myers to Tampa. Together, these Practices employ 62
Affiliated Physicians, have contracts with 29 hospitals and 17 outpatient
surgery centers and operate six outpatient laboratories. The Company has
centralized its marketing efforts to managed care organizations, multi-hospital
systems and national clinical laboratories. The Company intends to leverage size
and geographic coverage to expand contracts with national clinical laboratories
and managed care organizations from a local to a regional basis. The Company's
contract with a national clinical laboratory for the exclusive provision of
anatomic pathology services in five Florida counties was expanded in November
1996 to include 59 of Florida's 67 counties. During 1997, the Company plans to
install a management information system that is designed to expand and enhance
the financial reporting capabilities of the Practices.

4
<PAGE> 6

In February 1994, the Company's predecessor consummated a recapitalization
(the "Recapitalization") in order to capitalize the Company and diversify its
stockholder base. In February 1996, AmPath was formed as a holding company in a
share exchange. The Recapitalization is further described in this Summary in
Footnote 1 to Summary Consolidated Financial Information as well as in "The
Company," "Certain Transactions -- Recapitalization" and Note 1 to Consolidated
Financial Statements.

THE OFFERING

Common Stock Offered by the
Company............................. 5,700,000 shares

Common Stock Offered by the Selling
Stockholders...................... 500,000 shares(1)

Common Stock Outstanding After the
Offering............................ 17,051,356 shares(1)

Use of Proceeds by the Company...... Net proceeds of $71.7 million to the
Company will be used: (i) to repay the
outstanding principal amount of and
accrued interest on the Company's 10%
junior subordinated notes due December
31, 2001 (the "Junior Notes"); (ii) to
repay the outstanding principal amount
of and accrued interest on the
Company's 8% senior subordinated notes
due December 31, 1998 (the "Senior
Notes"); (iii) to pay accrued and
unpaid dividends on the Convertible
Preferred Stock; and (iv) the balance
to repay a portion of the outstanding
indebtedness under the Company's
revolving credit facility (the "Credit
Facility"). See "Use of Proceeds."

Nasdaq National Market Symbol....... "PATH"

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(1) The number of shares outstanding after the offering and the information set
forth in this Prospectus, unless otherwise indicated: (i) reflects a 40 for
one stock split effected as of August 1, 1994 and a 1.8 for one stock split
effected as of January 13, 1997, each by means of a stock dividend; (ii)
assumes the conversion of the Company's Series A 6% redeemable cumulative
convertible preferred stock (the "Convertible Preferred Stock") into shares
of Common Stock immediately prior to the consummation of this offering;
(iii) includes 1,833,433 shares of Common Stock (the "Restricted Stock")
issued during November 1996 pursuant to the Stock Rights Surrender &
Restricted Stock Grant Agreements (collectively, the "Restricted Stock
Agreements") which resulted in the surrender of contingent rights to receive
Common Stock (the "Contingent Shares") that had been granted to the sellers
of nine Practices in connection with the Recent Acquisitions (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Acquisitions"); (iv) excludes 1,620,000 shares of
Common Stock reserved for issuance under the Company's Amended and Restated
1996 Stock Option Plan (the "Option Plan"), of which options to purchase
972,011 shares of Common Stock have been granted and options to purchase
97,200 shares of Common Stock were exercisable at December 31, 1996 (See
"Management -- Option Plan"); and (v) excludes 180,000 shares of Common
Stock reserved for issuance under the Company's 1996 Director Stock Option
Plan (the "Director Option Plan"), of which no options have been granted.
See "Management -- Director Option Plan."

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
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1995 1996
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PRO FORMA PRO FORMA
1992 1993 1994(1) ACTUAL AS ADJUSTED(2) 1995 ACTUAL AS ADJUSTED(2)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total net revenue......... $11,443 $13,419 $14,461 $16,024 $ 81,954 $12,176 $20,840 $ 62,986
Operating costs:
Cost of services........ 8,791 10,803 6,780 8,271 37,433 6,147 10,234 28,622
Selling, general and
administrative
expense............... 1,696 1,634 2,287 2,644 12,733 1,931 4,026 10,657
Provision for doubtful
accounts.............. 787 953 1,003 1,161 7,702 910 1,655 5,804
Amortization expense.... -- -- -- -- 4,536 -- 357 3,386
-------- -------- -------- -------- ---------- -------- -------- ----------

Total operating
costs.......... 11,274 13,390 10,070 12,076 62,404 8,988 16,272 48,469
-------- -------- -------- -------- ---------- -------- -------- ----------
Income from operations.... 169 29 4,391 3,948 19,550 3,188 4,568 14,517
Interest expense.......... (62) (48) (1,584) (1,504) (2,664) (1,151) (1,637) (1,757)
Other income (expense),
net..................... 10 9 (46) (46) 42 (13) (143) (44)
-------- -------- -------- -------- ---------- -------- -------- ----------
Income (loss) before
income taxes............ 117 (10) 2,761 2,398 16,928 2,024 2,788 12,716
Provision for income
taxes(3)................ -- -- 696 900 7,122 759 1,075 5,331
-------- -------- -------- -------- ---------- -------- -------- ----------
Net income (loss)......... $ 117 $ (10) $ 2,065 $ 1,498 $ 9,806 $ 1,265 $ 1,713 $ 7,385
========= ========= ========= ========= ========= ========= ========= =========
Supplemental pro forma
data:(4)
Pro forma net income per
share................. $ .19 $ .55 $ .16 $ .20 $ .42
========= ========= ========= ========= =========
Pro forma weighted
average shares
outstanding........... 8,085 17,742 8,085 8,555 17,742
========= ========= ========= ========= =========
OPERATING DATA(5):
Pathologists.............. 5 5 6 6 75 6 55 80
Hospital contracts........ -- -- -- -- 43 -- 34 46
Outpatient laboratories... 1 1 1 1 12 1 9 12

<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------
PRO PRO FORMA
ACTUAL FORMA(6) AS ADJUSTED(7)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................................................... $ 193 $ 4,008 $ 4,008
Total assets.................................................................... 50,793 143,147 143,147
Long term debt, including current portion....................................... 44,684 96,031 25,242
Convertible Preferred Stock(8).................................................. 6,123 6,123 --
Stockholders' equity (deficit)(1)............................................... (9,416) 14,549 91,461
</TABLE>

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(1) In connection with the Recapitalization consummated on February 14, 1994,
the Company's predecessor, American Laboratory Associates, Inc. ("ALA"):
(i) acquired the assets of E.G. Poulos, M.D., M.J. Demaray, M.D. and A.P.
Kowalczyk, M.D., P.A. ("PDK") from Drs. Poulos, Demaray and Kowalczyk in
exchange for an aggregate of: (a) $3.5 million of Senior Notes; (b) $2.5
million principal amount of 8% non-negotiable subordinated contingent notes
(the "ALA Contingent Notes"); and (c) $20.5 million in cash, financed
partially by borrowings under the Company's line of credit with The First
National Bank of Boston; (ii) issued to Summit Ventures III, L.P., Summit
Subordinated Debt Fund, L.P. and Summit Investors II, L.P. (collectively,
"Summit") and Schroder Incorporated, Schroder Ventures Limited Partnership
and Schroder Ventures U.S. Trust (collectively, "Schroder") an aggregate of
(a) 3,208,120 shares of Convertible Preferred Stock for $5.5 million and
(b) $7.5 million of Junior Notes; and (iii) issued an aggregate of
1,425,600 shares of ALA common stock to Drs. Poulos, Demaray and Kowalczyk
for an aggregate of $1.0 million. The Company recorded a charge of
approximately $24.0 million to retained earnings as a distribution to the
holders of Common Stock. Cost of services includes $3.1 million and $4.4
million in 1992 and 1993, respectively, representing compensation paid to
stockholders in excess of the compensation of such stockholders following
the Recapitalization. Net income for the years ended December 31, 1994 and
1995 and the nine months ended September 30, 1995 and 1996 does not reflect
dividends payable on the Convertible Preferred Stock. See "The Company,"
"Certain Transactions -- Recapitalization" and Note 1 to Consolidated
Financial Statements.

(2) Reflects (i) the Recent Acquisitions, and (ii) the sale of the Shares
offered by the Company hereby, at an assumed initial public offering price
of $14.00 per share, and the application of the estimated net proceeds
therefrom, as if such transactions had been effected on January 1, 1995.
The Recent Acquisitions were financed in part by borrowings of $78.6
million under the Credit Facility, which replaced the Company's line of
credit, and involved the issuance of 2,037,308 shares of Common Stock and
the 1,833,433 shares of Restricted Stock subsequent to September 30, 1996.

(3) Prior to the Recapitalization, the Company elected to be taxed as a
Subchapter S corporation for federal income tax purposes and, accordingly,
consolidated statements of operations in 1992 and 1993, and a portion of
1994, do not include a provision for income taxes.

(4) For all periods presented, pro forma net income per share is computed on
the basis of the weighted average number of shares of common stock and
common stock equivalents, including: (i) the number of shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock; (ii)
Common Stock issued by the Company during the 12 months immediately
preceding the date of this Prospectus; (iii) with respect to the "Actual"
columns above, the Restricted Stock issued in connection with the Recent
Acquisitions completed prior to September 30, 1996 and with respect to "Pro
Forma" columns above, the Restricted Stock issued in connection with all of
the Recent Acquisitions; and (iv) shares of Common Stock which become
issuable pursuant to the grant of Common Stock options, using the treasury
stock method and an assumed initial public offering price of $14.00 per
share.

(5) Operating data is measured as of the end of the period indicated.

(6) Pro forma to reflect: (i) six Recent Acquisitions which were completed in
the fourth quarter of 1996 (the "Fourth Quarter Recent Acquisitions"); and
(ii) the issuance of (a) the 1,833,433 shares of Restricted Stock and (b)
85,999 shares of Common Stock for loan fees related to the Credit Facility
(collectively, the "Fourth Quarter Stock Issuances"), as if each such
transaction had occurred on September 30, 1996.

(7) Pro forma as adjusted to reflect the conversion of the Convertible
Preferred Stock and the sale of the Shares offered by the Company hereby at
an assumed initial public offering price of $14.00 per share, and the
application of the estimated net proceeds therefrom, as if both
transactions had occurred as of September 30, 1996.
(8) Includes Convertible Preferred Stock of $5.2 million plus accrued and
unpaid dividends of $925,000 at September 30, 1996.

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<PAGE> 9

RISK FACTORS

Reliance upon Government Programs. The Company derived 57.0%, 43.3% and an
estimated 38.0% of collections for the year ended December 31, 1995, the nine
months ended September 30, 1996 and on a pro forma basis the nine months ended
September 30, 1996, respectively, from payments made by government sponsored
healthcare programs (principally Medicare and Medicaid). Regulatory changes or
enactment of legislation, including legislation to balance the federal budget,
can result in reduction in reimbursement rates, limitations in reimbursement,
program reductions or elimination of coverage for certain individuals under the
programs. Such regulatory changes or legislation could have a material adverse
effect on the Company's financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Introduction." Legislation could also result in a reduction of
Medicare and Medicaid funding or an increase in state discretion over the
funding of Medicaid, or a combination thereof. Increased state discretion in
Medicare and Medicaid funding, coupled with the fact that such expenditures
comprise a substantial and growing share of state budgets, could lead to
significant reductions in reimbursement. Since these programs generally
reimburse on a fee schedule basis, rather than a charge-related basis, the
Company generally cannot increase net revenue by increasing the amount charged
for services provided. In addition, cost increases may not be able to be
recovered from government payors. Furthermore, because of cost containment
measures and market changes in non-governmental payors, the Company may not be
able to shift cost increases to, or recover them from, non-governmental payors.
Future increases in services provided by health maintenance organizations
("HMOs") and other managed care organizations to Medicare, Medicaid and other
government program beneficiaries will result in a change in referral practices,
and may result in the elimination or reduction of referrals or payments to
providers. Some states have recently enacted legislation to require that all
Medicaid patients be treated by HMOs, and similar legislation may be enacted in
other states, which could result in the redirection of certain referrals away
from the Practices or reduce reimbursement for services provided for such
patients. Funds received under these programs are subject to audit with respect
to the proper billing for laboratory and physician services and, accordingly,
retroactive adjustments of revenue from these programs may occur. Government
sponsored healthcare program changes which result in the inability to recover
cost increases through price increases or otherwise, could have a material
adverse effect on the Company's financial condition and results of operations.
See "Business -- Government Regulation."

Risks Relating to Acquisition Strategy. The Company's strategy includes
growth through acquisitions of and affiliations with practices that provide
anatomic pathology services. The Recent Acquisitions were the Company's first
actions in implementing this strategy as well as its first purchases of
pathology practices. In implementing its strategy, the Company will compete with
other potential acquirors, some of which may have greater financial resources
than the Company. Competition for acquisitions may intensify due to ongoing
consolidation in the healthcare industry, which may increase the costs of
capitalizing on acquisition opportunities. Several companies, both publicly
traded and privately held, which may have greater resources than the Company are
pursuing the acquisition of practices. In addition, companies in other
healthcare segments such as hospitals and managed care organizations, many of
which have greater financial and other resources than the Company, may pursue
the acquisition of practices. While the Company believes that it will be able to
compete for acquisitions, particularly in an environment of reduced
reimbursement rates, there can be no assurance that new competitors will not
enter the market, the Company will be able to identify and complete future
acquisitions or competitors will not make it more difficult for the Company to
complete acquisitions on favorable terms. While the Company routinely evaluates
acquisition and affiliation candidates and is continually engaged in on going
discussions, at present the Company is not involved in negotiations with any
such candidate, nor has it reached any agreement or understanding with respect
to any future acquisition or affiliation. In pursuing its acquisition strategy,
the Company intends to expand in areas where the Practices currently operate as
well as in new markets. Although the Company believes that it is in compliance
with applicable anti-trust laws, there can be no assurance that governmental
authorities would not view the Company as being dominant in a particular market
and, therefore, cause the Company to divest itself of any particular practice.
Acquisitions involve numerous short and long term risks, including diversion of
management's attention, failure to retain key personnel and contracts of the
acquired practices, government investigations of the activities of practices
prior to being acquired, inability to integrate acquired businesses

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<PAGE> 10

without material disruption, amortization of acquired intangible assets and the
effects of contingent purchase price payments and one-time acquisition expenses.
There can be no assurance that the Recent Acquisitions or any future acquisition
will be successfully integrated into the Company's operations or that practices,
once acquired, will grow. Consummation of acquisitions or affiliations could
result in the incurrence or assumption by the Company of additional
indebtedness, including contingent indebtedness, or the issuance of additional
equity. The issuance of shares of Common Stock to make acquisitions or
affiliations may result in dilution to the Company's stockholders. There can be
no assurance that the Company will be able to implement its acquisition
strategy, or that this strategy will ultimately be successful. See "Use of
Proceeds," and "Business -- Business Strategy."

Risks Relating to Growth. In addition to acquisitions of and affiliations
with practices, the Company intends to continue to grow through internal
expansion. The Company derives its net revenue from the net revenue of the
Practices. The Company's growth strategy requires: (i) capital investment; (ii)
compliance with present or future laws and regulations that may differ from
those pursuant to which the Company currently operates; (iii) further
development of the Company's corporate management and operational, financial and
accounting resources to accommodate and manage growth; and (iv) the ability to
expand the Affiliated Physician and employee base and to train, motivate and
manage employees of the Subsidiaries. While the Company is in the process of
integrating the marketing activities, courier networks and management
information systems of the Practices and of implementing consistent billing
systems, accounting policies and internal control procedures in the Practices,
delays in completing, or the inability to successfully complete such processes
could have a material adverse effect on the Company's financial condition and
results of operations. Although the Company is taking steps to manage rapid
growth, there can be no assurance that the Company will be able to do so
efficiently or that the Company's growth rate will continue in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Physician, PA Contractor and Other Contractual
Relationships" and "Business -- Government Regulation."

Dependence on Pathologists. The Company's business is dependent upon the
Practices' recruiting and retaining pathologists, particularly those with
subspecialities, such as dermatopathology. While the Practices have been able to
recruit and retain the Affiliated Physicians, no assurance can be given that the
Company or the Practices will be able to continue to do so on terms similar to
its current arrangements. The relationship between the pathologists and their
respective local medical communities is important to the profitability of the
Practices. In the event that a significant number of Affiliated Physicians were
to terminate their relationships with the Direct Subsidiaries or the PA
Contractors or become unable or unwilling to continue their employment, the
Company's business would be materially adversely affected. See
"Business -- Physician, PA Contractor and Other Contractual Relationships" and
"Business -- Affiliation Structure."

Reimbursement Risks. Virtually all of the Company's net revenue in 1995,
the nine months ended September 30, 1996 and on a pro forma basis the nine
months ended September 30, 1996 was derived from the Practices' charging for
services on a fee-for-service basis. Accordingly, the Company assumes the
financial risk related to collection, including the potential uncollectibility
of accounts, long collection cycles for accounts receivable and delays attendant
to reimbursement by third party payors, such as governmental programs, private
insurance plans and managed care organizations. Increases in write-offs of
doubtful accounts, delays in receiving reimbursement or potential retroactive
adjustments resulting from audits by government payors may require the Company
to borrow funds to meet its current obligations. The Company's financial
condition and results of operations would be adversely affected if it were
unable to borrow funds on terms acceptable to the Company. See
"Business -- Government Regulation."

Cancellation or Non-renewal of Hospital Contracts; Dependence on Hospital
Contracts. Hospital contracts maintained by the Direct Subsidiaries generally
have terms of one to five years and are cancelable by the hospital upon notice
of 30 to 180 days. While the Practices have been able to successfully negotiate
renewal of such contracts in the past, no assurance can be given that such
contracts with hospitals will not be canceled or will be renewed in the future.
Loss of any particular hospital contract would result in a loss of net revenue
to the Practice, and therefore to the Company, from that contract as well as
from outpatient net revenue that may be derived from the relationship with a
hospital and its medical staff. In addition, consolidation in the hospital
industry may result in fewer hospitals or fewer laboratories as hospitals move
to

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<PAGE> 11

combine their operations. At December 31, 1996, the Direct Subsidiaries had 46
hospital contracts, 20 of which were with hospitals owned by Columbia/HCA
Healthcare Corporation ("Columbia/HCA"). For the nine months ended September 30,
1996 and on a pro forma basis for the same period, 15.3% and 24.5%,
respectively, of net revenue was generated directly from contracts with
hospitals owned by Columbia/HCA. If the hospital contracts are canceled, not
renewed or not replaced with other contracts on at least as favorable terms, the
Company's financial condition and results of operations would be materially
adversely affected. See "Business -- Physician, PA Contractor and Other
Contractual Relationships."

Unpaid Contingent Acquisition Consideration. In connection with the Recent
Acquisitions, the Company has agreed to pay to sellers of ten Practices
additional consideration in the form of debt obligations (the "Contingent
Notes"), payment of which is contingent upon the Practice achieving its
specified profitability criteria over periods ranging from three to five years
from the date of acquisition. The principal amount of Contingent Notes to be
paid cannot be determined until the contingency periods terminate and
achievement of the profitability criteria is determined. If the maximum criteria
for the contingency payments with respect to each Recent Acquisition are
achieved, the Company will be obligated to make cash payments of $31.3 million
between December 31, 1996 and September 30, 2001. Lesser amounts of cash will be
paid if the maximum financial criteria are not met. Payments pursuant to the
Contingent Notes will result in an increase to the purchase price for such
Practice and an adjustment to goodwill attributable to such Practice. Although
the Company believes that it will be able to make such cash payments from
internally generated funds or proceeds of future borrowings, there can be no
assurance that the Company will be able to do so. The Contingent Notes are
payable annually only if the Practice attains its specified profitability
criteria. To the extent profitability goals are met, the incremental cash
generated from operations would exceed the cash required to satisfy the
Company's contingent obligations in any one year in which a payment is to be
made. Since the profitability criteria are calculated on a cumulative basis over
the period of the Contingent Notes, the performance of a Practice in one year
may affect the payment of the Contingent Notes in another year. In the event the
profitability criteria for a Practice are not met in a particular year, the
shortfall in that year may be satisfied by excess profitability in a later year,
in which event a payment would be made in that later year. To the extent that
the maximum profitability criteria are exceeded in any particular year, the
amount of the excess will be carried backward to a prior year when the
profitability criteria were not satisfied or forward to a subsequent year in
determining whether the profitability criteria for such year have been met. This
cumulative effect may cause contingent payments to be made with respect to a
year in which profitability criteria would not have been met if such year was
evaluated separately, and could cause contingent payments with respect to
multiple years to become due in a single or later year. Payments of Contingent
Notes will affect the Company's earnings per share and may cause volatility in
the market price of the Common Stock. While the Company has discontinued the use
of Contingent Shares, the Company expects to continue to use Contingent Notes as
partial consideration for acquisitions and affiliations. While the Company
believes that the Contingent Notes do not violate federal or state
"anti-kickback" or "self-referral" statutes, there can be no assurance that such
arrangements will not be challenged by regulatory authorities seeking to enforce
such laws. See "Business -- Government Regulation," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 3 to the
Consolidated Financial Statements.

Risks Related to Intangible Assets. The Recent Acquisitions resulted in
significant increases in net identifiable intangible assets and goodwill. Net
identifiable intangible assets, which include hospital contracts, physician
referral lists and laboratory contracts acquired in the Recent Acquisitions were
approximately $26.7 million at September 30, 1996 and $59.9 million on a pro
forma, as adjusted, basis at September 30, 1996 representing approximately 52.6%
and 41.9%, respectively, of the Company's total assets. Net identifiable
intangible assets are recorded at fair value on the date of acquisition and are
being amortized over periods ranging from 10 to 40 years, or a weighted average
of 27.0 years. Goodwill, which relates to the excess of cost over the fair value
of net assets of businesses acquired, was approximately $10.1 million at
September 30, 1996 and $58.5 million on a pro forma, as adjusted, basis at
September 30, 1996 representing approximately 19.8% and 40.9%, respectively, of
the Company's total assets. The Company amortizes goodwill on a straight line
basis over periods ranging from 15 to 35 years, or a weighted average of 34.2
years. There can be no assurance that the value of intangible assets will ever
be realized by the Company. On an ongoing basis, the Company makes an evaluation
based on undiscounted cash flows, whether events and circumstances indicate that
all or a

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<PAGE> 12

portion of the carrying value of intangible assets may no longer be recoverable,
in which case an additional charge to earnings may be necessary. Although at
September 30, 1996 the net amortized balance of intangible assets is not
considered to be impaired, any future determination requiring the write off of a
significant portion of unamortized intangible assets could have a material
adverse effect on the Company's financial condition and results of operations.
See Notes 2 and 6 to the Consolidated Financial Statements.

Possible Reform of Healthcare Industry. Federal and state governments have
recently focused significant attention on healthcare reform. It is not possible
to predict which, if any, proposal that has been or will be considered will be
adopted. There can be no assurance that the healthcare regulatory environment
will not change so as to restrict the existing operations of, impose additional
requirements on or limit the expansion of the Company and the PA Contractors.
Costs of compliance with changes in government regulations may not be subject to
recovery by the Company through price increases. Some of the proposals under
consideration, or others which may be introduced, could, if adopted, have a
material adverse effect on the Company's financial condition and results of
operations. See "Business -- Government Regulation."

Competition. The healthcare industry generally, and physician practice
management specifically, is highly competitive and has been subject to continual
changes in the method in which healthcare services are provided and the manner
in which healthcare providers are selected and compensated. The Company believes
that private and public reforms in the healthcare industry emphasizing cost
containment and accountability have resulted in increased competition and will
result in an increasing shift of hospital and related medical facilities from
individual or small practices to large practices and physician practice
management companies. The Company competes with other physician practice
management companies that are focused on owning or providing management services
to anatomic pathology practices. In addition, through its Direct Subsidiaries
and affiliation with PA Contractors, the Company's Practices also compete in
local markets with anatomic pathology practices, national clinical laboratories,
hospitals and clinics which provide anatomic pathology medical services. The
Company competes with several other companies for the acquisition of anatomic
pathology practices. In addition, companies in other healthcare industry
segments, such as hospitals, HMOs and large physician practices, many of which
have financial and other resources greater than those of the Company, may become
competitors in acquiring, or providing physician practice management services
to, anatomic pathology practices. There can be no assurance that the Company
will be able to compete effectively or that additional competitors will not
enter its markets or make it more difficult for the Company to acquire practices
on favorable terms. See "Business -- Competition."

State Laws Regarding Prohibition of Corporate Practice of Medicine. The
laws of many states prohibit business corporations, such as AmPath and its
subsidiaries, from exercising control over the medical judgments or decisions of
physicians and from engaging in certain financial arrangements, such as fee
splitting with physicians. These laws and their interpretations vary from state
to state and are enforced by both the courts and regulatory authorities, each
with broad discretion. Expansion into certain jurisdictions may require
structural and organizational modifications of the Company's form of
relationship with practices. Wherever possible, AmPath has, and will continue to
establish, wholly-owned subsidiaries incorporated in the respective state that
will own, control and operate practices and employ pathologists in that state.
In states with laws that prohibit such structure, AmPath will establish
affiliations and related arrangements that achieve the substance of such
ownership, control and operation, to the maximum extent practicable in
accordance with applicable state law, including the use of long-term management
agreements with professional associations and corporations. The Company provides
physician practice management services to 12 Practices in five states, including
Florida, Alabama, Kentucky, Texas and Ohio. In Florida, Alabama and Kentucky,
states that do not prohibit business corporations from directly employing
physicians, the Direct Subsidiaries employ physicians to provide medical
services. In Texas and Ohio, AmeriPath's PA Contractor Subsidiaries have
long-term management agreements with the PA Contractors (each of which is owned
by an Affiliated Physician or a trust of which AmPath is the sole beneficiary),
which in turn employ physicians to provide necessary medical services to
facilities for which the Company provides physician practice management
services. AmPath plans to organize a controlled non-profit corporate subsidiary
in Texas by June 1997 which will merge with or own the PA Contractor organized
in Texas (the "Texas PA") and will assume the management service agreement from
such Texas PA. In Texas and Ohio, a wholly-owned subsidiary of AmPath performs
only laboratory,

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<PAGE> 13

technical and non-medical administrative services and does not exercise
influence or control over the practice of medicine by the physicians employed by
the PA Contractors nor does the subsidiary practice medicine or represent such
to the public or to clients. Although the Company believes, based upon the
advice of counsel, that it is in compliance and that the Texas non-profit
corporate subsidiary will be in compliance with applicable state laws and
regulations relating to the corporate practice of medicine, there can be no
assurance that regulatory authorities or other parties will not assert that
AmPath or a Subsidiary is engaged in the corporate practice of medicine in such
states or that the management and administration fees paid to the Company by the
PA Contractors constitute fee splitting or the corporate practice of medicine.
If such a claim was successfully asserted, the Company could be subject to civil
and criminal penalties and the Company or the PA Contractor Subsidiaries could
be required to restructure their contractual arrangements. Such results or the
inability of the Company or the PA Contractor Subsidiaries to successfully
restructure their relationships to comply with such statutes could have a
material adverse effect on the Company's financial condition and results of
operations. See "Business -- Affiliation Structure" and " -- Physician, PA
Contractor and Other Contractual Relationships."

Effect of Government Regulation. The business of the Company and the PA
Contractors is subject to extensive and increasing regulation by federal and
state governments. Laws and regulations governing the Company's activities
include anti-kickback and self-referral laws, fraud and abuse statutes and
licensing requirements. These laws and regulations are enforced by various
federal and state regulatory agencies, including the Office of the Inspector
General ("OIG") of the Department of Health and Human Services ("HHS"). The
Health Insurance Portability and Accountability Act of 1996 has strengthened the
powers of the OIG and increased the funding for healthcare fraud investigations.
As a result, the OIG is currently expanding the scope of its healthcare fraud
investigations. In addition, federal and certain state laws provide individuals
(so-called "whistle-blowers") with a right to bring claims on behalf of federal
and state government agencies, and with a significant economic incentive to the
whistle-blower in the event a claim produces monetary recovery. These actions
are becoming increasingly prevalent in the healthcare industry, and have
resulted in increased scrutiny of healthcare providers. Federal anti-kickback
laws and regulations prohibit any knowing and willful offer, payment,
solicitation or receipt of any form of remuneration, either directly or
indirectly, in return for, or to induce: (i) the referral of an individual for a
service for which payment may be made by Medicare and Medicaid or certain other
federal healthcare programs; or (ii) the purchasing, leasing, ordering or
arranging for, or recommending the purchase, lease or order of, any service or
item for which payment may be made by Medicare, Medicaid or certain other
federal healthcare programs. Violations of federal anti-kickback rules are
punishable by monetary fines, civil and criminal penalties and exclusion from
participation in Medicare and Medicaid programs. The Practices rely upon
referrals of patient tests from physicians. Subject to certain exceptions, laws
known as "Stark I" and "Stark II" prohibit Medicare or Medicaid payments for
certain services furnished by an entity pursuant to referrals by a physician who
has a financial relationship with the entity through ownership, investment or a
compensation arrangement. This prohibition is broad and extends to immediate
family members of the physician and to the other physicians in a group practice.
See "Business -- Government Regulation." Possible sanctions against the Company,
the PA Contractors and the Affiliated Physicians for violation of these laws
include civil monetary penalties, exclusion from Medicare and Medicaid programs
and forfeiture of amounts collected in violation of such prohibitions. The
Company will notify physicians of the restrictions on referrals by physicians
who own capital stock of the Company and will seek a certification of compliance
from all physicians who refer tests to the Practices. Each of the states in
which the Subsidiaries and the PA Contractors do business, except Alabama, has
similar anti-kickback, anti-fee splitting and self-referral laws, which apply to
all payors and impose substantial penalties for violations. Certain of these
laws contain exceptions for relationships with pathologists and group practices.
Many of the Affiliated Physicians have a financial interest in the Company as a
result of the acquisition of their respective practices. These interests include
Contingent Notes and Common Stock which have been used by AmPath to purchase at
fair market value the assets or stock of the Practices. While the Company
believes that the current operations and transactions of the Company and the PA
Contractors comply with existing laws and regulations, the federal and state
self-referral and fraud and abuse laws and regulations are broadly written, and
the possibility exists that such current operations or transactions may be
deemed to violate the federal or state fraud and abuse or self-referral
prohibitions. Further, there can

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<PAGE> 14

be no assurance that physicians who own capital stock of the Company will not
violate these laws or that the Company will have knowledge of the identity of
all beneficial owners of its capital stock. In connection with the Recent
Acquisitions, the Company reviewed the Practices' compliance with federal and
state healthcare laws and regulations and revised certain policies and
procedures with respect to certain of the Practices. While the Company believes
that the operations of the Practices prior to their acquisition were generally
in compliance with such laws and regulations, there can be no assurance that the
prior operations of the Practices, if reviewed, would be found to be in full
compliance with such laws and regulations, as such laws may be ultimately
interpreted. A violation of such laws and regulations by a Practice prior to its
acquisition could result in civil and criminal penalties, exclusion from
participation in Medicare and Medicaid programs and/or loss of a physician's
license to practice medicine. To the extent the Practices were found not to be
in compliance with such laws and regulations, the Company's financial condition
and results of operations could be materially adversely affected. The
relationships, including fee payments, among the PA Contractors, hospital
clients and physicians have not been examined by federal or state authorities
under these laws and regulations. The Medicare and Medicaid fraud and abuse
provisions apply to laboratories participating in such programs. These
provisions include prohibitions of improper and unnecessary billing for tests
under these programs. Penalties for violations of these federal laws include
exclusion from participation in Medicare and Medicaid programs, asset
forfeitures and civil and criminal penalties. Although the Company believes that
the Company and the PA Contractors are in compliance with these laws and
regulations, there can be no assurance that federal or state regulatory
authorities will not challenge the current or future activities of the Company
or the PA Contractors under these laws. See "Business -- Government Regulation."

Professional Liability and Insurance. The business of the Company and the
PA Contractors entails an inherent risk of claims of liability for acts of
Affiliated Physicians and laboratory technicians. The Company, the PA
Contractors and Affiliated Physicians periodically become involved as defendants
in medical malpractice lawsuits, some of which are currently ongoing, and are
subject to the attendant risk of substantial damage awards. See
"Business -- Legal Proceedings." Certain of the Practices' contracts with
hospitals require the Practices to indemnify certain parties for losses
resulting from the negligence of Affiliated Physicians. The Company maintains
malpractice insurance coverage for the Affiliated Physicians, including coverage
for prior acts, with per physician primary limits of $1.0 million per occurrence
and $5.0 million in the annual aggregate, as well as surplus coverage shared
with the Company for up to $15.0 million per occurrence and $20.0 million in the
aggregate. While the Company believes it has adequate professional liability
insurance coverage for itself, the PA Contractors and each Affiliated Physician,
there can be no assurance that a future claim or claims will not be successful
or if successful will not exceed the limits of available insurance coverage or
that such coverage will continue to be available at acceptable costs and on
favorable terms. See "Business -- Insurance." A malpractice claim asserted
against the Company, a PA Contractor or an Affiliated Physician could, in the
event of an adverse outcome, have a material adverse effect on the Company's
financial condition and results of operations.

Dependence on Key Personnel. The success of the Company is dependent upon
the efforts and abilities of its key management personnel, particularly the
President and Chief Executive Officer, James C. New, and Executive Vice
President and Chief Financial Officer, Robert P. Wynn. The loss of service of
one or both of these persons could have a material adverse effect on the
Company's financial condition and results of operations. See
"Management -- Employment Agreements."

Control by Current Stockholders. Upon completion of this offering, Summit
will beneficially own an aggregate of approximately 28.5% of the outstanding
shares of Common Stock and the Company's Chief Executive Officer, Chief
Financial Officer and Affiliated Physicians will beneficially own an aggregate
of approximately 34.1% of the outstanding shares of Common Stock. Accordingly,
Summit, such executive officers and Affiliated Physicians will be able, if
acting together, to elect all of the Company's directors, determine the outcome
of all corporate actions requiring approval of the Board of Directors or
stockholders and to control the business affairs and policies of the Company.
Such control may also have the effect of delaying or preventing a change in
control of the Company and consequently may adversely affect the market price of
the Common Stock. See "Management" and "Principal and Selling Stockholders."

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No Prior Market; Volatility of Stock Price. Prior to this offering, there
has been no public market for the Common Stock, and there can be no assurance
that an active trading market will develop or be sustained after this offering.
The initial public offering price will be determined by negotiation among the
Company, the Selling Stockholders and the representatives of the Underwriters.
See "Underwriting." There has been significant volatility in the market price of
securities of healthcare companies that often has been unrelated to the
operating performance of such companies. The Company believes that various
factors, such as legislative and regulatory developments, quarterly variations
in the actual or anticipated results of operations of the Company, and lower
revenues or earnings than those anticipated by securities analysts in the
financial results of the Company, the overall economy and the financial markets,
could cause the price of the Common Stock to fluctuate substantially.

Immediate and Substantial Dilution. The purchasers of the Shares will
experience immediate and substantial dilution in net tangible book value of
approximately $14.49 per share of Common Stock as a result of the sale of
5,700,000 shares of Common Stock offered by the Company hereby. See "Dilution."

Shares Eligible for Future Sale. After consummation of this offering,
10,851,356 shares, representing 63.6% of the outstanding shares of Common Stock,
will be eligible for future sale in the public market at prescribed times
pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). Of such shares, 6,678,609 shares are subject to registration
rights and all shares are subject to lock-up agreements for a period of 180 days
following the date of this Prospectus. Sales of such shares in the public
market, or the perception that such sales may occur, could adversely affect the
market price of the Common Stock or impair the Company's ability to raise
additional capital in the future through the sale of equity securities. See
"Dilution," "Shares Eligible for Future Sale" and "Underwriting."

Anti-Takeover Provisions; Possible Issuance of Preferred Stock. Certain
provisions of the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Restated Bylaws (the "Bylaws") may be
deemed to have anti-takeover effects and may delay, defer or prevent a takeover
attempt that a stockholder might consider in its best interest. Such provisions
of the Certificate of Incorporation and Bylaws: (i) divide the Company's Board
of Directors into three classes, each of which will serve for different
three-year periods; (ii) provide that the stockholders may not take action by
written consent, but only at duly called annual or special meetings of
stockholders; (iii) provide that special meetings of the stockholders may be
called only by the Chairman of the Board of Directors, a majority of the entire
Board of Directors or the Chief Executive Officer; and (iv) establish certain
advance notice procedures for nomination of candidates for election as directors
and for stockholder proposals to be considered at annual stockholders' meetings.
The Certificate of Incorporation also authorizes the Board of Directors to
determine the rights, preferences, privileges and restrictions of unissued
series of the Company's authorized preferred stock (the "Preferred Stock") and
to fix the number of shares and the designation of any such series, without any
vote or action by stockholders. Thus, the Board of Directors can authorize and
issue shares of Preferred Stock with voting or conversion rights that could
adversely affect the voting or other rights of holders of the Common Stock.
Further, certain provisions of the Delaware General Corporation Law ("DGCL") may
have the effect of delaying, deferring or preventing a change in control of the
Company. See "Description of Capital Stock -- Anti-takeover Effects of Certain
Provisions of Delaware Law and the Certificate of Incorporation and Bylaws."

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THE COMPANY

AmeriPath is the leading physician practice management company focused on
anatomic pathology services. The Company owns or is affiliated with 12 Practices
located in five states which, as of December 31, 1996, employed a total of 81
pathologists. The pathologists provide medical services in 12 outpatient
laboratories owned and operated by the Company, 46 hospital inpatient
laboratories and 17 outpatient surgery centers. Of these pathologists, 77 are
board certified and four are board eligible in anatomic pathology. Thirty-nine
of the pathologists are also board certified in a subspecialty of anatomic
pathology, including dermatopathology (diseases of the skin), hematopathology
(diseases of the blood) and cytopathology (diseases of the cells).

The Company completed the Recapitalization in 1994 pursuant to which the
Company's predecessor, ALA, (i) acquired the assets of PDK, an outpatient
pathology practice formed in 1982 in Fort Lauderdale, Florida; (ii) issued
shares of Convertible Preferred Stock to Summit and Schroder; and (iii) issued
common stock to the former owners of PDK. The Recapitalization resulted in a
more diversified stockholder base with the investment by Summit and Schroder. In
February 1996, AmPath was formed as a holding company (the "Share Exchange") and
acquired the practice of Demaray and Poulos, P.A. ("D&P"), an inpatient practice
based in Fort Lauderdale, Florida, that provides pathology services to three
hospitals. The acquisition of D&P expanded the Company's presence in Broward
County, Florida. See "Certain Transactions -- Recapitalization."

The Company's principal executive offices are located at 7289 Garden Road,
Suite 200, Riviera Beach, Florida 33404 and its telephone number is (561)
845-1850.

RECENT ACQUISITIONS

In January 1996, with the appointment of James C. New as the Company's
President and Chief Executive Officer, the Company accelerated the acquisition
program it initiated in 1995. Since June 1996, the Company has acquired or
affiliated with ten anatomic pathology practices in five states: five practices
in Florida, one practice in Alabama, one practice in Kentucky, two practices in
Ohio and one practice in Texas. The Recent Acquisitions, which include the ten
Practices referred to above as well as D&P, established the Company -- in terms
of geographic breadth, number of physicians, number of practices and dollar
amount of net revenue -- as the leading physician practice management company
focused on anatomic pathology. Since the Recent Acquisitions, the Company has
integrated certain aspects of the billing, sales and marketing, accounting and
certain other functions of the Practices. Integration of such functions has
resulted in, among other things, certain cost efficiencies and more effective
marketing efforts. The Company is consolidating the financial reporting systems
of and implementing uniform internal control procedures for the acquired
Practices.

In acquiring or affiliating with an anatomic pathology practice, the
Company generally (to the extent permitted by applicable state law): (i)
purchases all of the assets of that practice, including, but not limited to, its
fixed assets (including laboratory facilities and testing equipment), referral
base, customer lists, contract rights, accounts receivable and goodwill and
other identifiable intangibles; and (ii) through a wholly-owned subsidiary, (a)
directly employs all technical and other personnel utilized in such practice and
(b) except in Ohio and Texas (where the PA Contractor employs the physicians),
directly employs the pathologists who conduct the practice of medicine. The
Recent Acquisitions in Ohio and Texas were effected (in addition to the
foregoing) through (1) long-term management agreements between the PA Contractor
Subsidiaries and each PA Contractor in such states, and (2) in the case of the
two Practices in Ohio, contribution of the stock of each Ohio PA to trusts, of
which AmeriPath is the sole beneficiary, and, in the case of the Practice in
Texas, an agreement by the Affiliated Physician who owns all of the stock in the
Texas PA Contractor to transfer such stock to a corporation controlled by
AmeriPath (without further consideration to or action on the part of such
Affiliated Physician). The Recent Acquisitions were funded with various
combinations of cash, Common Stock, debt and contingent consideration. The
aggregate non-contingent purchase price paid for the Recent Acquisitions was
approximately $108.0 million. For additional information regarding the
consideration paid in the Recent Acquisitions, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent
Acquisitions" and Note 3 to the Consolidated Financial Statements. All

15
<PAGE> 17

references below to numbers of facilities, contracts and employees, including
pathologists, are as of December 31, 1996.

FLORIDA

Since June 1996, AmeriPath completed five acquisitions in Florida which,
together with the prior acquisitions of PDK and D&P, established the Company as
the leading provider of anatomic pathology services in Florida and established
the Company's model for growth.

Derrick and Associates Pathology, Inc. ("Derrick") was acquired in June
1996. Based in Orlando and founded in 1975, Derrick employs 148 people,
including 24 pathologists, and provides a broad range of pathology
subspecialties, including dermatopathology. Derrick's physicians provide
anatomic pathology services at 14 hospitals and 13 outpatient surgery centers
throughout Central and Southern Florida and Derrick operates one of the largest
outpatient anatomic pathology laboratories in Florida. The acquisition of
Derrick established the Company's presence in Central Florida.

Amazon and Rosen, M.D., Inc. d/b/a Florida Pathology Associates ("FPA") was
also acquired in June 1996. Based in Miami and founded in 1988, FPA employs 14
people, including two pathologists, and operates the pathology laboratory in the
Columbia Miami Heart Institute, a Columbia/HCA hospital. The acquisition of FPA
established the Company's presence in Dade County.

Volusia Pathology Group, M.D., Inc. ("Volusia") was acquired in October
1996. Based in Ormond Beach and founded in 1970, Volusia employs 34 people,
including seven pathologists. Volusia's operations are primarily hospital based,
with three hospital contracts in the Daytona area. Volusia also operates an
outpatient anatomic pathology laboratory.

Drs. Seidenstein, Levine & Associates, Inc. ("Seidenstein") was also
acquired in October 1996. Based in Ft. Myers and founded in 1983, Seidenstein
employs 40 people, including nine pathologists who provide anatomic pathology
services at five hospitals and three outpatient surgery centers owned by
Columbia/HCA. Seidenstein also manages an outpatient anatomic pathology
laboratory and an outpatient clinical laboratory owned by Columbia/HCA.

Gulf Coast Pathology Associates, Inc. ("Gulf Coast") was acquired in
November 1996. Based in Cape Coral and founded in 1986, Gulf Coast employs 31
people, including five pathologists, and has contracts with three hospitals and
four outpatient surgery centers. Gulf Coast also operates two outpatient
clinical laboratories. Together with the acquisition of Seidenstein, Gulf Coast
established the Company's presence, and provides the Company strategic,
marketing and other operational synergies, on the West Coast of Florida.

ALABAMA

SkinPath, P.C. ("SkinPath") was acquired in August 1996. Based in
Birmingham and founded in 1995, SkinPath employs 22 people, including three
pathologists, and operates an outpatient dermatopathology laboratory. SkinPath
represented the Company's first entry into a market outside Florida and
established its presence in Alabama.

KENTUCKY

Pathology Associates, P.S.C. and Technical Pathology Services,
Inc. (collectively, "Pathology Associates") was acquired in August 1996. Based
in Lexington and founded in 1988, Pathology Associates employs 57 people,
including eight pathologists. Pathology Associates operates two outpatient
cytology laboratories and an outpatient histology laboratory and has contracts
with 16 hospitals. The acquisition of Pathology Associates represented the
Company's initial acquisition in the Midwest and established the Company's
presence in Kentucky.

OHIO

Beno Michel, M.D., Inc. d/b/a Cutaneous Pathology & Immunofluorescense
Laboratory ("CPI") became affiliated with the Company in October 1996. Based in
Cleveland and founded in 1976, CPI employs 15 people, including three
pathologists who each specialize in dermatopathology. CPI operates an outpatient
dermatopathology laboratory and a dermatology practice.

16
<PAGE> 18

David R. Barron, M.D., Inc. d/b/a Richfield Laboratory of Dermatopathology
("Richfield Labs") also became affiliated with the Company in October 1996.
Richfield Labs, founded in 1968, employs 32 people, including three
pathologists, and operates the largest outpatient dermatopathology laboratory in
Cincinnati. Together with CPI, Richfield Labs established the Company's presence
in Ohio.

TEXAS

Freeman-Cockerell Laboratories, Inc. ("Freeman") was acquired, and Clay J.
Cockerell, M.D., P.A. (the "Texas PA") became affiliated with the Company
through a long-term management service agreement, in October 1996. Based in
Dallas and founded in 1994, Freeman employs 40 people and the Texas PA, also
based in Dallas and founded in 1993, employs two pathologists who operate an
outpatient dermatopathology laboratory. The acquisition of Freeman and the
affiliation with the Texas PA established the Company's presence in Texas.

17
<PAGE> 19

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of 5,700,000
shares of Common Stock offered by the Company hereby, based upon an assumed
initial public offering price of $14.00 per share, are estimated to be
approximately $71.7 million (approximately $73.4 million if the Underwriters
exercise the over-allotment option in full).

The Company intends to apply the net proceeds from this offering as
follows: (i) approximately $7.5 million to repay the outstanding principal
amount of and accrued interest on the Junior Notes; (ii) approximately $3.5
million to repay the outstanding principal amount of and accrued interest on the
Senior Notes; (iii) approximately $1.1 million to pay the accrued and unpaid
dividends on the Convertible Preferred Stock; and (iv) to repay approximately
$59.6 million of the approximately $81.7 million outstanding balance of
indebtedness under the Credit Facility at December 31, 1996.

The Junior Notes, which are held by Summit and Schroder, mature on December
31, 2001, and bear interest at an annual rate of 10%. The Senior Notes, which
are held by Drs. Poulos, Demaray and Kowalczyk, mature on December 31, 1998 and
bear interest at an annual rate of 8%. See "Certain Transactions."

The Company currently maintains an $85.0 million Credit Facility for
acquisition and working capital purposes with a syndicate of banks (the "Banks")
led by The First National Bank of Boston, as agent (the "Agent"). The Credit
Facility provides for borrowings of up to $85.0 million: (i) for working capital
in an amount limited to a maximum of 80% of the Company's eligible accounts
receivable; and (ii) to fund acquisitions, which borrowings may be made up to
$85.0 million if borrowings are not otherwise used for working capital purposes.
The Credit Facility requires the Company to make quarterly payments of an annual
commitment fee equal to 0.375% of the unused portion of the commitment. All
outstanding advances are due and payable on December 31, 1998. The Company has
pledged its assets, including the capital stock of its subsidiaries, as
collateral. The Credit Facility bears interest at variable interest rates based,
at the Company's option, on the Agent's base rate or the Eurodollar rate plus
2.50%. As of December 31, 1996, $81.7 million was outstanding under the Credit
Facility at an annual effective interest rate of 8.25%. The Credit Facility
provides that the Company may reborrow funds which it has previously borrowed
and repaid. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

In the event the Underwriters exercise their over-allotment option, net
proceeds to the Company from such exercise will be applied to reduce the
remaining outstanding balance under the Credit Facility.

The Company will not receive any of the proceeds from the sale of the
Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."

DIVIDEND POLICY

Other than the Company's stock dividends declared in connection with (i)
the 40 for one stock split effected as of August 1, 1994 and (ii) the 1.8 for
one stock split effected as of January 13, 1997, the Company has not declared or
paid, nor does it currently intend to declare or pay, any dividends on its
Common Stock. The Company intends to retain all earnings for the operation and
expansion of its business. The declaration and payment of future dividends will
be at the discretion of the Board of Directors, subject to such factors as the
Board of Directors may deem relevant, including future earnings, results of
operations, capital requirements, the general financial condition of the
Company, general business conditions and contractual restrictions, as well as
such other factors as the Board of Directors may deem relevant. In addition, the
Credit Facility prohibits the payment of dividends by the Company without the
consent of the Agent. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

Prior to the Recapitalization, the Company's predecessor elected to be
treated as a Subchapter S corporation under Section 1361(a) of the Internal
Revenue Code of 1986, as amended. The aggregate amount of the shareholders'
compensation and distributions were $4.2 million in 1992 and $5.5 million in
1993. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

18
<PAGE> 20

DILUTION

The net tangible book value (deficit) of the Company at September 30, 1996,
was approximately $(37.2) million, or $(12.75) per share of Common Stock. Net
tangible book value (deficit) per share represents the amount of total assets of
the Company, less: (i) goodwill and identifiable intangible assets; (ii) total
liabilities (not including the deferred income tax liability recorded in
accordance with SFAS 109, Accounting for Income Taxes, for differences between
the assigned values and the tax bases of the indentifiable intangible assets
recognized in purchase business combinations); and (iii) Convertible Preferred
Stock, divided by the number of outstanding shares of Common Stock. The increase
in net tangible book value (deficit) per share of $9.38 attributable to the
Fourth Quarter Recent Acquisitions assumes those transactions were completed as
of September 30, 1996. The decrease in net tangible book value (deficit) per
share of $7.11 attributable to the issuance of the Restricted Stock in November
1996 assumes those issuances were made at September 30, 1996. The decrease in
net tangible book value (deficit) per share of $0.30 resulted from the issuance
of shares of Common Stock for loan fees related to the Credit Facility. The
decrease in net tangible book value (deficit) per share of $7.67 attributable to
the conversion of the Convertible Preferred Stock assumes the conversion of
3,088,116 shares of the Convertible Preferred Stock using a conversion rate of
1.8 for one, into Common Stock immediately prior to the consummation of this
offering. After giving effect to the sale of 5,700,000 shares offered by the
Company hereby at an assumed initial public offering price of $14.00 per share,
and the application of estimated net proceeds therefrom, the pro forma net
tangible book value (deficit) of the Company at September 30, 1996 would have
been approximately $(8.3) million, or $(0.49) per share. This represents an
immediate decrease in net tangible book value (deficit) of $6.56 per share to
existing stockholders and an immediate dilution of $14.49 per share to new
investors. The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $ 14.00
Net tangible book value (deficit) per share at September 30, 1996............ $(12.75)
Pro forma (increase) decrease in net tangible book value (deficit)
attributable to:
Fourth Quarter Recent Acquisitions......................................... (9.38)
Issuance of Restricted Stock............................................... 7.11
Issuance of Common Stock for loan fees..................................... 0.30
Conversion of Convertible Preferred Stock.................................. 7.67
New investors.............................................................. 6.56
-------
Pro forma net tangible book value (deficit) per share after the offering..... (0.49)
------
Dilution per share to new investors.......................................... $ 14.49
======
</TABLE>

The pro forma net tangible book value (deficit) per share after this
offering would be further decreased by ($1.09), in the event the deferred income
tax liabilities related to the Recent Acquisitions were deducted from total
assets, resulting in an immediate dilution of $15.58 per share to new investors.

The following table sets forth, on a pro forma basis, at September 30,
1996, the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing holders of
Common Stock and by new investors purchasing shares of Common Stock offered
hereby:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)................. 11,351,356 66.6% $ 31,809,300 28.5% $ 2.80
New investors(1)......................... 5,700,000 33.4 79,800,000 71.5 14.00
---------- ---- ----------- ----
Total........................... 17,051,356 100.0% $111,609,300 100.0%
========== ==== =========== ====
</TABLE>

- ---------------

(1) Includes 5,558,609 shares of Common Stock that will be issued upon
conversion of the Convertible Preferred Stock, 957,299 shares issued in
connection with the Fourth Quarter Recent Acquisitions, 1,833,433 Restricted
Shares issued pursuant to the Restricted Stock Agreements and 85,999 shares
issued for loan fees related to the Credit Facility. See "Certain
Transactions -- Recapitalization," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Acquisitions."
The sale of Common Stock by the Selling Stockholders in this offering will
reduce the number of shares held by the existing stockholders to 10,851,356,
or 63.6% of the total number of shares of Common Stock to be outstanding
after this offering, and will increase the number of shares to be purchased
by new investors to 6,200,000 or 36.4% of the total shares of Common Stock
to be outstanding after this offering. See "Principal and Selling
Stockholders."

The foregoing tables assume no exercise of outstanding options. At
September 30, 1996, there were outstanding options to purchase 912,611 shares of
Common Stock at a weighted average exercise price of $3.85 per share. Options to
purchase 90,000 shares are exercisable at September 30, 1996. See
"Management -- Option Plan" and Note 11 of Notes to Consolidated Financial
Statements.

19
<PAGE> 21

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of September 30, 1996, (i) on an actual basis (ii) on a pro forma
basis assuming the Fourth Quarter Recent Acquisitions and the Fourth Quarter
Stock Issuances had been consummated on September 30, 1996 and (iii) on a pro
forma basis, as adjusted to give effect to the conversion of the Convertible
Preferred Stock and the sale of the Common Stock offered by the Company hereby
and the application of the estimated net proceeds therefrom as described under
"Use of Proceeds." This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Unaudited Pro Forma Consolidated Financial Data, the Consolidated Financial
Statements and related notes thereto and the other financial information
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Credit Facility(1)............................................ $ 30,844 $ 80,241 $ 20,452
Senior Notes(1)............................................... 3,500 3,500 --
Junior Notes(1)............................................... 7,500 7,500 --
Subordinated Notes(2)......................................... 2,840 4,677 4,677
Note payable(3)............................................... -- 113 113
Convertible Preferred Stock:
Series A 6% redeemable cumulative convertible preferred
stock, $.01 par value, 5,000,000 shares authorized;
3,088,116 shares issued and outstanding at September 30,
1996(4)(5)............................................... 6,123 6,123 --
Common stockholders' equity (deficit):
Common stock, $.01 par value, 8,000,000 shares authorized;
2,916,016 issued and outstanding; 5,792,747 shares issued
and outstanding, pro forma and 17,051,356 shares issued
and outstanding pro forma as adjusted(5)(6).............. 29 58 171
Additional paid-in capital -- accumulated deficit remaining
from conversion from Subchapter S corporation tax
status(8)................................................ (13,253) 10,683 87,482
Note receivable from executive officer(7)................... (270) (270) (270)
Retained earnings(8)........................................ 4,078 4,078 4,078
-------- -------- -------
Total common stockholders' equity (deficit)......... (9,416) 14,549 91,461
-------- -------- -------
Total capitalization................................ $ 41,391 $ 116,703 $ 116,703
======== ======== =======
</TABLE>

- ---------------

(1) The increase of $49.4 million in the Credit Facility between Actual and Pro
Forma relates to borrowings under the Credit Facility in connection with the
Fourth Quarter Recent Acquisitions. The decrease in the Credit Facility and
Senior and Junior Notes from the Pro Forma to the Pro Forma As Adjusted,
results from the application of the estimated net proceeds of the offering
to the Company. See "Use of Proceeds."
(2) Includes current maturities of $782,000 actual and $1.1 million pro forma.
(3) Represents a note assumed in connection with the acquisition of Gulf Coast.
See Notes 7 and 9 to the financial statements of Fernandez and Kalemeris,
P.A. d/b/a Gulf Coast Pathology Associates.
(4) Prior to the consummation of this offering, the holders of the Convertible
Preferred Stock will convert the shares of Convertible Preferred Stock into
5,558,609 shares of Common Stock. See "Principal and Selling Stockholders"
and "Certain Transactions -- Preferred Stockholders."
(5) Immediately prior to the consummation of this offering, the Company will
amend the Certificate of Incorporation to increase the number of authorized
shares of Common Stock to 30,000,000 and to provide for 2,000,000 shares of
Preferred Stock. See "Description of Capital Stock."
(6) Excludes (i) 1,620,000 shares of Common Stock reserved for issuance under
the Option Plan, of which options to purchase 912,611 shares and 972,011
shares of Common Stock have been granted at September 30, 1996 and September
30, 1996 on a pro forma basis, respectively, and options to purchase 90,000
shares of Common Stock were exercisable at September 30, 1996 and (ii)
180,000 shares of Common Stock reserved for issuance under the Director
Option Plan, of which no options have been granted. See
"Management -- Option Plan" and "-- Director Option Plan." Includes
1,833,433 shares of Common Stock issued in November 1996 pursuant to the
Restricted Stock Agreements that resulted in the surrender of contingent
rights to receive Contingent Shares. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent
Acquisitions."
(7) Represents a loan to the Chief Executive Officer in connection with his
purchase of Common Stock. See "Certain Transactions."
(8) The Recapitalization resulted in a charge of approximately $24.0 million to
retained earnings as a distribution to the common stockholders at that time.
The remaining deficit was transferred to additional paid-in capital upon
conversion from Subchapter S corporation tax status in 1994. See Note 1 to
the Consolidated Financial Statements.

20
<PAGE> 22

SELECTED CONSOLIDATED FINANCIAL DATA

The Selected Consolidated Financial Data set forth below as of and for each
of the four years in the period ended December 31, 1995 and as of and for the
nine months ended September 30, 1996, have been derived from the Company's
consolidated financial statements, audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are included in this Prospectus and
elsewhere in the Registration Statement. The Selected Consolidated Financial
Data of the Company as of and for the year ended December 31, 1991 and as of and
for the nine months ended September 30, 1995 have been derived from the
unaudited consolidated financial statements of the Company which, in the opinion
of the Company, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the information set forth
therein. The results of operations for the nine months ended September 30, 1996
are not necessarily indicative of the results for any other interim period or
full year. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Unaudited Pro Forma Condensed Consolidated Financial Data, the Consolidated
Financial Statements and the related notes thereto and the other financial
information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- -----------------
1991 1992 1993 1994(1) 1995 1995 1996
------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenue................................ $8,070 $11,443 $13,419 $14,461 $16,024 $12,176 $20,840
Operating costs:
Cost of services......................... 4,800 8,791 10,803 6,780 8,271 6,147 10,234
Selling, general and administrative
expense................................ 1,640 1,696 1,634 2,287 2,644 1,931 4,026
Provision for doubtful accounts.......... 234 787 953 1,003 1,161 910 1,655
Amortization expense..................... -- -- -- -- -- -- 357
------ ------- ------- ------- ------- ------- -------
Total operating costs............. 6,674 11,274 13,390 10,070 12,076 8,988 16,272
------ ------- ------- ------- ------- ------- -------
Income from operations..................... 1,396 169 29 4,391 3,948 3,188 4,568
Interest expense........................... (121) (62) (48) (1,584) (1,504) (1,151) (1,637)
Other income (expense), net................ (2) 10 9 (46) (46) (13) (143)
------ ------- ------- ------- ------- ------- -------
Income (loss) before income taxes.......... 1,273 117 (10) 2,761 2,398 2,024 2,788
Provision for income taxes(2).............. -- -- -- 696 900 759 1,075
------ ------- ------- ------- ------- ------- -------
Net income (loss).......................... $1,273 $ 117 $ (10) $ 2,065 $ 1,498 $ 1,265 $ 1,713
====== ======= ======= ======= ======= ======= =======
Supplemental pro forma data:(3)
Pro forma net income per share........... $ .19 $ .16 $ .20
======= ======= =======
Pro forma weighted average shares
outstanding............................ 8,085 8,085 8,555
======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994(1) 1995 1996
------ ------ ------ -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................... $ 99 $ 113 $ 322 $ 103 $ 58 $ 193
Total assets................................ 2,116 2,437 2,676 10,264 9,992 50,793
Long term debt, including current portion... 826 752 513 17,005 15,146 44,684
Convertible Preferred Stock(4).............. -- -- -- 5,735 6,085 6,123
Stockholders' equity (deficit)(1)........... 1,052 1,169 913 (13,281) (12,133) (9,416)
</TABLE>

21
<PAGE> 23

(1) In connection with the Recapitalization, ALA, the predecessor to the
Company: (i) acquired the assets of PDK in exchange for an aggregate of: (a)
$3.5 million of Senior Notes; (b) $2.5 million of ALA Contingent Notes; and
(c) $20.5 million in cash; (ii) issued to Summit and Schroder an aggregate
of (a) 3,208,120 shares of Convertible Preferred Stock for $5.5 million and
(b) $7.5 million of Junior Notes; and (iii) issued to Drs. Poulos, Demaray
and Kowalczyk an aggregate of 1,425,600 shares of ALA common stock for $1.0
million. The Company recorded a charge of approximately $24.0 million to
retained earnings as a distribution to the holders of Common Stock. Cost of
services includes $2.1 million, $3.1 million and $4.4 million in 1991, 1992
and 1993, respectively, representing compensation paid to stockholders in
excess of the compensation of such stockholders following the
Recapitalization. Net income for the years ended December 31, 1994 and 1995
and the nine months ended September 30, 1995 and 1996 does not reflect
dividends payable on the Convertible Preferred Stock. See "The Company,"
"Certain Transactions -- Recapitalization" and Note 1 to Consolidated
Financial Statements.

(2) Prior to the Recapitalization, the Company elected to be taxed as a
Subchapter S corporation for federal income tax purposes and, accordingly,
the consolidated statements of operations in 1992 and 1993 and a portion of
1994 do not include a provision for income taxes.
(3) For all periods presented, pro forma net income per share is computed on the
basis of the weighted average number of shares of common stock and common
stock equivalents, including (i) the number of shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock; (ii) Common
Stock issued by the Company during the 12 months immediately preceding the
date of this Prospectus; (iii) the Restricted Stock issued in connection
with the five Recent Acquisitions completed prior to September 30, 1996; and
(iv) shares of Common Stock which become issuable pursuant to the grant of
Common Stock options, using the treasury stock method and an assumed initial
public offering price of $14.00 per share.
(4) Includes Convertible Preferred Stock of $5.2 million plus accrued and unpaid
dividends of $925,000 at September 30, 1996.

22
<PAGE> 24

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following Unaudited Pro Forma Consolidated Balance Sheet at September
30, 1996 and the Unaudited Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1995 and the nine months ended September 30, 1996
give effect to: (i) the Recent Acquisitions, including the acquisitions of D&P,
Derrick, FPA, Volusia, Seidenstein, Gulf Coast, SkinPath, Pathology Associates,
CPI, Richfield Labs and Freeman; and (ii) the consummation of this offering and
the application of the estimated net proceeds therefrom as if these transactions
had occurred at January 1, 1995 with respect to the consolidated statements of
operations and as if the Fourth Quarter Recent Acquisitions had been completed
on September 30, 1996 with respect to the Pro Forma Consolidated Balance Sheet.
See "The Company -- Recent Acquisitions" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent
Acquisitions." The Unaudited Pro Forma Consolidated Financial Data should be
read in conjunction with the Consolidated Financial Statements and related notes
thereto.

The Unaudited Pro Forma Consolidated Data has been prepared by the Company
based, in part, on the financial statements of the Recent Acquisitions which
financial statements are included elsewhere in the Prospectus, adjusted where
necessary to the Company's basis of accounting policies used in the Consolidated
Financial Statements. The Unaudited Pro Forma Consolidated Data is not intended
to be indicative of the results that would have occurred if the Recent
Acquisitions had occurred on the dates indicated or which may be realized in the
future.

23
<PAGE> 25

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOURTH ACQUISITION
QUARTER RECENT PRO FORMA PRO FORMA OFFERING PRO FORMA
HISTORICAL ACQUISITIONS(A) ADJUSTMENTS(B) TOTAL ADJUSTMENTS(C) AS ADJUSTED
---------- --------------- -------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 193 $ 3,815 $ -- $ 4,008 $ -- $ 4,008
Accounts receivable, net..... 7,944 5,438 -- 13,382 -- 13,382
Inventories.................. 142 -- -- 142 -- 142
Other current assets......... 840 252 -- 1,092 -- 1,092
------- ------- ------- -------- -------- --------
Total current assets... 9,119 9,505 -- 18,624 -- 18,624
Property and equipment, net.... 3,055 887 -- 3,942 -- 3,942
Goodwill, net.................. 10,068 345 48,084 58,497 -- 58,497
Identifiable intangibles,
net.......................... 26,726 -- 33,200 59,926 -- 59,926
Other.......................... 1,825 113 220(d) 2,158 -- 2,158
------- ------- ------- -------- -------- --------
Total assets........... $ 50,793 $10,850 $ 81,504 $143,147 $ -- $ 143,147
======= ======= ======= ======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued
expenses................... $ 4,406 $ 4,695 $ 939(d) $ 10,040 $ -- $ 10,040
Current portion of long-term
debt....................... 782 300 -- 1,082 -- 1,082
Deferred tax liability....... 1,152 496 -- 1,648 -- 1,648
Other current liabilities.... 109 -- 1,326 1,435 -- 1,435
------- ------- ------- -------- -------- --------
Total current
liabilities.......... 6,449 5,491 2,265 14,205 -- 14,205
------- ------- ------- -------- -------- --------
Credit Facility................ 30,844 -- 49,397 80,241 (59,789) 20,452
Senior Notes................... 3,500 -- -- 3,500 (3,500) --
Junior Notes................... 7,500 -- -- 7,500 (7,500) --
Subordinated Notes............. 2,058 397 1,140 3,595 -- 3,595
Note payable................... -- 113 -- 113 -- 113
Deferred tax liability......... 3,735 -- 9,586 13,321 -- 13,321
------- ------- ------- -------- -------- --------
Total long-term
liabilities.......... 47,637 510 60,123 108,270 (70,789) 37,481
------- ------- ------- -------- -------- --------
Convertible Preferred Stock.... 6,123 -- -- 6,123 (6,123) --
Total common stockholders'
equity (deficit)............. (9,416) 4,849 19,116 14,549 76,912 91,461
------- ------- ------- -------- -------- --------
Total liabilities and
stockholders' equity
(deficit)............ $ 50,793 $10,850 $ 81,504 $143,147 $ -- $ 143,147
======= ======= ======= ======== ======== ========
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial data.

24
<PAGE> 26

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------------------------
RECENT PRO FORMA OFFERING PRO FORMA
HISTORICAL ACQUISITIONS(E) ADJUSTMENTS(F) PRO FORMA ADJUSTMENTS AS ADJUSTED
---------- --------------- -------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Patient services.......... $ 16,024 $68,042 $ (4,945) $79,121 $ -- $79,121
Management service
agreement............... -- -- 2,833 2,833 -- 2,833
------- ------- -------- ------- ------ -------
Total net revenue... 16,024 68,042 (2,112) 81,954 -- 81,954
Operating costs:
Cost of services.......... 8,271 46,011 (16,849) 37,433 -- 37,433
Selling, general and
administrative
expense................. 2,644 10,773 (684) 12,733 -- 12,733
Provision for doubtful
accounts................ 1,161 6,634 (93) 7,702 -- 7,702
Amortization expense...... -- -- 4,536(g) 4,536 -- 4,536
------- ------- -------- ------- ------ -------
Total operating
costs............. 12,076 63,418 (13,090) 62,404 -- 62,404
------- ------- -------- ------- ------ -------
Income from operations...... 3,948 4,624 10,978 19,550 -- 19,550
Interest expense............ (1,504) (126) (7,146)(h) (8,776) 6,112(k) (2,664)
Other income (expense),
net....................... (46) 185 (116)(i) 23 19(l) 42
------- ------- -------- ------- ------ -------
Income before income
taxes..................... 2,398 4,683 3,716 10,797 6,131 16,928
Provision for income
taxes..................... 900 476 3,355(j) 4,731 2,391(j) 7,122
------- ------- -------- ------- ------ -------
Net income.................. $ 1,498 $ 4,207 $ 361 $ 6,066 $ 3,740 $ 9,806
======= ======= ======== ======= ====== =======
Supplemental pro forma data:
Pro forma net income per
share................... $ .19 $ .50 $ .55
======= ======= =======
Pro forma weighted average
shares outstanding(m)... 8,085 12,042 17,742
======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------------------------------------------------------------------
RECENT PRO FORMA OFFERING PRO FORMA
HISTORICAL ACQUISITIONS(E) ADJUSTMENTS(F) PRO FORMA ADJUSTMENTS AS ADJUSTED
---------- --------------- -------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Patient services.......... $ 20,840 $43,487 $ (3,781) $60,546 $ -- $60,546
Management service
agreement............... -- -- 2,440 2,440 -- 2,440
------- ------- -------- ------- ------ -------
Total net revenue... 20,840 43,487 (1,341) 62,986 -- 62,986
Operating costs:
Cost of services.......... 10,234 29,683 (11,295) 28,622 -- 28,622
Selling, general and
administrative
expense................. 4,026 7,772 (1,141) 10,657 -- 10,657
Provision for doubtful
accounts................ 1,655 4,149 -- 5,804 -- 5,804
Amortization expense...... 357 20 3,009(g) 3,386 -- 3,386
------- ------- -------- ------- ------ -------
Total operating
costs............. 16,272 41,624 (9,427) 48,469 -- 48,469
------- ------- -------- ------- ------ -------
Income from operations...... 4,568 1,863 8,086 14,517 -- 14,517
Interest expense............ (1,637) (71) (4,521)(h) (6,229) 4,472(k) (1,757)
Other income (expense),
net....................... (143) 27 58(i) (58) 14(l) (44)
------- ------- -------- ------- ------ -------
Income before income
taxes..................... 2,788 1,819 3,623 8,230 4,486 12,716
Provision for income
taxes..................... 1,075 259 2,247(j) 3,581 1,750(j) 5,331
------- ------- -------- ------- ------ -------
Net income.................. $ 1,713 $ 1,560 $ 1,376 $ 4,649 $ 2,736 $ 7,385
======= ======= ======== ======= ====== =======
Supplemental pro forma data:
Pro forma net income per
share................... $ .20 $ .39 $ .42
======= ======= =======
Pro forma weighted average
shares outstanding(m)... 8,555 12,042 17,742
======= ======= =======
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial data.

25
<PAGE> 27

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

<TABLE>
<S> <C>
(a) Represents the historical balance sheets of the Fourth Quarter Recent Acquisitions as if the
transactions had occurred as of September 30, 1996.
(b) Reflects the total estimated costs of $72.2 million for the Fourth Quarter Recent Acquisitions
consisting of: (i) $49.4 million in cash; (ii) $1.5 million principal amount of Subordinated
Notes; (iii) $9.2 million of Common Stock (957,299 shares); (iv) $10.9 million of Restricted
Stock (1,399,036 shares) pursuant to the Restricted Stock Agreements; and (v) $1.2 million of
estimated transaction costs. The aggregate purchase price has been allocated, on a preliminary
basis, to the net assets acquired based on their estimated fair market value and to identifiable
intangible assets based on reports of independent consultants. The allocation of the purchase
price is preliminary, while the Company continues to obtain the information to determine the fair
value of the assets acquired and liabilities assumed. The identifiable intangible assets relate
to hospital contracts, physician referral lists and laboratory contracts acquired in the Recent
Acquisitions. The remaining $48.4 million of the unallocated purchase price has been recorded as
goodwill. The Company expects to perform a final analysis of the purchase price and does not
anticipate material changes to the preliminary allocation. In addition, the Company issued $3.4
million of additional Restricted Stock (434,398 shares) related to the five Recent Acquisitions
completed prior to September 30, 1996 pursuant to the Restricted Stock Agreements. The following
summarizes the acquisition pro forma adjustments related to the above transactions (in
thousands):
Total estimated costs for the Fourth Quarter Recent
Acquisitions................................................... $ 72,239
Add additional Restricted Stock.................................. 3,379
Net assets of Fourth Quarter Recent Acquisitions................. $ 4,849
Net assets distributable to former owners........................ (1,326)
Repayment of Fourth Quarter Recent Acquisition debt.............. 397
Goodwill recorded in the historical financial statements of
Fourth Quarter Recent Acquisitions............................. (345)
--------
Less net tangible assets acquired................................ 3,575
--------
Net intangible assets acquired................................... 72,043
Add deferred tax liability recorded on identifiable intangible
assets......................................................... 9,586
--------
Total intangible assets.......................................... 81,629
Less identifiable intangible assets.............................. 33,200
--------
Estimated goodwill............................................... 48,429
Less goodwill recorded in the historical financial statements of
Fourth Quarter Recent Acquisitions............................. 345
--------
Adjustment to increase goodwill.................................. $ 48,084
========
In connection with certain Fourth Quarter Recent Acquisitions, net assets of $1.3 million
included in the historical financial statements of those acquired Practices are distributable to
the sellers of such Practices, in accordance with the acquisition agreements.
(c) Reflects the conversion of the Convertible Preferred Stock and the sale of the Shares offered by
the Company hereby, at an assumed initial public offering price of $14.00 per share, and the
application of the estimated net proceeds therefrom, as if both transactions had occurred on
September 30, 1996.
</TABLE>

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Gross proceeds from this offering............................................... $ 79,800
Underwriting discounts and commissions.......................................... (5,586)
Estimated expenses of this offering............................................. (2,500)
--------
Net proceeds........................................................... 71,714
Repayment of Junior Notes....................................................... (7,500)
Repayment of Senior Notes....................................................... (3,500)
Payment of Convertible Preferred Stock cumulative dividends..................... (925)
Repayment of Credit Facility.................................................... (59,789)
--------
Net increase in cash and cash equivalents.............................. $ --
========
(d) Included is the $1.2 million of transaction costs (Note b) and the effect of the issuance of
85,999 shares of Common Stock for loan fees related to the Credit Facility of $480,000, of which
$260,000 reduced accounts payable and accrued expenses and $220,000 increased deferred debt issue
costs included in other assets. Such shares have been recorded at their estimated fair market
value at the date of the respective credit facility agreement and amendments thereto. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
</TABLE>

26
<PAGE> 28

<TABLE>
<S> <C>
(e) With respect to the year ended December 31, 1995, represents the historical results of operations
of the Recent Acquisitions as if these transactions occurred at January 1, 1995; with respect to
the nine months ended September 30, 1996, represents the historical results of operations of the
Recent Acquisitions from January 1, 1996 through the date of acquisition or affiliation for the
five Recent Acquisitions completed prior to September 30, 1996 and through September 30, 1996 for
the Fourth Quarter Recent Acquisitions.
The acquisitions of Richfield Labs, CPI and Freeman involved affiliations with the three PA
Contractors in Ohio and Texas.
In the case of Richfield Labs and CPI, all of the common stock of each of these companies is held
in trust. The Company is the sole beneficiary of each trust and receives all income from the
trusts. The Company, at its sole discretion, can replace the trustees, withdraw any asset from
the trusts, modify the terms of the trust agreements, or terminate the trusts, and direct the
trustees to distribute income and any asset from the trusts. No assets of the trusts can be sold
or otherwise disposed of without the Company's consent. Additionally, a wholly-owned PA
Contractor Subsidiary of the Company entered into 40-year management agreements with each of
Richfield Labs and CPI, under which such subsidiary provides all management and other non-medical
services for Richfield Labs and CPI for a fee equal to the practice's net revenue less practice
expenses, including physician salaries, which are fixed by employment agreements, and related
professional expenses. Therefore, the Company is entitled to all of the net income of these
practices. Based on the provisions of the purchase agreements, trust agreements and management
agreements, consolidation of Richfield Labs and CPI is required to present the Company's
financial position and results of operations in conformity with generally accepted accounting
principles because the Company has the controlling financial interest in Richfield Labs and CPI
by means other than direct record ownership of voting stock. Accordingly, these acquisitions are
accounted for as purchase business combinations and are consolidated in the Unaudited Pro Forma
Consolidated Financial Statements.
In connection with the acquisition of Freeman and affiliation with the Texas PA, a wholly-owned
PA Contractor Subsidiary and the Texas PA have entered into a 40-year management service
agreement under which the Company provides, on an exclusive basis, the technical laboratory
services, management and all other non-medical practice services for the Texas PA. The Company's
PA Contractor Subsidiary in Texas employs all of the technical employees and owns all of the
laboratory facilities, testing equipment and other assets used in connection with the pathology
services performed by the Texas PA's physicians. The Texas PA's payments to the PA Contractor
Subsidiary under this management service agreement are comprised of the reimbursement of the
costs and expenses for providing the technical laboratory services, a base fee and a performance
fee based on achievement of goals and objectives established annually. Assuming the PA Contractor
Subsidiary achieves its goals and objectives, such fees will result in the PA Contractor
Subsidiary receiving substantially all net revenue less practice expenses of the Practice.
Practice expenses include physician salaries which are fixed by employment agreement and related
professional expenses. Therefore, the Company is the direct beneficiary of substantially all of
the net income of the Texas PA. Because the Company has a net profits interest in the Texas PA,
the net revenue and expenses of the Texas PA are displayed in the Company's consolidated net
revenue and operating costs. The following summarizes the Texas PA's pro forma net revenue, costs
and the fees to the Practice for management and other services as presented in the Unaudited Pro
Forma Consolidated Statements of Operations:
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
1995 1996
------------- ------------
<S> <C> <C>
Management service agreement revenue:
Reimbursement of technical costs.................................. $ 220 $ 303
Reimbursement of expenses and overhead............................ 1,942 1,656
Management fees................................................... 671 481
------ ------
Total management service agreement revenue................. $ 2,833 $2,440
====== ======
Under the terms of the acquisition agreement, the sole shareholder of the Texas PA is prohibited
from selling, assigning or disposing of the common stock of the Texas PA prior to September 30,
1997, except that at the direction of the Company, without further consideration, such
shareholder is required to transfer ownership of the shares of the Texas PA to, or merge the
Texas PA into, a Texas 5.01(a) non-profit corporation (the "501(a) corporation") which the
Company is in the process of forming and of which the Company will be the sole member. The
formation of the 501(a) corporation is subject to review by Texas regulatory authorities. Members
of the board of directors of the 501(a) corporation will be appointed by, and can be removed by,
the sole member, which will be the Company. The Company believes that the formation of the 501(a)
corporation and its merger with the Texas PA prior to September 30, 1997 is virtually assured.
Upon such merger, the Company will have direct voting control over the 501(a) corporation and
will consolidate its operations in the Company's consolidated financial statements.
</TABLE>

27
<PAGE> 29

<TABLE>
<S> <C>
The Company will consolidate any future acquisitions or affiliations in which it acquires the
controlling financial interest through the acquisition of direct ownership of voting stock or
other appropriate means. For any future affiliations through management service or other
agreements in which the Company does not obtain the controlling financial interest, but does have
a net profits interest, the Company will separately display management service agreement revenue
(at least, until such time that the Company gains a controlling financial interest).
The Emerging Issues Task Force ("EITF"), in EITF No. 97-2, is addressing accounting and reporting
issues relating to physician practice management company affiliations with medical practices. Any
consensus reached in EITF No. 97-2 could affect the presentation in the Company's consolidated
financial statements of the assets, liabilities, net revenue or costs related to pathology
practices affiliated with the Company.
(f) The pro forma adjustments to net revenue, cost of services, selling, general and administrative
expense and the provision for doubtful accounts include adjustments to: (1) exclude the net
revenue and related expenses attributable to an inpatient laboratory in a hospital that was
closed (the "Closed Hospital") prior to the date of acquisition of Derrick; (2) eliminate the net
revenue and related expenses attributable to the dermatology practice of Beno Michel, M.D. (the
"Derm Practice") that were included in the historical financial statements of CPI, but will not
be included in the operations of the Company; (3) eliminate certain non recurring expenses
directly related to the Recent Acquisitions and related transactions ("Non Recurring"); (4)
reduce cost of services to reflect the reduction in physician compensation, including bonuses and
other compensation, to the amounts that will be paid to the Affiliated Physicians after the
acquisition of the Practices in accordance with their employment agreements with the Company
("Physician Compensation"); and (5) reclassify the net revenue and expenses to display the
results of operations of the Texas PA as discussed in Note (e) above ("Management Service
Agreement"). The following table summarizes these adjustments:
</TABLE>

<TABLE>
<CAPTION>
MANAGEMENT
CLOSED PHYSICIAN SERVICE
HOSPITAL DERM PRACTICE NON RECURRING COMPENSATION AGREEMENT TOTAL
-------- ------------- ------------- ------------ ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1995
Patient services........... $ (551) $(1,234) $ -- $ -- $ (3,160) $ (4,945)
Management service
agreement................ -- -- -- -- 2,833 2,833
Cost of services........... -- (906) -- (15,616) (327) (16,849)
Selling, general and
administrative expense... (41) (151) (492) -- -- (684)
Provision for doubtful
accounts................. (93) -- -- -- -- (93)
SEPTEMBER 30, 1996
Patient services........... $ -- $(1,011) $ -- $ -- $ (2,770) $ (3,781)
Management service
agreement................ -- -- -- -- 2,440 2,440
Cost of services........... -- (775) -- (10,190) (330) (11,295)
Selling, general and
administrative expense... -- (125) (1,016) -- -- (1,141)
(g) Represents the amortization expense for both net identifiable intangible assets and goodwill
based upon the Company's preliminary allocation of purchase price. The net identifiable
intangible assets total approximately $59.9 million and are being amortized over periods ranging
from 10 to 40 years. The amortization periods of identifiable intangible assets were estimated by
the Company based on reports of independent consultants. In determining amortization periods the
Company considered each Practice's operating history, contract renewals, stability of physician
referral lists and industry statistics. The values were determined using a discounted cash flow
valuation model. The goodwill is approximately $58.5 million and is being amortized over periods
ranging from 15 to 35 years. The amortization periods for goodwill were determined by the Company
with consideration given to the lives assigned to the identifiable intangible assets, the
reputation of each Practice, the length of each Practice's operating history, and the potential
of the market in which the acquired Practice is located. In addition, the adjustment includes the
estimated amortization of goodwill related to the Contingent Notes which would have been payable
based on the Recent Acquisitions' pro forma profitability.
</TABLE>

28
<PAGE> 30

<TABLE>
<S> <C>
The following table summarizes the values assigned to each of the identifiable intangible assets
and goodwill and the related weighted average amortization periods.
</TABLE>

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
AMORTIZATION
VALUE PERIOD
-------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Hospital contracts............................................ $ 28,950 36.5
Physician referral lists...................................... 28,931 18.7
Laboratory contracts.......................................... 2,300 10.0
Goodwill...................................................... 58,575 34.2
--------------
Total................................................ $118,756
===============
(h) Represents interest expense related to amounts borrowed to finance the Recent Acquisitions as if
such borrowings had occurred as of the beginning of the periods presented. The amount of the
outstanding borrowings under the Credit Facility represents cash of approximately $78.6 million
for the purchase prices of the Recent Acquisitions and related transaction fees at an interest
rate of 8.5% and 8.25% for 1995 and for the nine months ended September 30, 1996, respectively.
In addition, the adjustment includes interest expense in connection with the Subordinated Notes.
(i) Represents an adjustment to record the amortization of deferred debt issuance costs as if the
current Credit Facility was in place from the beginning of the periods presented.
(j) Represents the incremental tax effect of the pro forma and offering adjustments related to the
Recent Acquisitions and the provision for income taxes related to three Recent Acquisitions for
the year ended December 31, 1995 and two Recent Acquisitions for the nine months ended September
30, 1996, none of which provided for such taxes in their historical financial statements because
of the election by such entities to be taxed as Subchapter S corporations for federal income tax
purposes.
(k) Reflects a reduction in interest expense in connection with the repayment of certain outstanding
debt of the Company with the estimated net proceeds of this offering as described under "Use of
Proceeds," as if the transactions had occurred as of the beginning of the periods presented.
(l) Reflects the elimination of the amortization of deferred debt issuance costs related to the
repayment of the principal amounts of the Junior Notes and Senior Notes with a portion of the
estimated net proceeds of this offering.
(m) For all periods presented, pro forma net income per share is computed based on the weighted
average numbers of shares of common stock and common stock equivalents, including (i) the number
of shares of Common Stock issuable upon conversion of the Convertible Preferred Stock; (ii)
Common Stock issued by the Company during the 12 months immediately preceding the date of this
Prospectus; (iii) the Restricted Stock; and (iv) shares of Common Stock which become issuable
pursuant to the grant of Common Stock options, using the treasury stock method and an assumed
initial public offering price of $14.00 per share.
</TABLE>

29
<PAGE> 31

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of the Company's results of operations and
financial condition should be read in conjunction with the Unaudited Pro Forma
Consolidated Financial Data, the Consolidated Financial Statements and related
notes thereto and other financial information included elsewhere in this
Prospectus.

INTRODUCTION

Prior to implementing the acquisition program, the Company's operations
consisted of providing outpatient anatomic pathology services, principally
dermatopathology, through pathologists employed by the Company. With the Recent
Acquisitions, the Company affiliated with three Practices that provide
exclusively outpatient anatomic pathology services and acquired eight Practices
that provide both inpatient anatomic pathology services under exclusive
contracts with hospitals as well as outpatient anatomic pathology services. The
Company intends to pursue acquisitions of and affiliations with inpatient and
outpatient anatomic pathology practices. The Company derives its net revenue
from the net revenue of the Practices.

The Practices provide anatomic pathology and related histological services
with particular emphasis on dermatopathology (diseases of the skin),
hematopathology (diseases of the blood), and cytopathology (diseases of the
cells), as well as surgical pathology (diagnostic services in connection with
surgical procedures).

Outpatient pathology services are performed in free-standing, independent
pathology laboratories owned and operated by the Company or in hospital-owned
laboratories operated by the Company. Services performed are billed to patients,
Medicare, Medicaid, other third party payors, national clinical laboratories and
attending physicians on a fee-for-service basis, which cover both the
professional and technical components of such services.

The Company currently derives management service agreement revenue from the
Texas PA. The Company is in the process of forming a Texas 501(a) corporation
which will permit the Company to consolidate the results of operations of the
Texas PA with the Company's other Direct Subsidiaries. In the event the Company
affiliates with practices in other states that prohibit the corporate practice
of medicine, the Company may have additional management service agreement
revenue. See Note 3 to the Consolidated Financial Statements.

Inpatient pathology services are performed pursuant to exclusive
contractual arrangements with hospitals. Net revenue for inpatient pathology
services is dependent in large part on the level of inpatient admissions at the
hospitals. Generally, such arrangements provide that a pathologist will provide
diagnostic pathology services for the hospital's staff physicians and serve as
the medical director of the hospital's laboratory with responsibility for the
clinical laboratory and histology departments, as well as the hospital's blood
bank and microbiology services. In exchange for these services, the Company and
the PA Contractors bill patients, Medicare, Medicaid and other third party
payors for the professional component of the services provided by the
pathologists on a fee-for-service basis. In certain cases, the Practices are
paid an annual fee for an Affiliated Physician to serve as the medical director
of the laboratory. Currently, the aggregate annual amount of such fees is
approximately $1.9 million.

The Company and the PA Contractors typically bill government programs
(principally Medicare and Medicaid), indemnity insurance companies, managed care
organizations, national clinical laboratories, physicians and patients. Net
revenue differs from amounts billed for services due to: (i) Medicare and
Medicaid reimbursements at annually established rates; (ii) payments from
managed care organizations at discounted fee-for-service rates; (iii) negotiated
reimbursement rates with other third party payors; (iv) rates negotiated under
sub-contracts with national clinical laboratories for the provision of anatomic
pathology services; and (v) discounted and uncollectible amounts, principally
from private pay patients.

In recent years, there has been a shift away from traditional indemnity
insurance companies to managed care as employers and other payors move their
participants into lower cost plans. The Company benefits more from patients
covered by Medicare and traditional indemnity insurance than managed care
organizations and

30
<PAGE> 32

national clinical laboratories, many of whom contract with managed care
organizations to provide anatomic pathology services. The Company and the PA
Contractors have contracts with managed care organizations and national clinical
laboratories and the Company is attempting to increase the number of such
contracts to increase test volume. Since the majority of the Company's operating
costs, principally physician and non-physician technical compensation, are
fixed, increases in volume resulting from contracts at discounted rates enhance
the Company's profitability. Historically, net revenue from capitated contracts
has represented an insignificant amount of net revenue. See "Risk
Factors -- Reliance upon Government Programs."

The Company estimates that, on a pro forma basis for the nine months ended
September 30, 1996, approximately one-third of net revenue was attributable to
government sponsored healthcare programs (principally Medicare and Medicaid).
The federal government sets reimbursement rates for services performed for
patients covered by Medicare on an annual basis. Medicare reimbursement rates
may also impact Medicaid and other reimbursement rates. From 1993 through 1996,
Medicare rates for the Company's primary reimbursement code in Florida
increased, on average, 4.0% per year. Effective January 1, 1997, the same
Medicare reimbursement rate is scheduled to decrease by 5.3% to 6.0% in Florida,
where a majority of the Company's net revenue from Medicare is derived. The
Company plans to mitigate the adverse effects of the reimbursement reduction on
net revenue and earnings through implementation of its strategy, specifically
(i) increasing marketing efforts to expand referral services and (ii) reducing
practice costs through implementation of operating and production efficiencies.
While the Company cannot predict future Medicare reimbursement rates, the
Company believes it will be able to offset any future reimbursement rate
decreases by increasing net revenue and maintaining profitability of the
Practices through implementation of its strategies. No assurance can be given
that the Company will be able to maintain or increase its net revenue or
profitability.

Prior to the Recapitalization, the Company elected to be treated as a
Subchapter S corporation for federal income tax purposes and accordingly was not
subject to federal and certain state income taxes during such period. During
1996, the Company ceased the unprofitable operation of a clinical laboratory and
acquired one Practice whose operations include two outpatient clinical
laboratories. Many anatomic pathology practices operate clinical pathology
laboratories incidental to their businesses. In implementing its acquisition
strategy, the Company may acquire other practices that provide outpatient
clinical pathology services. The Company believes that operating clinical
laboratories will continue to be incidental to its business. See "Business --
Government Regulation."

RECENT ACQUISITIONS

The Recent Acquisitions were funded with various combinations of cash,
Common Stock, debt and contingent consideration. The aggregate non-contingent
purchase price paid for the Recent Acquisitions was approximately $108.0
million, $78.6 million of which was paid in cash, $4.5 million of which was paid
in Subordinated Notes and $24.9 million of which was paid in shares of Common
Stock, at a weighted average price of $6.41 per share. The cash portion of the
purchase prices was financed with borrowings under the Credit Facility. The
Contingent Notes are payable based upon the Practices' achievement of specified
profitability objectives over periods ranging from 1996 to 2001. The contingent
payments vary in duration of payment and the minimum and maximum amounts to be
paid upon the achievement of profitability objectives relating to the Practice.
Generally, the amount of the contingent consideration to be paid cannot be
determined until the earlier of the termination of the contingency period or
until a profitability objective has been met. If the Practices achieve minimum
specified profitability objectives, the Company would be obligated to make
aggregate contingent payments of at least $8.7 million between 1997 and 2001. No
amounts would be paid if the minimum profitability objectives are not met. If
the Practices achieve the maximum profitability objectives, the Company would
make aggregate contingent payments of $31.3 million between 1997 and 2001. Since
the profitability criteria are calculated on a cumulative basis over the period
of the Contingent Notes, the performance of a Practice in one year may affect
the payment of the Contingent Notes in another year. In the event the
profitability criteria for a Practice are not met in a particular year, the
shortfall in that year may be satisfied by excess profitability in a later year
in which event a payment would be made in that later year. To the extent that
the maximum profitability criteria are exceeded in any particular year, the
amount of the excess will be carried backward to a prior year when the
profitability criteria were not

31
<PAGE> 33

satisfied or forward to a subsequent year in determining whether the
profitability criteria for such year have been met. This cumulative effect may
cause contingent payments to be made with respect to a year in which
profitability criteria would not have been met if such year was evaluated
separately, and could cause contingent payments with respect to multiple years
to become due in a single or later year. Additional consideration, if any, paid
in cash under these contingent arrangements will be accounted for as an
additional purchase price for the Practice. The Company believes that the
incremental cash generated from operations will be sufficient to satisfy the
payment, if any, of the contingent obligations in any one year period. See "Risk
Factors -- Unpaid Contingent Acquisition Consideration." Such payments, if any,
will result in a corresponding increase in goodwill and the related amount of
amortization thereof in periods following the payment.

The PA Contractor Subsidiaries have long-term management agreements with
three PA Contractors in Texas and Ohio (the "PA Management Agreements"). In
Texas, the Texas PA is owned by an Affiliated Physician. In Ohio, the PA
Contractors are owned by a trust, of which AmPath is the sole beneficiary. Under
the PA Management Agreements, the Company has control over all non-medical
functions of the PA Contractors, including all administrative, management,
billing and support functions, while the PA Contractors and the physicians they
employ have control over all functions relating to the provision of medical
services. AmeriPath's PA Contractor Subsidiaries receive a management fee for
the services. In Ohio, the fee is equal to the net revenue of the pathology
practice. In Texas, the management fee consists of a flat base fee, which is
determined on an annual basis according to the operating plan of the Practice,
and a performance-based percentage fee, which may be paid if the performance of
the Practice exceeds budgeted targets. In addition, the Texas PA reimburses the
PA Contractor Subsidiary in Texas for all direct operating and production costs.
Pursuant to a management service agreement with the Texas PA, the PA Contractor
Subsidiary expects to receive a flat base management fee of approximately
$400,000 in 1997, which amount excludes a performance fee the amount of which
will be determined by the PA Contractor Subsidiary in Texas. The base management
fee together with the performance fee are expected by the Company (assuming the
Texas PA Contractor Subsidiary meets its targets pursuant to the management
service agreement) to approximate the net revenue of the Texas PA in 1997. Each
of the PA Management Agreements have terms of 40 years and are subject to
renegotiation at the end of such term. See "Business -- Government Regulation,"
"Risk Factors -- Government Regulation" and "Risk Factors -- Dependence on
Pathologists."

Other than the acquisition of the assets of D&P, each of the Recent
Acquisitions involving Practices in Florida, Kentucky and Alabama were
structured as the purchase of all of the outstanding capital stock of the
acquired Practice. Each of the Recent Acquisitions involving Practices in Ohio
and Texas were effected through (i) in the case of the Practice in Texas, the
purchase of all tangible and intangible assets (or of stock including such
assets) of the Practice's laboratory facilities and related equipment and other
assets, (ii) a long-term management agreement between the PA Contractor
Subsidiaries and each PA Contractor, and (iii) in the case of the two Practices
in Ohio, contribution of the stock of each Ohio PA to a trust, of which AmPath
is the sole beneficiary, and, in the case of the Practice in Texas, an agreement
by the Affiliated Physician who owns all of the stock in the Texas PA Contractor
to transfer such stock to a corporation controlled by AmeriPath (without further
consideration to or action on the part of such Affiliated Physician). See Note
(e) to Unaudited Pro Forma Consolidated Financial Data and "Business-Affiliation
Structure." Each of the Recent Acquisitions was accounted for as a purchase of
the underlying net assets.

The Recent Acquisitions have resulted in a significant increase in
intangible assets. At September 30, 1996, net intangible assets were $36.8
million, including $26.7 million of net identifiable intangible assets and $10.1
million of goodwill, principally due to the Recent Acquisitions completed in the
nine months ended September 30, 1996. Virtually all of the aggregate purchase
price of approximately $108.0 million was recorded as either net identifiable
intangible assets or goodwill. For a discussion of the preliminary allocation of
the purchase price in the Recent Acquisitions, see Note 3 to the Consolidated
Financial Statements. At September 30, 1996, on a pro forma basis, approximately
$59.9 million represents net identifiable intangible assets and $58.5 million
represents goodwill. Net identifiable intangible assets include hospital
contracts, physician referral lists and laboratory contracts acquired in
connection with the Recent Acquisitions and will be amortized on a straight line
basis over periods ranging from 10 to 40 years. For the year ended December 31,
1995, and the nine months ended September 30, 1996, amortization of net
identifiable

32
<PAGE> 34

intangible assets on a pro forma basis for the Recent Acquisitions was $2.6
million and $2.0 million, respectively. Goodwill represents the excess of cost
over the fair value of the net assets of the Recent Acquisitions and will be
amortized on a straight line basis over periods ranging from 15 to 35 years. For
the year ended December 31, 1995, and the nine months ended September 30, 1996
amortization of goodwill on a pro forma basis for the Recent Acquisitions was
$1.9 million and $1.4 million, respectively. These amortization amounts will
increase on an annual basis in the event that the contingent payments are made
pursuant to the Contingent Notes. There can be no assurance that the value of
the intangible assets will ever be realized by the Company. The Company will
evaluate the carrying values attributed to intangible assets on an on-going
basis. In the event of an impairment of the values attributed to goodwill or
identifiable intangible assets, there would be a charge to earnings that could
have a material adverse effect on the Company's financial condition and results
of operations. See "Risk Factors -- Risks Related to Intangible Assets" and
Unaudited Pro Forma Consolidated Financial Data.

To date, the Company has integrated certain aspects of the billing, sales
and marketing, accounting, purchasing, insurance and courier functions of the
Practices. Integration of such functions has resulted in greater efficiency in
negotiating insurance coverage and effective marketing of the Practices to
national clinical laboratories. In addition, the Company has taken steps to
consolidate the accounting procedures and financial reporting systems of the
Practices and is implementing cash management and other fiscal control programs.
See "Business -- Regional Business Model" and "Business -- Affiliation
Structure."

33
<PAGE> 35

PRACTICES

As of December 31, 1996, the 12 Practices consisted of:

<TABLE>
<CAPTION>
AFFILIATED TOTAL HOSPITAL OUTPATIENT 1995
PRACTICE(1) LOCATION PHYSICIANS(2) PERSONNEL(3) CONTRACTS LABORATORY NET REVENUE
- --------------------- ------------------- ------------- ------------ --------- ---------- -----------
(IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
American Laboratory Fort Lauderdale, FL 6 121 -- X $16,024
Associates
Cutaneous Pathology & Beachwood, OH 3 15 -- X 3,798
Immunofluorescence
Laboratory(4)
D&P Pathology Fort Lauderdale, FL 9 9 3 2,548
Derrick and Orlando, FL 24 148 14 X 21,706
Associates
Pathology
Florida Pathology Miami Beach, FL 2 14 1 X 3,055
Associates
Freeman-Cockerell Dallas, TX 2 40 -- X 3,160
Laboratories
Gulf Coast Pathology Cape Coral, FL 5 31 3 X 8,786
Associates
Pathology Associates Lexington, KY 8 57 16 X 4,934
Richfield Laboratory Cincinnati, OH 3 32 -- X 6,202
of Dermatopathology
Drs. Seidenstein, Fort Myers, FL 9 40 5 6,181
Levine & Associates
SkinPath Birmingham, AL 3 22 1 X 1,847
Volusia Pathology Ormond Beach, FL 7 34 3 X 5,825
Group
-- --- -- -------
Totals 81 563 46 $84,066
== === == =======
</TABLE>

- ---------------

(1) The Company is not licensed to practice medicine. The practice of medicine
is conducted solely by the Affiliated Physicians who are employed by either
the Direct Subsidiaries or the PA Contractors.

(2) In the Practices located in Ohio and Texas, the Affiliated Physicians are
employed directly by the Ohio PAs and the Texas PA, respectively.

(3) Does not include 22 administrative and executive personnel of AmPath. Does
include the Affiliated Physicians employed by the Ohio PAs and the Texas PA.

(4) The net revenue of the dermatology practice ($1.2 million for 1995) less
operating expenses is paid to the seller of this Practice.

34
<PAGE> 36

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
consolidated financial data as a percentage of net revenue (patient billings net
of contractual allowances).

<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUE
---------------------------------------------
NINE MONTHS
YEAR ENDED ENDED SEPTEMBER
DECEMBER 31, 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenue........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs:
Cost of services................................. 80.5 46.9 51.6 50.5 49.1
Selling, general and administrative expense...... 12.2 15.8 16.5 15.9 19.3
Provision for doubtful accounts.................. 7.1 6.9 7.2 7.5 7.9
Amortization expense............................. -- -- -- -- 1.7
----- ----- ----- ----- -----
Total operating costs.................... 99.8 69.6 75.3 73.9 78.0
----- ----- ----- ----- -----
Income (loss) from operations...................... 0.2 30.4 24.7 26.1 22.0
Interest expense................................... (0.4) (11.0) (9.4) (9.4) (7.9)
Other income (expense), net........................ 0.1 (0.3) (0.3) (0.1) (0.7)
----- ----- ----- ----- -----
Income (loss) before income taxes.................. (0.1) 19.1 15.0 16.6 13.4
Provision for income taxes......................... -- 4.8 5.6 6.2 5.2
----- ----- ----- ----- -----
Net income (loss).................................. (0.1)% 14.3% 9.4% 10.4% 8.2%
===== ===== ===== ===== =====
</TABLE>

Nine Months Ended September 30, 1996 as Compared to Nine Months Ended September
30, 1995

The Company completed the acquisition of five Practices in the first nine
months of 1996, the results of which are included in the Company's operating
results from the date of acquisition. Changes in operations between the nine
months ended September 30, 1995 and the nine months ended September 30, 1996
were primarily due to these acquisitions.

Net revenue increased by $8.7 million, or 71.2%, to $20.8 million for the
nine months ended September 30, 1996 from $12.2 million for the nine months
ended September 30, 1995. The increase was attributable to $8.9 million from the
five Recent Acquisitions, and $633,000 from same practice growth, offset by the
decline in net revenue of $892,000 from the Company's clinical laboratory which
ceased operations on May 31, 1996. Same practice net revenue increased $633,000,
compared to the same period in 1995, due to an increase in test volume and an
increase in the Medicare reimbursement rate for surgical biopsies of 2.6% which
became effective on January 1, 1996. References to same practice mean Practices
at which the Company provided services for the entire period for which the
amount is calculated and the entire prior comparable period.

Cost of services increased by $4.1 million, or 66.5%, to $10.2 million for
the nine months ended September 30, 1996 from $6.1 million for the nine months
ended September 30, 1995. The increase was attributable primarily to $4.8
million from the five Recent Acquisitions and a decrease of $690,000
attributable to the Company's clinical laboratory which ceased operations on May
31, 1996. Same practice cost of services decreased by $74,000 for the nine
months ended September 30, 1996 compared to the same period in 1995 due to
increased productivity by the Affiliated Physicians.

Selling, general and administrative expense increased by $2.1 million, or
108.5%, to $4.0 million for the nine months ended September 30, 1996 from $1.9
million for the nine months ended September 30, 1995. Of this increase, $1.2
million, or 57.1%, was attributable to the Practices acquired during the nine
months ended September 30, 1996. The remaining increase was due to the
appointment of a Chief Executive Officer, as of January 1, 1996, increased
staffing levels in marketing, billing and accounting and costs incurred to
expand the Company's administrative support infrastructure and complete the
transition to an upgraded billing system.

35
<PAGE> 37

Provision for doubtful accounts increased by $745,000, or 81.9%, to $1.7
million for the nine months ended September 30, 1996 from $910,000 for the nine
months ended September 30, 1995. This increase was primarily attributable to the
Practices acquired in the nine months ended September 30, 1996. The provision
for doubtful accounts as a percentage of net revenue was 7.9% and 7.5% for the
nine months ended September 30, 1996 and 1995, respectively. The provision for
doubtful accounts as a percentage of net revenue is higher for inpatient
services than for outpatient services due primarily to a larger concentration of
indigent and private pay patients and longer billing and collection cycles for
inpatient services.

Amortization expense of $357,000 for the nine months ended September 30,
1996 was attributable to amortization of goodwill and net identifiable
intangible assets from acquired Practices. There was no amortization expense
during the nine months ended September 30, 1995. In light of the identifiable
intangibles and goodwill arising in the Recent Acquisitions, these amortization
amounts will increase on an annual basis in connection with the Company's future
acquisitions and in the event that contingent payments are made pursuant to the
Contingent Notes. Additionally, the Company will evaluate the carrying values
attributed to identifiable intangible assets and goodwill on an on-going basis.
In the event of an impairment of the values attributed to goodwill or
identifiable intangible assets, there would be a charge to earnings that could
have a material adverse effect on the Company's financial condition and results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Recent Acquisitions."

Interest expense increased by $486,000, or 42.2%, to $1.6 million for the
nine months ended September 30, 1996 from $1.2 million for the nine months ended
September 30, 1995. This increase was attributable to indebtedness incurred to
finance the acquisition of five Practices.

The effective income tax rate was approximately 38.6% for the nine months
ended September 30, 1996 as compared to 37.5% for the nine months ended
September 30, 1995. The Company anticipates an increase in its effective tax
rate due to the non-deductibility of amortization expense relating to intangible
assets resulting from certain of the Recent Acquisitions.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net revenue increased by $1.5 million, or 10.8%, to $16.0 million for the
year ended December 31, 1995 from $14.5 million for the year ended December 31,
1994. Of this increase, $891,000 was attributable to an increase in outpatient
net revenue resulting from volume and price increases implemented for certain
services during 1994. The remaining $673,000 was attributable to an increase in
net revenue from the Company's clinical laboratory.

Cost of services increased by $1.5 million, or 22.0%, to $8.3 million for
the year ended December 31, 1995 from $6.8 million for the year ended December
31, 1994. Of this increase, $981,000 was due to the addition of two Affiliated
Physicians, additional non-physician personnel and increased variable operating
costs for anatomic pathology services and $510,000 was due to increased variable
operating costs, additional non-physician personnel and overtime costs and
allocation of additional overhead for the Company's clinical laboratory. As a
percentage of net revenue, cost of services increased to 51.6% in 1995 from
46.9% in 1994.

Selling, general and administrative expense increased by $357,000, or
15.6%, to $2.6 million for the year ended December 31, in 1995, from $2.3
million for the year ended December 31, 1994. This increase was primarily
attributable to an increase in marketing costs, including the employment of two
additional full-time marketing representatives, and the addition of billing
personnel as the Company began a conversion and upgrade of its billing system.

Provision for doubtful accounts increased by $158,000, or 15.8%, to $1.2
million for the year ended December 31, 1995 from $1.0 million for the year
ended December 31, 1994. This increase was attributable to increases in net
revenue. Provision for doubtful accounts, as a percentage of net revenue,
increased from 6.9% to 7.2% due to the increase in the Company's clinical
laboratory operations which typically have a higher level of doubtful accounts
due to smaller per patient billings and a greater concentration of private pay
patients.

36
<PAGE> 38

Interest expense decreased by $80,000, or 5.1%, to $1.5 million for the
year ended December 31, 1995 from $1.6 million in 1994. This decrease was
attributable to a reduction in the amount of outstanding indebtedness and a
reduction in interest rates to 8.5% from 9.5% on the line of credit.

The effective income tax rate was approximately 37.5% for the year ended
December 31, 1995 compared to 25.2% for the year ended December 31, 1994, due to
the Company's conversion from Subchapter S tax status as of February 14, 1994.
Taxable income for the period January 1, 1994 to February 14, 1994 was
attributable to the shareholders prior to the Recapitalization.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

The Company completed the Recapitalization on February 14, 1994.

Net revenue increased by $1.0 million, or 7.8%, to $14.5 million for the
year ended December 31, 1994, as compared to $13.4 million for the year ended
December 31, 1993. This increase was primarily attributable to an increase in
test volume and an increase in the Medicare reimbursement rates for surgical
pathology services by 3.6%, effective January 1, 1994.

Cost of services decreased by $4.0 million, or 37.2%, to $6.8 million for
the year ended December 31, 1994 from $10.8 million for the year ended December
31, 1993. Prior to the Recapitalization, the Company elected to be taxed as a
Subchapter S corporation for federal income tax purposes and all the net income
therefrom was distributed to the principal shareholders as additional
compensation. Subsequent to the Recapitalization, the compensation of the
principal stockholders was reduced, resulting in a $4.0 million reduction in
compensation expense and cost of services, in 1994.

Selling, general and administrative expense increased by $653,000, or
40.0%, to $2.3 million for the year ended December 31, 1994 from $1.6 million
for the year ended December 31, 1993. Of this increase, $515,000 was
attributable to the addition of marketing and management personnel and related
expenses.

Provision for doubtful accounts increased by $50,000, to $1.0 million for
the year ended December 31, 1994 from $950,000 for the year ended December 31,
1993. This increase was attributable to increases in net revenue. Provision for
doubtful accounts, as a percentage of net revenue, decreased from 7.1% to 6.9%
of net revenue for the years ended December 31, 1993 and 1994, respectively.

Interest expense increased by $1.5 million to $1.6 million for the year
ended December 31, 1994 from $48,000 for the year ended December 31, 1993
primarily due to interest on the line of credit and the Senior Notes and Junior
Notes issued in connection with the Recapitalization.

The effective income tax rate was approximately 25.2% for the year ended
December 31, 1994 due to the fact that the Company's taxable income for the
period January 1, 1994 to February 14, 1994 was included in the income tax
returns of the shareholders prior to the Recapitalization. In 1993, the Company
elected to be taxed as a Subchapter S corporation for federal income tax
purposes and the taxation of the earnings thereof was the responsibility of the
individual shareholders. Therefore no provision was made for federal or state
income taxes in 1993.

37
<PAGE> 39

QUARTERLY RESULTS

The following table presents certain unaudited quarterly financial data for
each of the quarters in the years ended December 31, 1994 and 1995 and the
quarters ended March 31, June 30 and September 30, 1996. This information has
been prepared on the same basis as the Consolidated Financial Statements
appearing elsewhere in this Prospectus and include, in the opinion of the
Company, all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the quarterly results when read in conjunction with
the Consolidated Financial Statements and related notes thereto. The Company has
historically experienced fluctuations in its third quarter results due to
seasonal population variations in Florida. The addition of Practices in the
Midwest is expected to reduce this seasonal fluctuation. The operating results
for any quarter are not necessarily indicative of results for any future period
or for the full year.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
1994 CALENDAR QUARTERS 1995 CALENDAR QUARTERS 1996 CALENDAR QUARTERS
---------------------------------- ----------------------------------- --------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
------ ------ ------ ------- ------ ------- ------ ------- ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue................... $3,491 $3,672 $3,442 $3,856 $3,929 $4,267 $3,980 $3,848 $4,853 $4,837 $11,150
Operating costs:
Cost of services............ 1,534 1,696 1,748 1,802 1,968 2,130 2,049 2,124 2,403 2,141 5,690
Selling, general and
administrative expense.... 524 573 518 672 631 663 637 713 924 898 2,204
Provision for doubtful
accounts.................. 259 229 228 287 290 303 317 251 309 336 1,010
Amortization Expense........ 357
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total operating
costs............... 2,317 2,498 2,494 2,761 2,889 3,096 3,003 3,088 3,636 3,375 9,261
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income from operations........ 1,174 1,174 948 1,095 1,040 1,171 977 760 1,217 1,462 1,889
Interest expense.............. (380) (355) (402) (447) (401) (384) (366) (353) (374) (393) (870)
Other income (expense), net... (14) (14) (13) (5) (21) 27 (19) (33) (2) (199) 58
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income before income taxes.... 780 805 533 643 618 814 592 374 841 870 1,077
Provision for income taxes.... 197 203 134 162 231 305 223 141 317 290 468
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net income............ $ 583 $ 602 $ 399 $ 481 $ 387 $ 509 $ 369 $ 233 $ 524 $ 580 $ 609
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== =======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Prior to the Recapitalization, the Company's principal cash requirements
were to fund working capital in order to support growth of net revenue and to
fund compensation and distributions to the shareholders. Prior to the
Recapitalization the Company elected to be treated as a Subchapter S
corporation. The Company funded such requirements principally with cash
generated from operations. Cash flows generated from operations were $424,000
for the year ended December 31, 1993 and $2.3 million for each of the years
ended December 31, 1994 and 1995. For the nine months ended September 30, 1996,
cash flows generated from operations were $2.2 million.

Pursuant to the Recapitalization, the Company acquired the assets and
assumed the liabilities of PDK for consideration consisting of $20.5 million in
cash, $3.5 million principal amount of Senior Notes and $2.5 million principal
amount of ALA Contingent Notes. In the Recapitalization, the Company issued an
aggregate of $5.5 million of Convertible Preferred Stock and issued the Junior
Notes in the aggregate principal amount of $7.5 million. ALA also issued an
aggregate of 1,425,600 shares of common stock to the owners of PDK for an
aggregate purchase price of $1.0 million. In the Recapitalization, the Company
also entered into the line of credit and borrowed $7.5 million thereunder. See
"Certain Transactions." The Recapitalization resulted in a significant increase
in the Company's interest expense beginning in the first three months of 1994.
In April 1996, the ALA Contingent Note obligations were satisfied by the
issuance of 194,400 shares of Common Stock.

Following the Recapitalization, the Company's principal cash requirements
have been to fund acquisitions and debt service and provide working capital to
support the growth of net revenue. The Company funded these requirements with
cash generated from operations and with borrowings under the line of credit and
the Credit Facility. The Credit Facility replaced the line of credit in May
1996. In connection with the Recent Acquisitions, the Company borrowed $78.6
million under the Credit Facility. At September 30, 1996

38
<PAGE> 40

and December 31, 1995, the Company had working capital of $2.7 million and $1.6
million, respectively, including $193,000 and $58,000, respectively, in cash and
cash equivalents. In addition, practices acquired by the Company are typically
required to have working capital at closing sufficient to fund one month of
operations or one payroll period.

Accounts receivable are primarily derived from fees due from patients and
other third party payors. These receivables are presented in the Consolidated
Financial Statements net of allowances for contractual adjustments and doubtful
accounts. The provision for uncollectible accounts, which is charged to
operations, is based on an evaluation of expected collections, based on an
analysis of current and past due accounts, historical collections experience in
relation to amounts billed and other relevant information. Contractual
adjustments result from the difference between the Company's scheduled rates for
services performed and the amount of reimbursement from government and other
third party payors for such services. See Note 4 to the Consolidated Financial
Statements.

At December 31, 1996 and September 30, 1996, of the $85.0 million available
under the Credit Facility, $81.7 million and $30.8 million, respectively, was
outstanding. Borrowings under the Credit Facility bear interest, at the
Company's option, at the Agent's base rate (8.25% at December 31, 1996) or the
Eurodollar rate plus 2.50%. At December 31, 1996, amounts outstanding under the
Credit Facility had an effective interest rate of 8.25%. The Credit Facility
provides for up to $85.0 million through two lines of credit: (i) a revolving
working capital line of credit in an amount equal to a maximum of 80% of the
Company's eligible accounts receivable, which at September 30, 1996 amounted to
available funds of $5.5 million, of which $2.9 million was outstanding; and (ii)
as a revolving line of credit available to fund acquisitions and which may be up
to $85.0 million if borrowings are not otherwise used for working capital
purposes. During the nine months ended September 30, 1996, the Company received
advances under the Credit Facility of $34.6 million and repaid $7.9 million,
primarily from cash available from operations. Pursuant to the Credit Facility,
the Company has pledged its assets, including the stock of the subsidiaries, as
security. The Credit Facility also contains covenants which require the Company
to maintain certain financial ratios (including minimum net income and operating
cash flow to total debt service), limit the amount of additional indebtedness
and annual capital expenditures the Company can incur, prohibit the payment of
dividends and specify restrictions on investments, mergers and sales of assets.
Additionally, the Company is required to obtain the consent of the Banks for
individual acquisitions utilizing bank debt in excess of $10.0 million. At
December 31, 1996, the Company was in compliance with the covenants in the
Credit Facility. See Note 8 to the Consolidated Financial Statements.

Historically, the Company's capital expenditures have been primarily for
laboratory equipment, management information systems and leasehold improvements.
Total capital expenditures were $488,000, $492,400 and $582,000 in 1994, 1995
and for the nine months ended September 30, 1996, respectively. The Company has
been assessing, and will continue to assess, the capabilities of the various
systems acquired in connection with each of the Recent Acquisitions, and is in
the process of replacing, upgrading and integrating the systems into a single
network. See "Business -- Management Information Systems." Priority has been
given to enhancements in billing and information systems. Planned capital
expenditures are expected to be between $1.7 million and $2.0 million in 1997.

The net proceeds of this offering, estimated to be $71.7 million, will be
used to repay the outstanding principal amount and accrued interest on the
Junior Notes and the Senior Notes, the accrued dividends on the Convertible
Preferred Stock and a portion of the outstanding indebtedness under the Credit
Facility. See "Use of Proceeds." As a result, after giving effect to this
offering and the application of the net proceeds therefrom, the Company will
have reduced its aggregate indebtedness from $96.0 million to $25.2 million. The
Company may reborrow under the Credit Facility to fund future acquisitions,
working capital and for general corporate purposes. In connection with the
prepayment of the Junior Notes and Senior Notes, the Company will write-off
approximately $90,000 of deferred financing costs associated with the incurrence
of these obligations which write-off will be reflected in the first quarter of
1997.

The Company anticipates that its outstanding indebtedness following the
consummation of this offering will be $25.2 million under the Credit Facility
and the Contingent Notes and Subordinated Notes issued in

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connection with the Recent Acquisitions. The Company expects to make further
borrowings under the Credit Facility in the short term to fund acquisitions. The
Company anticipates that funds generated by operations and funds available under
the Credit Facility will be sufficient to meet working capital requirements and
finance capital expenditures and, together with the issuance of shares of Common
Stock and Contingent Notes, acquisitions for the short term. Further, in the
event payments under the Contingent Notes become due, the Company believes that
the incremental cash generated from operations would exceed the cash required to
satisfy the Company's payment, if any, of the contingent obligations in any one
year period. Such payments, if any, will result in a corresponding increase in
goodwill and the related amount of amortization thereof in periods following the
payment. Historically, the Practices funded their capital expenditures with cash
flows from operations. For the year ended December 31, 1995, capital
expenditures of the Practices approximated 2.2% of net revenue. The Company is
integrating its laboratory information, billing and collections systems, which
may result in an increase in the percentage of capital expenditures to net
revenue. The Company believes, however, that such information systems
enhancements will result in cost efficiencies that may enable the Company to
continue to fund its capital expenditures with cash flows from operations. See
"Business -- Management Information Systems." Funds generated from operations
and funds available under the Credit Facility, along with the issuance of equity
and debt securities, may not be sufficient to implement the Company's growth
strategy in the long term. The Company may be required to seek additional
financing through increases to this Credit Facility, negotiation of credit
facilities with other banks or public or private placements of equity or debt
securities. No assurance can be given that the Company will be able to extend
the Credit Facility, secure additional bank borrowings or complete additional
debt or equity financings on terms favorable to the Company.

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BUSINESS

GENERAL

The Company provides physician practice management services and the
Affiliated Physicians provide medical services in the Company's outpatient
laboratories and in inpatient laboratories owned by hospitals. Eight Practices
owned by the Direct Subsidiaries have exclusive contracts with a total of 46
hospitals to manage their inpatient laboratories and provide professional
pathology services. Four of these eight Practices have established outpatient
laboratories that focus upon outpatient referral sources. Generally under a
hospital contract, the Practice provides the medical director for the hospital's
laboratory, who is responsible for the laboratory's anatomic and clinical
operations, as well as the hospital's blood bank and microbiology services.
Through their relationships with the medical staff of the hospitals and the
local medical community, inpatient based Practices also provide anatomic
pathology services to office based physicians. By using an inpatient laboratory
to conduct both outpatient and inpatient services, the Practices capitalize on
the trend towards more procedures being performed in an outpatient setting. The
four other Practices (three of which are PA Contractors) operate in outpatient
laboratories and provide services to attending physicians, national clinical
laboratories and managed care organizations. The outpatient pathology services
provided by the Practices are focused primarily on dermatopathology, which
relates to the examination of skin biopsies.

ANATOMIC PATHOLOGY

The practice of pathology includes anatomic pathology, which involves the
diagnosis of diseases through examination of tissues and cells, and clinical
pathology, which involves the chemical testing and analysis of body fluids, such
as blood and urine. Clinical pathology involves an interpretation of
standardized laboratory test results, a process which is frequently automated,
while anatomic pathology typically requires the involvement of a pathologist in
making a specific diagnosis. Anatomic pathologists do not treat patients, but
rather assist physicians by establishing a definitive diagnosis for many
diseases. In addition, anatomic pathologists may consult with attending
physicians regarding treatment plans. In these capacities, the anatomic
pathologist serves as the "physician's physician," creating what is often a
long-term relationship. Attending physicians remove specimens which are then
transported to a laboratory, either by courier or by overnight delivery service.
Once received at the laboratory, a specimen is processed and mounted onto a
slide by a laboratory technician for examination by a pathologist. Since
specimens may be transported, samples can be diagnosed by a pathologist from a
remote location. Therefore, pathologists are generally not needed "on-site" to
make a diagnosis, which enhances utilization of available capacity in outpatient
and inpatient laboratories and allows the practice to service a wider geographic
area.

An anatomic pathologist must have an understanding of a broad range of
medical specialties. Subspecialities within anatomic pathology include the
examination and diagnosis of skin biopsies taken by a dermatologist
(dermatopathology), of tissue samples, such as prostate or breast, taken during
a surgical procedure (surgical pathology), diagnostic analysis of diseases and
disorders in blood, bone marrow and lymph nodes (hematopathology) and
interpretation of pap smears, fine needle aspiration, biopsies, washings and
brushings and body fluids (cytopathology). While physical examination or
radiology procedures may suggest a diagnosis for many diseases, the definitive
diagnosis is generally established by the anatomic pathologist.

Based on information published by the American Medical Association, there
are approximately 14,000 practicing pathologists in the United States. According
to the American Society of Dermatopathology, in

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1994, approximately 900 practicing pathologists specialized in dermatopathology.
The Company has targeted outpatient pathology services and inpatient pathology
services at hospitals with 400 or fewer beds. Based on a study prepared for the
Company, the Company believes that the domestic market as of 1995 for
non-hospital pathology services (approximately 3,300 outpatient laboratories)
was approximately $2.1 billion and inpatient pathology services at hospitals
with 400 or fewer beds was approximately $1.1 billion. The Company expects the
provision of anatomic pathology services to grow primarily due to the aging of
the United States population, increased incidence of cancer and medical
advancements that allow for earlier diagnosis and treatment of diseases. As an
example, according to The Journal of the American Academy of Dermatology, the
number of new cases of non-melanoma skin cancer diagnosed in 1977 was 480,000 as
compared to over 900,000 new cases diagnosed in 1994. Further, estimates
published by The American Cancer Society in 1996 indicate that 50% of the U.S.
population who live to age 65 or older will develop some form of skin cancer
during their lifetimes.

Most hospitals operate a pathology laboratory to provide urgent anatomic
pathology services, as well as more routine testing, for the physicians on
staff. Laboratories operated by a hospital or by a single independent pathology
practice are limited in the range of specialty services that they can provide
and in their available referral sources for utilization of the pathologists, and
are often constrained by time and expense associated with administrative
functions. Cost containment pressures and medical advancements are expected to
decrease the number of tests being performed in hospitals and increase the
number of procedures that will be performed by a physician in an outpatient
setting. Further, as hospitals consolidate their operations and increase the
outsourcing of certain services, the Company expects growth in outpatient
pathology services to continue to outpace the growth in inpatient pathology
services. As a result of these trends, the Company believes that there will be
greater utilization of outpatient pathology laboratories, such as those operated
by the Company.

Cost containment pressures are also causing hospitals to increase their
utilization of outside contract management companies to manage specialized
functions, improve physician utilization and reduce the hospital's
responsibility for certain administrative duties. Physician practice management
companies, such as the Company, can provide a hospital with professional
management of its pathology laboratory staff, including recruiting and
scheduling, as well as the assumption of certain financial risks and
administrative duties associated with physician billing and collections,
utilization and outcome data and payment of physician malpractice insurance
premiums.

Although the selection of a pathologist is primarily made by individual
physicians, a trend is evolving toward decisions being made by managed care
organizations and other insurance plans. While the majority of referrals by
managed care organizations for outpatient anatomic pathology services are made
directly to pathology practices on a local basis, in certain cases managed care
organizations contract with national clinical laboratories. Generally, national
clinical laboratories subcontract anatomic pathology services to large practices
that can provide a comprehensive range of anatomic pathology services. The
Company believes that hospitals, managed care organizations and national
clinical laboratories will continue to contract for the provision of anatomic
pathology services.

Historically, the anatomic pathology industry has been highly fragmented,
with the majority of the services being provided by relatively small practices.
The Company estimates that there are over 3,300 pathology practices operating in
outpatient laboratories in the United States. There is an evolving trend among
pathologists to form larger practices that can provide a broad range of
outpatient and inpatient services and enhance the utilization of the
pathologists. The Company believes this trend can be attributed to several
factors, including cost containment pressures by government and other
third-party payors, increased competition and rising costs of operating a
medical practice. In addition, given the current trends of increasing outpatient
services and outsourcing and consolidation by hospitals, pathologists are
seeking to align themselves with larger practices and physician practice
management companies that can assist providers in the evolving healthcare
environment. Larger practices and physician practice management companies can
also offer physicians certain advantages, such as negotiating contracts with
hospitals, managed care providers and national clinical laboratories, marketing
of professional services, providing continuing education and career advancement
opportunities, making available a broad range of specialists with whom to
consult, providing

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access to capital and business experience, establishing and implementing billing
and collection procedures and expanding the Practice's geographic coverage area.
Each of these factors support the pathologists in the efficient management of
the complex and time-consuming, non-medical aspects of their practice.

BUSINESS STRATEGY

The Company's objective is to enhance its position as the leading provider
of physician practice management services to anatomic pathology practices
through the following strategies:

Focus on Anatomic Pathology. The Company believes that its focus on
providing management services to anatomic pathology practices provides it
with a competitive advantage in the acquisition of such practices. A
significant opportunity exists to acquire or affiliate with anatomic
pathology practices that are seeking to be acquired or to affiliate with a
physician practice management company with experienced management and
access to capital. As a result of the Company's focus on providing
management services to anatomic pathology practices, Affiliated Physicians
are able to form an internal network for consultations and to offer
specialized services to their clients. The Company believes that its focus
allows it to develop expertise in managing both inpatient and outpatient
pathology practices.

Acquire Leading Practices. The Company expects to increase its
presence in existing markets and enter into new markets through
acquisitions of and affiliations with leading practices. The Company's
acquisition criteria include market demographics, size, profitability,
local prominence, payor relationships, fit with other acquisitions and
opportunities for growth of the acquired Practice. The Company intends to
continue to source acquisitions by capitalizing on the professional
reputations of the Practices and the Affiliated Physicians, the Company's
management experience and the benefits of being part of a public company,
including increased resources and improved access to capital. In existing
markets, the Company targets acquisitions that can expand its presence,
provide new medical services, such as dermatopathology, and provide
operational efficiencies for the Practices in that market. In new markets,
the Company seeks to acquire and affiliate with prominent practices to
serve as a platform for expansion.

Expand Sales and Marketing Efforts. The Company focuses on generating
internal growth for the Practices by augmenting their existing physician
and contractual relationships with a professional sales and marketing
program. The Company's marketing program is designed to (i) increase
relationships with physicians over a broader geographic region, (ii) expand
contracts with national clinical laboratories that subcontract for anatomic
pathology services, and (iii) capitalize on existing managed care
relationships. Since specimens can be transported, the Company's sales and
marketing efforts focus on expanding the geographic scope of the Practices.
Four Practices contract with national clinical laboratories to provide
outpatient anatomic pathology services. These contracts generally are
exclusive to the individual Practice and are limited to the local area. The
Company is seeking to extend existing contracts with national clinical
laboratories to include multiple Practices that cover a broad geographic
region. The Company believes that this regional business model can offer
national clinical laboratories and managed care organizations a convenient
single source for anatomic pathology services. The Company also intends to
apply its regional business model in obtaining managed care contracts.

Increase Contracts with Hospitals. The Company seeks to gain
additional exclusive hospital contracts for the Practices through the
acquisition of or affiliation with anatomic pathology practices, as well as
through expansion of the Company's existing relationships with
multi-hospital systems. The Company believes that multi-hospital systems
will benefit from contracting with a single provider of pathology services
in a geographic region. The Company's management of inpatient laboratories
can also facilitate the growth of the Practices' outpatient services in the
same region.

Achieve Operational Efficiencies. The Company believes that the
Practices will benefit from the management and administrative support the
Company provides. To maximize operational efficiencies, the Company is
implementing systems in which a small corporate staff develops policies
that are implemented by the Practices locally, on a day-to-day basis. The
corporate staff will also provide oversight, centralize reporting and other
administrative functions. The Company intends to achieve

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operational efficiencies by centralizing certain functions, enhancing
Practice efficiency and utilizing its size to negotiate discounts on
laboratory equipment, other medical supplies and services and health and
malpractice insurance. The Company intends to centralize financial
reporting, payroll and benefits administration and regulatory compliance.
Prior to their acquisition, the Practices either managed their billing and
collections inhouse or outsourced these functions. In September 1996, the
Company entered into a contract with Medaphis Physician Services
Corporation ("Medaphis") to provide inpatient billing services for 20
hospital contracts of the Practices with rates under the contract tied to
billing volume. In addition, the Company's Fort Lauderdale administrative
office has assumed the outpatient billing for two Practices. The Company
will continue to evaluate billing and collections systems at the Practices
and may centralize such functions for other Practices or newly acquired
Practices in the future. The Company plans to introduce "bench-marking"
programs to enhance the efficiency of the Practices. In certain markets,
the Company intends to develop a regional business model with centralized
administrative functions, common marketing plans, and integrated courier
systems.

REGIONAL BUSINESS MODEL

Through the implementation of its strategies, the Company intends to
develop integrated networks of anatomic pathology practices on a regional basis.
These networks will consist of a number of practices that together, (i) have a
substantial market presence; (ii) offer a broad range of services; (iii) have an
extensive referral base; and (iv) possess complementary strengths and offer
operating efficiencies. The Company is currently developing its regional
business model in Florida. The Company believes that Florida represents an
attractive market due to its population demographics, including the growth of
the general population and a large population of senior citizens, as well as the
Company's familiarity and understanding of the anatomic pathology market in
Florida. The Company owns, controls and manages anatomic pathology practices in
Florida that extend from Miami to Orlando and from Fort Myers to Tampa.
Together, these Practices employ a total of 363 persons, including 62 Affiliated
Physicians, have contracts with 29 hospitals and 17 outpatient surgery centers
and operate six outpatient laboratories. In addition, five of the Affiliated
Physicians maintain faculty affiliations at medical schools in Florida,
including the University of Miami and the University of Florida, which positions
enhance their relationships with the medical community in Florida. The Company's
contract with SmithKline Beecham PLC ("SmithKline"), a national clinical
laboratory, to provide anatomic pathology services, on an exclusive basis, in
seven counties in Florida was expanded in November 1996 to include 59 of
Florida's 67 counties.

The Company believes that this regional business model offers short and
long term benefits to the Company, attending physicians, third party payors and
patients. The Company is integrating the administrative functions, including the
billing and collection function, of three Practices and expects such integration
to result in enhanced operational efficiencies. The Company has consolidated
outpatient billing for two Practices at the Company's Fort Lauderdale
administrative office. The Company's courier system for transporting specimens
enables the Practices to penetrate areas outside their current markets and
enhance the utilization of their laboratory facilities. The Company is also
integrating and coordinating the marketing personnel of the Practices to
effectively promote the Practices to physicians, hospitals, managed care
organizations and national clinical laboratories to enhance the growth of the
Company. This marketing effort is based upon promoting the broad geographic
coverage and extensive professional services the Company offers. The Company's
strategy is to leverage its size to extend contracts with national clinical
laboratories to all of the Practices in Florida. The Company intends to market
its services under the name "AmeriPath" to develop a branded set of products and
services to payors and other clients. The Company plans to integrate the
Practices' management information systems into a single system that will expand
the financial and clinical reporting capabilities of each of the Practices. The
Company believes that implementation of this regional model will increase the
revenues of the Practices in the region. The Company plans to apply this
regional business model to Practices in other states.

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AFFILIATION STRUCTURE

AmPath is a holding company that owns, controls and manages the 12
Practices through five wholly-owned subsidiaries and long-term management
agreements with the three PA Contractors in Texas and Ohio (where the Company
manages and controls all non-medical functions). Each Practice is either a
Subsidiary, a division of a Subsidiary or a PA Contractor. AmPath controls all
non-medical functions of the Practices, including financial reporting, human
resources, payroll, billing, employee benefits and accounting. In Texas and
Ohio, the Affiliated Physicians are employed by the PA Contractors. In Florida,
Alabama and Kentucky, the Affiliated Physicians are employed by the Direct
Subsidiaries, which also own and operate the outpatient laboratories. See
" -- Physician, PA Contractor and Other Contractual Relationships."

In Texas and Ohio, states that prohibit the corporate practice of medicine,
a PA Contractor Subsidiary of the Company has entered into a 40 year management
agreements with the Ohio PA Contractors and the Texas PA Contractor. Pursuant to
the terms of these management contracts, the Company provides all non-medical
administrative support functions to the PA Contractor. See "-- Physician, PA
Contractors and Other Contractual Relationships."

The Board of Directors and management formulate strategies and policies
which are implemented locally on a day-to-day basis by each Practice. Each
Practice has a Managing Director who reports to the Company's Chief Operating
Officer. Management, particularly the Company's Medical Director and Chief
Operating Officer, develop and review standards for the Affiliated Physicians
and their medical practices. The Chief Operating Officer supervises all
employment matters with respect to Affiliated Physicians and staffing decisions
at the Practices. The Company coordinates marketing activities, negotiates
managed care and national clinical laboratory contracts and creates and
supervises the implementation of budgeting, accounting, billing, finance,
personnel and administrative policies. The Company is currently consolidating
the accounting procedures and financial reporting systems of the Practices and
is implementing cash management and other fiscal control programs. The Company
is also developing personnel policies and uniform benefit plans for all
employees of the Company.

The Company employs, or has long-term agreements with PA Contractors who
employ, 81 pathologists, 77 of whom are board certified and four of whom are
board eligible in anatomic pathology. Thirty-nine of the pathologists have
additional subspecialty board certifications in such areas as dermatopathology,
hematopathology and cytopathology. The experience and certification of the
Affiliated Physicians provide opportunities for immediate consultation in
complex cases among the internal network of Affiliated Physicians. Pathology is
a specialized field of medicine and is a core requirement in a dermatologist's
training. Through teaching at medical institutions, an Affiliated Physician has
an opportunity to develop a reputation and following among residents and
practicing physicians. Eleven Affiliated Physicians have teaching positions with
a university or an affiliation with another institution for training and
continuing medical education of physicians, particularly dermatologists. In
addition to salary and bonuses, the Company provides Affiliated Physicians with
benefit plans, group health insurance and physician malpractice insurance. See
"-- Insurance" and "-- Physician, PA Contractor and Other Contractual
Relationships."

The Company manages and controls all of the non-medical functions of the
Practices, including: (i) recruiting, training, employing and managing the
technical and support staff of the Practices; (ii) developing, equipping and
staffing laboratory facilities; (iii) establishing and maintaining courier
services to transport specimens; (iv) negotiating and maintaining contracts with
hospitals, national clinical laboratories and managed care organizations and
other payors; (v) providing financial reporting and administration, clerical,
purchasing, payroll, billing and collection, information systems, sales and
marketing, risk management, employee benefits, legal, tax and accounting
services to the Practices; (vi) complying with applicable laws and regulations;
and (vii) with respect to the Company's ownership and operation of anatomic
pathology laboratories, providing slide preparation and other technical
services. The Company is not licensed to practice medicine. The practice of
medicine is conducted solely by the Affiliated Physicians. All of the Company's
outpatient laboratories are licensed under the guidelines established by the
federal Clinical Laboratory Improvement Act ("CLIA") and applicable state
statutes and are managed by the medical director of the laboratory. Seven
outpatient laboratories are accredited by the College of American Pathology.

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The Company's quality assurance and quality improvement programs are designed to
assure that all laboratories are in compliance with applicable law. Each of the
Company's laboratories has a management information system and modern laboratory
instrumentation that enables laboratory personnel to track, process, report and
archive biopsies and other specimens.

The Practices contract with hospitals to provide pathology services. The
Practices staff each hospital with at least one pathologist who generally serves
as the medical director of the laboratory, which facilitates the hospital's
compliance with licensing requirements. The Practices are responsible for
recruiting, staffing and scheduling the Affiliated Physicians in the hospital's
inpatient laboratories. In addition to providing pathology services, the medical
director of the laboratory is responsible for (i) the overall management of the
laboratory, including quality of care, professional discipline, and utilization
review; (ii) serving as a liaison to the hospital administrators and medical
staff; and (iii) maintaining professional and public relations in the hospital
and the community. Three Practices have both outpatient laboratories and
hospital contracts which allow outpatient specimens to be processed and examined
in inpatient laboratories, which enhances utilization of Affiliated Physicians
in inpatient facilities. In 42 hospital contracts, technical personnel are
employed by the hospital, rather than by the Practices. Three Practices have a
centralized histology laboratory which serves the needs of multiple hospitals.

MANAGEMENT INFORMATION SYSTEMS

The Company believes that the integration of its laboratory information,
billing and collections and financial reporting systems will enable it to cost
effectively monitor the operations of the Practices, enhance utilization of the
Affiliated Physicians, develop practice protocols and archives and provide the
Company with a competitive advantage in negotiating national clinical laboratory
and managed care contracts. Each of the Company's laboratories has a management
information system and modern laboratory instrumentation that enables laboratory
personnel to track, process, report and archive biopsies and other specimens. In
1995, the Company acquired an outpatient billing and collections software
program and upgraded its computer hardware to increase operating efficiency and
storage capacity at its Fort Lauderdale administrative office. The Company is in
the process of installing a complete general ledger and financial reporting
system to handle the accounting for the Practices and facilitate the
consolidation of billing and financial information.

Historically, the Company and three of the Practices have outsourced their
inpatient billing and collections functions to Medaphis, a national provider of
physician billing services. The Company entered into a new contract with
Medaphis in September 1996 to provide inpatient billing services for 20 hospital
contracts with rates tied to billing volume. Prior to their acquisition, the
Practices either managed their billing and collections in house or outsourced
those functions. In the course of acquiring the Practices, the Company analyzed
and evaluated each of the billing and collections systems. Based on such
evaluations, the Company assumed outpatient billing for two Practices at the
Company's centralized billing operation at its Fort Lauderdale administrative
office and may transfer additional inpatient billing for two Practices to
Medaphis. The Company invested $332,000 and $302,000 in information systems in
1995 and for the nine months ended September 30, 1996, respectively, and plans
to invest approximately $1.7 million in 1997 to increase the capacity of its
centralized outpatient billing system and laboratory information systems at its
Fort Lauderdale administrative office. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources." In 1997, the Company expects to complete the integration of its
management information system that electronically links the accounting, billing
and collection systems of the Practices. While no assurance can be given, the
Company intends to complete an integrated management information system that
electronically links the laboratory information systems of its existing
Practices in 1998.

MARKETING

The Company's marketing efforts are focused on physicians, hospital and
outpatient surgery center administrators, national clinical laboratories and
managed care organizations. Prior to being acquired by the Company, the
Practices' marketing efforts were primarily based upon the professional
reputations and individual efforts of the pathologists. The Company believes
that there is an opportunity to capitalize on the

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professional reputations of the Affiliated Physicians by hiring experienced
personnel and applying professional sales and marketing techniques to the
Practices. Historically, the Practices marketed outpatient services primarily to
dermatologists. The Company intends to increase the Practices' volume of
business by also directing its marketing efforts to other medical specialists,
including gynecologists, urologists and gastroenterologists. Since specimens may
be sent by courier service or overnight delivery, the Company will utilize its
sales professionals to expand the potential geographic market for each Practice
beyond its local physician community. Several of the Practices currently market
their outpatient services to a broad geographic area including neighboring
states. The Company intends to augment its 14 person sales force with additional
sales personnel. These representatives will report to the Company's Vice
President of Sales, who assists in the development of the Company's marketing
strategies and is responsible for their implementation.

The Practices have contracts with 46 hospitals, 20 of which are owned by
Columbia/HCA, the country's largest publicly-owned hospital company. The Company
plans to dedicate members of its professional sales force to meet the needs of
multi-hospital systems with facilities of 400 or fewer beds. The Company
believes it can assist multi-hospital systems which currently have numerous
contracts for pathology services by serving as a single source provider of
pathology services. The Company's marketing effort will be directed toward
consolidating the various contracts of multi-hospital systems on a regional
basis and thus facilitating more efficient operation of multiple laboratories
owned by such systems. See "-- Regional Business Model."

Four Practices, including the three PA Contractors, have an aggregate of
six contracts with two national clinical laboratories, SmithKline and Laboratory
Corporation of America Holdings ("LabCorp"), on a local basis. The Company is
directing marketing efforts to national clinical laboratories to expand these
contracts on a regional basis to additional Practices as well as to enter into
new contracts. In addition, the Company is seeking to secure new contracts and
expand existing contracts with managed care organizations for the provision of
anatomic pathology services. The Company is prepared to negotiate flexible
arrangements for the Practices with managed care organizations, including on a
discounted fee-for-service or capitated contract basis. The Company does not
believe that contracting directly with managed care organizations will adversely
affect the Company's relationships with national clinical laboratories because
anatomic pathology services are not part of a national clinical laboratory's
core business.

CLIENT AND PAYOR RELATIONSHIPS

The Practices provide services to a wide variety of healthcare providers
and payors including physicians, government programs, indemnity insurance
companies, managed care organizations and national clinical laboratories.
Physicians that are not affiliated with a hospital or managed care organization
are a principal source of the business. Fees for anatomic pathology services
rendered to the physicians are billed either to the physicians, the patient, or
the patient's third party payor. Hospital contracts grant Practices the
exclusive right and responsibility to manage the pathology services at the
hospital. In this capacity, the Practices provide pathology services to staff
physicians and support personnel and administrative services for the laboratory,
as well as an Affiliated Physician who serves as the medical director of the
laboratory. Upon initiation, the contracts typically have terms of one to five
years. Thereafter, the contracts typically renew for additional terms of one
year unless otherwise terminated by either party. Since most of the contracts
have passed their initial term, 35 hospital contracts are currently subject to
renewal on an annual basis. One of the 11 remaining contracts is subject to
renewal in 1997. The contracts typically provide that the hospital may terminate
the agreement prior to the expiration of the initial or renewal term. With
respect to 42 hospital contracts, technical laboratory support personnel are
employed by the hospital, rather than by the Company. The Company is responsible
for the training and supervision of technical personnel who are employed by the
hospitals. As the medical director of the laboratory, the Affiliated Physician
may be responsible for hiring and terminating laboratory personnel. Neither the
Company nor any Practice prior to its acquisition has lost a contract in a
hospital with ongoing operations.

The national clinical laboratories that contract with managed care
organizations perform clinical laboratory services and generally subcontract
anatomic pathology services to large practices. Under these contracts, the
practices bill national clinical laboratories on a fee schedule basis. Contracts
with national clinical laboratories provide for the exclusive subcontracting of
anatomic pathology services for clients of the

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national clinical laboratories in a defined geographic area. These contracts
have terms of one to three years and generally provide for automatic renewal for
additional one to three year terms. The Company's relationships with managed
care organizations typically provide for the provision of services to their
participants on the basis of an agreed upon fee schedule.

PHYSICIAN, PA CONTRACTOR AND OTHER CONTRACTUAL RELATIONSHIPS

The Company employs pathologists, or contracts with the PA Contractors who
employ pathologists, to provide medical services in hospitals and in other
inpatient and outpatient laboratories. The employment agreements typically have
terms of five years and generally can be terminated at any time upon 60 to 180
days' notice. The Affiliated Physicians generally receive a base salary and a
performance bonus. The Affiliated Physicians are required to hold a valid
license to practice medicine in the jurisdiction in which the pathologist
practices and, with respect to inpatient services, to become a member of the
medical staff at the contracting hospital with privileges in pathology. The
Company is responsible for billing patients, physicians and third party payors
for services rendered by the Affiliated Physicians. Substantially all of the
Affiliated Physicians have agreed, for a period of one to two years after
termination of employment, not to compete with AmeriPath or the PA Contractor
within a defined geographic area and not to solicit Affiliated Physicians, other
employees or certain clients of the Company. See "Risk Factors -- Professional
Liability and Insurance."

AmeriPath has management agreements with three PA Contractors in Texas and
Ohio (the "PA Management Agreements"). In Texas, the Texas PA is owned by an
Affiliated Physician, who is licensed in the state of Texas and is also an
officer of the PA Contractor. In Ohio, the PA Contractors are owned by a trust,
of which AmPath is the sole beneficiary. Under the PA Management Agreements, the
Company has control over all non-medical functions of the PA Contractors,
including all administrative, management, billing and support functions. The PA
Contractors pay AmeriPath a management fee for its services. In Ohio, the fee is
equal to the net revenue of the pathology practice. In Texas, the management fee
consists of a flat base fee, which is determined on an annual basis according to
the operating plan of the Practice, and a performance-based percentage fee,
which may be paid if the performance of the Practice exceeds budgeted targets.
The management fee may be adjusted from time to time to reflect industry
standards, the range of services provided by the PA Contractor and the level of
performance of AmeriPath. Each of the PA Management Agreements have terms of 40
years and are subject to renegotiation at the end of such term. See "Risk
Factors -- Government Regulation" and "Risk Factors -- Dependence on
Pathologists."

Acquisition Management Services, Inc. ("AMS") has served as the Company's
consultant in implementing its acquisition program. AMS has assisted the Company
with matters relating to human resources, due diligence, financial analyses,
valuations, projections, strategic analyses and negotiation of the Recent
Acquisitions. AMS performs its services for the Company on a non-exclusive,
independent contractor basis and is indemnified by the Company for actions other
than fraud, gross neglect or willful misconduct. Since the Company believes that
AMS's services have increased the efficiency of the Company's acquisition
process, the Company expects to continue to use AMS's services in the near term.

GOVERNMENT REGULATION

The business of the Company and the PA Contractors is subject to a variety
of governmental and regulatory requirements relating to healthcare matters as
well as laws and regulations which relate to business corporations in general.
The Company believes that it exercises care in an effort to structure its
practices and arrangements with hospitals and physicians to comply with relevant
federal and state law and believes that such current arrangements and practices
comply with all applicable statutes and regulations. In connection with the
Recent Acquisitions, the Company reviewed the Practices' compliance with federal
and state healthcare laws and regulations and revised certain policies and
procedures with respect to certain of the Practices. While the Company believes
that the operations of the Practices prior to their acquisition were generally
in compliance with such laws and regulations, there can be no assurance that the
prior operations of the Practices, if reviewed, would be found to be in full
compliance with such laws, as such laws may be ultimately interpreted. A
violation of such laws by a Practice prior to its acquisition could result in
civil and criminal penalties, exclusion from participation in Medicare and
Medicaid programs and/or loss of a

48
<PAGE> 50

physician's license to practice medicine. To the extent the Practices were found
not to be in compliance with such laws, the Company's financial condition and
results of operations could be materially adversely affected.

The Company derived 57.0%, 43.3% and an estimated 38.0% of collections for
the year ended December 31, 1995 and the nine months ended September 30, 1996
and on a pro forma basis for the nine months ended September 30, 1996,
respectively, from payments made by government-sponsored healthcare programs
(principally Medicare and Medicaid). The decrease in the percentage of net
revenue attributable to government sponsored healthcare programs resulted
primarily from the acquisition of Practices outside Florida. These programs are
subject to substantial regulation by the federal and state governments. Any
change in reimbursement regulations, policies, practices, interpretations or
statutes that places substantial limitations on reimbursement amounts or
practices could adversely affect the Company's financial condition and results
of operations. Increasing budgetary pressures at both the federal and state
level and the rapidly escalating costs of healthcare and reimbursement programs
have led, and may continue to lead, to significant reductions in government
reimbursements for certain medical charges and elimination of coverage for
certain individuals under these programs. Federal legislation could result in a
reduction of Medicare and Medicaid funding or an increase in state discretionary
Medicaid funding, or a combination thereof. Particularly in view of the fact
that Medicaid is a substantial and growing portion of state budgets, increases
in state discretion could result in payment reductions. Although governmental
payment reductions have not materially affected the Company in the past, it is
possible that changes in the future could have a material adverse effect on the
Company's financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Introduction." In addition, Medicare, Medicaid and other
government sponsored healthcare programs are increasingly shifting to managed
care. Some states have recently enacted legislation to require that all Medicaid
patients be treated by managed care organizations, and similar legislation may
be enacted in other states, which could result in reduced payments to the
Company for such patients. Funds received under these programs are subject to
audit with respect to the proper billing for physician services and,
accordingly, retroactive adjustments of revenue from these programs may occur.
The Company expects that there will continue to be proposals to reduce or limit
Medicare and Medicaid reimbursements. The Company cannot predict at this time
whether or when any of such proposals will be adopted or, if adopted and
implemented, what effect such proposals would have on the Company. There can be
no assurance that payments under government sponsored healthcare programs will
remain at levels comparable to present levels. See "Risk Factors -- Reliance
Upon Government Programs" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Introduction."

Federal law prohibits the offer, payment, solicitation or receipt of any
form of remuneration intended to compensate for the referral of Medicare,
Medicaid and certain other federal health program patients or patient care
opportunities, or in return for the purchase, lease or order of items or
services that are covered by Medicare, Medicaid or certain other government
health programs. In addition, absent an applicable exception, federal law
prohibits the referral of Medicare or Medicaid patients for designated health
services, which include laboratory services, to entities which have specific
types of financial relationships with the referring physician. One of the
relationships that results in a prohibition of referrals is ownership of certain
securities. Although there is an exception in the law for the ownership of
certain publicly held securities, the Common Stock does not currently qualify
for this exception. Consequently, no physician owning Common Stock will be able
to make referrals to the Company. The Company intends to notify referring
physicians of this prohibition. Violation of these laws can result in
substantial penalties and exclusion from the Medicare and Medicaid programs.
Each of the states in which the Company does business, except Alabama, have
anti-kickback, anti-fee splitting and self-referral laws that are similar to the
federal laws, apply to all payors and impose substantial penalties for
violations. Certain of these laws contain exceptions for relationships with
pathologists and group practices. Although the Company believes that its
operations do not violate these federal or state laws, which are commonly known
as the "anti-kickback" and "self-referral" statutes, there can be no assurance
that its activities will not be challenged by regulatory authorities seeking to
enforce these laws. See "Risk Factors -- Effect of Government Regulation."

The Company is not licensed to practice medicine. The practice of medicine
is conducted solely by the Affiliated Physicians. The manner in which licensed
physicians can be organized to perform and bill for

49
<PAGE> 51

medical services is governed by the laws of the state in which medical services
are provided and by the medical boards or other entities authorized by such
states to oversee the practice of medicine. Business corporations are generally
not permitted under state law to exercise control over the medical judgments or
decisions of physicians, or engage in certain practices such as fee-splitting
with physicians. In states where the Company is not permitted to directly own a
medical practice, the Company performs only non-medical administrative services,
does not represent to the public or its clients that it offers medical services
and does not exercise influence or control over the practice of medicine by the
PA Contractors or the Affiliated Physicians employed by the PA Contractors.
Corporate practice of medicine restrictions in Ohio prohibit a business
corporation from employing physicians to engage in the practice of medicine, but
permit an entity employing physicians to practice medicine to be owned by a
trust, provided that the trustee of such trust is a licensed physician. In
addition, a business corporation is not prohibited from being the beneficial
owner of such trust or from performing administrative, marketing, billing and
other non-medical or other services on behalf of the entity employing physicians
engaged in the practice of medicine. In Ohio, the Company contracts with two PA
Contractors (which are owned by trusts of which AmPath is the sole beneficiary),
which in turn employ or contract with physicians to provide necessary physician
and medical services. The trustees of each of the trusts that own the stock of
the Ohio PA Contractors are physicians licensed to practice medicine in Ohio.
Based on the advice of counsel, the Company believes that it is in compliance
with Ohio state laws relating to the corporate practice of medicine.

In Texas, corporate practice of medicine restrictions provide that only
entities that are owned by licensed physicians are permitted to employ
physicians to engage in the practice of medicine. However, such entities are not
prohibited from retaining business corporations to manage other aspects of the
business to provide administrative, marketing, billing and other non-medical
services. In Texas, the Company contracts with the Texas PA (which is owned by a
licensed physician employed by the Texas PA), which in turn employs physicians
to provide necessary physician and medical services. Based on the advice of
counsel, the Company believes that it is in compliance with Texas state laws
relating to the corporate practice of medicine.

Florida, Kentucky and Alabama do not have laws prohibiting business
corporations from directly employing physicians to practice medicine. Such
states, however, have medical practice acts which provide that only licensed
physicians may provide medical care. Accordingly, in Florida, Kentucky and
Alabama, business corporations may directly employ physicians to engage in the
provision of medical services, provided that the physicians have control over
the manner in which medical care is provided. The "Managing Directors" of the
Practices located in Florida, Kentucky and Alabama are each physicians licensed
to practice medicine in their respective states. Pursuant to their employment
agreements with the Subsidiaries, such Managing Directors have exclusive control
over the actual provision of medical care at their respective Practices and are
responsible for setting policies relating to and monitoring the practice of
medicine. Based on the advice of counsel, the Company believes that it is in
compliance with the laws in Florida, Kentucky and Alabama relating to the
corporate practice of medicine.

There can be no assurance that regulatory authorities or other parties will
not assert that the Company is engaged in the corporate practice of medicine. If
such a claim were successfully asserted in any jurisdiction, the Company, the PA
Contractors and the Affiliated Physicians could be subject to civil and criminal
penalties under such jurisdiction's laws and could be required to restructure
its contractual arrangements. In addition, expansion of the operations of the
Company to other "corporate practice" states will require similar structural and
organizational modification of the Company's form of relationship with PA
Contractors or hospitals. Such results or the inability to successfully
restructure contractual arrangements could have a material adverse effect on the
Company's financial condition and results of operations. See "Risk
Factors -- State Laws Regarding Prohibition of Corporate Practice of Medicine."

The Medicare and Medicaid fraud and abuse provisions apply to laboratories
participating in such programs. These provisions include prohibitions of
improper and unnecessary billing for tests under these programs. Penalties for
violations of these federal laws include exclusion from participation in
Medicare and Medicaid programs, asset forfeitures and civil and criminal
penalties.

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<PAGE> 52

In addition to current regulation, state and federal government sponsored
continue to focus significant attention on reforming the healthcare system in
the United States. A broad range of healthcare reform measures have been
introduced in Congress and in certain state legislatures. The Health Insurance
Portability and Accountability Act of 1996 has strengthened the powers of the
OIG and increased the funding for healthcare fraud investigations. As a result,
the OIG is currently expanding the scope of its healthcare fraud investigations.
In addition, federal and certain state laws provide individuals (so-called
"whistle-blowers") with a right to bring claims on behalf of federal and state
government agencies, and with a significant economic incentive to the
whistle-blower in the event a claim produces monetary recovery. These actions
are becoming increasingly prevalent in the healthcare industry, and have
resulted in increased scrutiny of healthcare providers. In addition, the U.S.
Congress is considering major reductions in the rate of increase of Medicare and
Medicaid spending as part of efforts to balance the budget of the United States.
Although the Company cannot predict whether these or other reductions in the
Medicare or Medicaid programs will be adopted, the adoption of such proposals
could have a material adverse effect on the business of the Company and the PA
Contractors. There can be no assurance that any proposed or future healthcare
legislation or other changes in the administration, interpretation or
enforcement of government sponsored healthcare programs will not have an adverse
effect on the financial condition and results or operations of the Company.
Concern about such proposals has been reflected in the volatility of the stock
prices of companies in healthcare and related industries. See "Risk
Factors -- Possible Reform of Healthcare Industry" and "-- No Prior Market;
Volatility of Stock Price."

CLIA extends federal oversight to virtually all laboratories by requiring
that laboratories be certified by the government. Many laboratories must also
meet governmental quality and personnel standards, undergo proficiency testing
and be subject to biennial inspection. Rather than focusing on location, size or
type of laboratory, this extended oversight is based on the complexity of the
test performed by the laboratory. In 1992, HHS published regulations
implementing CLIA. The quality standards and enforcement procedure regulations
became effective in 1992. The quality standards regulations divide all tests
into three categories (waivered, moderate complexity and high complexity) and
establish varying requirements depending upon the complexity of the test
performed. A laboratory that performs high complexity tests must meet more
stringent requirements than a laboratory that performs only moderate complexity
tests, while those that perform only one or more of eight routine "waivered"
tests may apply for a waiver from most requirements of CLIA. The Company's
outpatient laboratories are certified by CLIA to perform high complexity
testing. Generally, the HHS regulations require laboratories that perform high
complexity or moderate complexity tests, to implement systems that ensure the
accurate performance and reporting of tests results, establish quality control
systems and have proficiency testing conducted by approved agencies, and
biennial inspections. The sanction for failure to comply with these regulations
may be suspension, revocation or limitation of a laboratory's CLIA certificate
necessary to conduct business, significant fines and criminal penalties. The
loss of a license, imposition of a fine or future changes in such federal, state
and local laws and regulations (or in the interpretation of current laws and
regulations) could have a material adverse effect on the Company's financial
condition and results of operations. The Company is also subject to state
regulation. CLIA provides that a state may adopt more stringent regulations than
federal law. For example, state law may require that laboratory personnel meet
certain qualifications, specify certain quality controls, maintain certain
records and undergo proficiency testing.

In addition, the Company is subject to licensing and regulation under
federal, state and local laws relating to the handling and disposal of medical
specimens, infectious and hazardous waste and radioactive materials as well as
to the safety and health of laboratory employees. All Company laboratories are
operated in accordance with applicable federal and state laws and regulations
relating to the disposal of all laboratory specimens and other biohazardous
waste and the Company utilizes licensed vendors for disposal of such specimens.
Although the Company believes that it is currently in compliance with such
federal, state and local laws, failure to comply could subject the Company to
denial of the right to conduct business, fines, criminal penalties or other
enforcement actions.

In addition to its comprehensive regulation of safety in the workplace, the
federal Occupational Safety and Health Administration ("OSHA") has established
extensive requirements relating to workplace safety for

51
<PAGE> 53

healthcare employers, including clinical laboratories, whose workers may be
exposed to blood-borne pathogens, such as HIV and the hepatitis B virus. These
regulations require work practice controls, protective clothing and equipments,
training, medical follow-up, vaccinations and other measures designed to
minimize exposure to, and transmission of, blood-borne pathogens. Regulations of
the Department of Transportation, the Public Health Services and the U.S. Postal
Service also apply to the transportation of laboratory specimens.

INSURANCE

The Company's business entails an inherent risk of claims of physician
professional liability. Prior to the Recent Acquisitions, the Practices had
coverages ranging from $500,000 to $5.0 million per occurrence, and $1.0 million
to $8.0 million in the annual aggregate. In October 1996, the Company
consolidated its medical liability coverages with Steadfast Insurance Company
(Zurich-American), whereby each of the Affiliated Physicians is insured with
primary limits of $1.0 million per occurrence and $5.0 million in the annual
aggregate, and share with the Company in surplus coverage of up to $15 million
per occurrence, and $20.0 million in the aggregate. The policy also provides
prior acts coverage for each of the Affiliated Physicians with respect to the
Practices prior to the their acquisition by the Company. Pursuant to the terms
of the purchase agreements for the Recent Acquisitions, the Company has certain
limited rights of indemnification from the sellers of the Practices. The Company
also maintains property and umbrella liability insurance policies. While the
Company believes that its insurance is adequate for the Company's business,
there can be no assurance that a future successful claim will not exceed the
limits of available insurance coverage or that such coverage will continue to be
available at acceptable costs and on favorable terms. See "Risk
Factors -- Professional Liability and Insurance" and "-- Legal Proceedings."

COMPETITION

The markets for the services provided by the Company and the Practices
consist of: (1) the provision of physician practice management services to
anatomic pathology practices; and (2) the provision of anatomic pathology
services. The Company competes with other physician practice management
companies that are focused on the ownership or management of anatomic pathology
practices. Through its Direct Subsidiaries and affiliations with the PA
Contractors, the Company competes with anatomic pathology practices, national
clinical laboratories, hospitals and clinics which provide anatomic pathology
medical services. The Company estimates that there are over 3,300 pathology
practices operating in outpatient laboratories in the United States. In
addition, competition may result from companies in other healthcare industry
segments, such as managers of other hospital-based specialties or large
physician group practices, that may enter the Company's markets, some of which
have financial and other resources greater than those of the Company. With
respect to physician practice management services, the Company believes that the
principal competitive factors are sales and marketing, billing, collections and
financial reporting, management of physicians, laboratories and related medical
services and human resources. To date, the Company has not experienced
significant competition in the provision of physician practice management
services to anatomic pathology practices. The Company's Practices do, however,
experience competition in local markets in which the Practices provide anatomic
pathology services. The Company believes that the infrastructure it is building
provides a competitive advantage in its markets. The principal competitive
factors regarding the provision of anatomic pathology services are professional
reputation of the pathologist, the price charged for pathology services, the
scope of services offered, the ability to operate laboratories on an efficient
basis and geographic coverage. The Company competes with several other companies
for the acquisition of anatomic pathology practices. In addition, companies in
other healthcare segments, such as hospitals, HMOs and large physician
practices, many of which have greater financial and other resources than the
Company, may become competitors in acquiring, or providing physician practice
management services to, anatomic pathology practices. The Company competes for
acquisitions on the basis of the reputation of the Practices, its management
experience and its focus on anatomic pathology. There can be no assurance that
the Company will not experience more competition in its markets, that new
competitors will not enter such markets, or that such competition will not make
it more difficult for the Company to acquire practices on favorable terms.

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<PAGE> 54

SERVICE MARKS

The Company has registered the service mark "AmeriPath" and
"AmeriPath -- Integrated Pathology Services" with the United States Patent and
Trademark Office, and has also filed applications for registration of the
Company's name and logo.

EMPLOYEES

At December 31, 1996, there were a total of 585 persons, including 81
Affiliated Physicians, employed by or affiliated with the Company. Of the
Affiliated Physicians, 73 are employed by subsidiaries of the Company and eight
are employed by PA Contractors. The Company's employees include 244 laboratory
technicians, 59 couriers and 201 billing, marketing and administrative staff, of
which 22 personnel are located at the Company's executive offices. None of the
Company's employees are subject to collective bargaining agreements. The Company
believes that its relations with its employees are good.

PROPERTIES

The Company leases its executive offices located in Riviera Beach, Florida
(approximately 4,000 square feet), its billing and administrative office in Fort
Lauderdale, Florida (approximately 3,500 square feet) and leases 16 other
facilities: ten in Florida, one in Alabama, two in Kentucky, two in Ohio and one
in Texas. See "Certain Transactions." These facilities are used for laboratory
operations, administrative and billing and collections operations and storage
space. The 16 facilities encompass an aggregate of approximately 71,000 square
feet, have an aggregate annual rent of approximately $742,000 and have lease
terms expiring from 1997 to 2006. As laboratory leases are scheduled to expire,
the Company will consider whether to extend or renegotiate the existing lease or
move the facility to another location within the defined geographic area of the
Practice.

LEGAL PROCEEDINGS

During the ordinary course of business, the Company has become and may in
the future be subject to pending and threatened legal actions and proceedings.
The Company may have liability with respect to its own employees as well as with
respect to hospital employees who are under the supervision of Affiliated
Physicians. The majority of the pending legal proceedings involve claims of
medical malpractice, particularly cytology, and are generally covered by
insurance. Based upon the investigations conducted to date, the Company believes
that the outcome of such legal actions and proceedings, individually or in the
aggregate, will not have a material adverse effect on the Company's financial
condition, results of operations or liquidity. If liability results from medical
malpractice claims, there can be no assurance that the Company's medical
malpractice insurance coverage will be adequate to cover liabilities arising out
of such proceedings. See "Risk Factors -- Professional Liability and Insurance."

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<PAGE> 55

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
James C. New(1)(2)..................... 51 President, Chief Executive Officer and
Director
Alan Levin, M.D........................ 45 Chief Operating Officer and Director
Robert P. Wynn......................... 50 Executive Vice President and Chief
Financial Officer
Michael J. Demaray, M.D................ 51 Executive Vice President, Medical
Director and Director
Annette L. Bell........................ 38 Vice President of Sales
Stephen V. Fuller...................... 41 Vice President of Human Resources
Thomas S. Roberts(1)(2)(3)............. 33 Chairman of the Board
Timothy Kilpatrick, M.D................ 41 Director and Managing Director of
Derrick
E. Roe Stamps, IV(3)................... 51 Director
</TABLE>

- ---------------

(1) Member of Acquisition Review Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.

The Company's Board of Directors intends to appoint at least two additional
directors who are not affiliated with the Company within 90 days of the
consummation of this offering. The additional directors will serve on the
Compensation Committee and the Audit Committee and have not been identified as
of the date of this Prospectus.

James C. New has been the President, Chief Executive Officer and a director
of AmeriPath since January 1996. Prior to joining AmeriPath, Mr. New served as
President and as a director of RehabClinics, Inc., one of the largest outpatient
rehabilitation companies in the country, which he formed in 1991. RehabClinics
completed its initial public offering in June 1992 and merged with NovaCare,
Inc. in February 1994. Mr. New was President of NovaCare, Inc.'s Outpatient
Division from 1994 to 1995. Prior to founding RehabClinics, Inc., he served as
President of Greater Atlantic Health Service and Physicians Choice of
Southeastern Pennsylvania, a start-up HMO. From 1993 through 1996, Mr. New was
the Chairman of the Acquisition Committee of the Board of Directors of Pet
Practice, Inc. From 1978 to 1985, Mr. New served in various executive positions
at Textron, Inc. and Emerson Electric, Inc.

Alan Levin, M.D. has been Chief Operating Officer since September 1996. He
became a director and an Affiliated Physician in June 1996 after the Company
acquired Derrick. Prior to that, he served on the Board of Directors of Derrick
since 1987, as Treasurer from 1990 to 1994, and President from 1994 until the
acquisition of Derrick. Dr. Levin has 14 years experience as a pathologist and
is board certified in anatomic and clinical pathology. He serves as the medical
director of the inpatient pathology laboratory at Columbia Medical Center, Port
St. Lucie, Florida, and as a member of that hospital's Board of Trustees. Since
1990, he has served as an advisor to Florida's State Agency for Healthcare
Administration. Dr. Levin received his B.A. from Emory University and his M.D.
from the University of Miami Medical School. He performed his medical oncology
internship at Jackson Memorial Hospital and completed his anatomic and clinical
pathology residency at Mount Sinai Medical Center in Miami, Florida.

Robert P. Wynn has served as the Executive Vice President and Chief
Financial Officer since February 1996. He served as Vice President and Chief
Operating Officer of ALA from August 1993 to 1996. Mr. Wynn was Vice President
and Chief Financial Officer of International Magnetic Imaging, Inc. ("IMI"),
from May

54
<PAGE> 56

1991 until August 1993. Prior to joining IMI, Mr. Wynn, a certified public
accountant, was an audit partner with Deloitte, Haskins & Sells (predecessor to
Deloitte & Touche LLP). Mr. Wynn has over 26 years of experience in finance and
accounting. Mr. Wynn received his B.S. in Accounting from King's College in
Pennsylvania.

Michael J. Demaray, M.D. has been a director and the Medical Director of
AmeriPath since the Share Exchange in 1996 and was a director of ALA from the
Recapitalization to 1996. Dr. Demaray is also an Affiliated Physician. Along
with Dr. Poulos, he founded ALA in 1982 and was Vice President of that entity
until February 1996. He has 20 years experience as a pathologist and is
board-certified in anatomic and clinical pathology, as well as in
dermatopathology. He serves as Director of Pathology at each of Columbia
Northwest Regional Hospital in Margate, Florida and Columbia Pompano Beach
Medical Center in Pompano Beach, Florida. In addition, Dr. Demaray is an
Associate Pathologist at North Ridge Medical Center in Fort Lauderdale, Florida.
Dr. Demaray received his B.A. from DePauw University and his M.D. from Michigan
State University. He completed his residency in pathology at Jackson Memorial
Hospital at the University of Miami.

Annette L. Bell has been Vice President of Sales since September 1996. She
was Director of Sales and Marketing for ALA from 1990 to 1996 and for AmeriPath
since February 1996. From 1987 to 1989, Ms. Bell held various positions with HSN
Health Services, Inc., a subsidiary of Home Shopping Network, Inc., including
District Sales Manager. Ms. Bell has over 15 years experience in sales and
marketing. She attended Purdue University and Pensacola Christian College.

Stephen V. Fuller has been Vice President of Human Resources since November
1996. From 1993 to 1996, he served as Vice President, Human Resources for
Columbia Miami Heart Institute, a 315-bed full service hospital. From 1991 to
1993, Mr. Fuller served as Director, Human Resources for Delray Community
Hospital, an acute care trauma hospital with over 200 beds and 1,400 employees.
From 1990 to 1991, he served as Vice President, Human Resources for Hialeah
Hospital, a 411-bed hospital with 1,250 employees. Mr. Fuller is a Certified
Senior Professional in Human Resources with over 15 years experience in
healthcare human resources. He received his Bachelor of Science in Personnel
Management and Industrial Relations from Auburn University and his Masters of
Business Administration from Nova Southeastern University.

Thomas S. Roberts has been a director of the Company since the Share
Exchange in 1996 and was a director of ALA from the Recapitalization to 1996.
Mr. Roberts is a General Partner of Summit Partners, a general partnership
venture capital firm which is the general partner of various venture capital
funds (including Summit Ventures III, L.P. and Summit Investors II, L.P., and
Summit Subordinated Debt Fund, L.P., stockholders of the Company). Mr. Roberts
has been employed with Summit Partners in various positions since 1989. Mr.
Roberts is also a director of AMX Corporation, Intelligroup, Inc. and PowerCerv
Corporation, as well as several privately held companies.

Timothy Kilpatrick, M.D. has been a director of the Company and an
Affiliated Physician since June 1996 when the Company acquired Derrick. He has
also been Managing Director of Derrick since October 1996. Dr. Kilpatrick was a
shareholder and employee of Derrick since 1986. From 1995 until June 1996, Dr.
Kilpatrick was Vice President of Derrick and from 1992 until June 1996, Chairman
of its Strategic Planning Committee. He has 11 years experience as a pathologist
and is board certified in anatomic and clinical pathology, as well as in
Dermatopathology. Dr. Kilpatrick received his B.S. from the University of
Florida and his M.D. from the University of Florida, College of Medicine. He
completed his residency in pathology at Bowman Gray School of Medicine.

E. Roe Stamps, IV has been a director of the Company since the Share
Exchange in 1996 and was a director of ALA from the Recapitalization to 1996.
Mr. Stamps has more than 22 years experience in venture capital investing and is
the Managing General Partner of Summit Partners. He has served on the board of
numerous private and public companies. Mr. Stamps is currently the Chairman of
the Board of Boca Research, Inc. and is a director of Pediatrix Medical Group,
Inc.

After this offering, the Company expects that it will pay each director who
is neither an employee nor associated with one of the Company's principal
stockholders a $1,000 fee for each meeting of the Board of

55
<PAGE> 57

Directors attended in person by such director, $500 for each meeting of a
committee of the Board of Directors attended in person, which meeting is not
held in conjunction with a regular Board of Directors meeting, and fees of $500
and $250 for each Board of Directors meeting and committee meeting, respectively
attended by telephone conference. The Company expects that outside directors
will also be eligible to receive options to purchase shares of Common Stock
pursuant to the Directors Option Plan. The Company also reimburses all directors
for out-of-pocket expenses incurred in connection with the rendering of services
as a director.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In 1996, the Board of Directors established a Compensation Committee to
administer the Option Plan consisting of Messrs. Roberts and Stamps. All
compensation decisions affecting Mr. New were approved by the Company's
directors, exclusive of Mr. New.

Pursuant to the Recapitalization, Summit, with which Messrs. Roberts and
Stamps are affiliated, purchased 3,084,730 shares of the Convertible Preferred
Stock for approximately $5.3 million. Additionally, the Company issued
approximately $7.2 million principal amount of Junior Notes to Summit. A
financing fee of $190,000 was paid to Summit in connection with these
transactions. In connection with the formation of AmPath in February 1996,
Summit exchanged its holdings of Junior Notes and Convertible Preferred Stock of
ALA for the same number and type of debt and equity securities of the Company.
In February 1996, Summit converted 115,388 shares of the Convertible Preferred
Stock into 207,698 shares of Common Stock and then sold such shares to Mr. New
for consideration of $432,691 pursuant to the terms of Mr. New's employment
agreement. The consideration paid approximated the fair value of such shares.
Summit will convert its shares of Convertible Preferred Stock into 5,344,817
shares of Common Stock prior to consummation of this offering.

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the total
compensation paid or accrued by the Company, for services rendered during 1996
and 1995, to the Company's Chief Executive Officer and certain other officers
whose total 1996 salary and bonus exceeded $100,000 (collectively the "Named
Officers").

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)
- ------------------------------------------------------------------- ------ --------- --------
<S> <C> <C> <C>
James C. New(2).................................................... 1996 213,942 50,000
President and Chief Executive Officer 1995 -- --
Alan Levin, M.D.(3)................................................ 1996 112,732 100,000
Chief Operating Officer 1995 -- --
Michael J. Demaray, M.D.(4)........................................ 1996 349,820 --
Executive Vice President and Medical Director 1995 350,000 --
Robert P. Wynn(5).................................................. 1996 141,605 --
Executive Vice President and Chief Financial Officer 1995 128,725 25,000
Annette L. Bell(6)................................................. 1996 64,153 56,559
Vice President of Sales 1995 64,592 50,744
</TABLE>

- ---------------

(1) The column for "Other Annual Compensation" has been omitted because there is
no compensation required to be reported in such columns. The aggregate
amount of perquisites and other personal benefits provided to each Named
Officer is less than 10% of the total annual salary and bonus of such
officer.

(2) Mr. New's employment with the Company commenced in January 1996.

(3) Dr. Levin was employed by Derrick during 1995 and the first six months of
1996. His employment with the Company commenced in June 1996 in connection
with the acquisition of Derrick. As of September 1996, Dr. Levin became the
Chief Operating Officer of AmPath.

(4) Dr. Demaray was employed by ALA during 1995. Dr. Demaray is currently
employed as an Affiliated Physician and is also employed by AmPath as its
Medical Director.

(5) Mr. Wynn was employed by ALA during 1995, and was acting in the capacity of
ALA's chief executive officer. Mr. Wynn is currently employed by AmPath as
its Executive Vice President and Chief Financial Officer.

(6) Ms. Bell was employed by ALA during 1995. Bonus amounts paid to Ms. Bell
include commissions.

56
<PAGE> 58

OPTIONS

The following table sets forth the options granted to the Named Officers
during the year ended December 31, 1996.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED TO EXERCISE OR BASE TERM
OPTIONS EMPLOYEES IN FISCAL PRICE PER EXPIRATION -----------------------
GRANTED(1) YEAR SHARE(1),(2) DATE 5% 10%
---------- ------------------- ---------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
James C. New.............. 360,011 50% $ 1.67 1/1/06 $6,888,104 $10,469,602
Alan Levin, M.D........... 36,000 5% 10.00 9/26/06 231,768 365,010
Michael J. Demaray,
M.D..................... -- -- -- -- -- --
Robert P. Wynn............ -- -- -- -- -- --
Annette L. Bell........... 18,000 2% 10.00 9/26/06 115,884 182,505
</TABLE>

- ---------------

(1) After giving effect to the Company's 1.8 for 1 split of its Common Stock on
January 13, 1997.
(2) All options were granted at exercise prices greater than the fair market
value of the Common Stock on the date of the grant.
(3) Potential realizable value is based on the difference between the option
exercise price and the initial public offering price of the Common Stock
(based upon an assumed initial public offering price of $14.00 per share)
multiplied by the number of shares of Common Stock underlying the option.
These assumed annual rates of appreciation were used in compliance with the
rules of the Securities and Exchange Commission and are not intended to
forecast future price appreciation of the Common Stock or to take into
account the immediate increase in potential realizable value that will
occur. The actual value realized from the options could be higher or lower
than the values reported above, depending on the future appreciation or
depreciation of the Common Stock during the option period and the timing of
exercise of the options.

Year End Option Table. The following table sets forth information
regarding exercise of options and the number and value of options held at
December 31, 1996 by each of the Named Officers. No options were exercised
during 1996 by such executives.

AGGREGATE UNEXERCISED OPTIONS AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR END(#) AT YEAR END($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James C. New.................................... -- 360,011 -- $ 4,438,933
Alan Levin, M.D................................. -- 36,000 144,000
Michael J. Demaray, M.D......................... -- -- -- --
Robert P. Wynn.................................. 86,400 129,600 $ 1,113,696 1,670,544
Annette L. Bell................................. -- 18,000 -- 72,000
</TABLE>

- ---------------

(1) The value of the options is based on the difference between the option
exercise price of $1.67, $10.00, $1.11 and $10.00 with respect to Mr. New,
Dr. Levin, Mr. Wynn and Ms. Bell, respectively, and the initial public
offering price of the Common Stock (based upon an assumed initial public
offering price of $14.00) multiplied by the number of shares of Common Stock
underlying the option. No market existed for the Common Stock prior to this
offering.

EMPLOYMENT AGREEMENTS

The Company entered into an employment agreement with Mr. New effective
January 1, 1996. The agreement, as amended, provides that Mr. New will receive a
base salary of $275,000 per year. In addition, for the year ending December 31,
1996 Mr. New will receive a bonus equal to 25% of his base salary and up to an
additional 25% of his base salary upon attaining mutually agreed upon objectives
relating to the Company's performance. Upon termination of his employment by the
Company for reasons other than disability, death or cause, Mr. New will receive
his base salary and benefits for a period of 12 months. In connection with his
employment, Mr. New purchased 216,007 shares of Common Stock of the Company from
Summit and Schroder, and the Company granted him an option to purchase 360,011
shares of Common Stock.

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<PAGE> 59

In connection with the Recapitalization, the Company assumed ALA's
employment agreement with Mr. Wynn. The agreement, as amended, provides that Mr.
Wynn shall receive a base salary of $142,000 per year and may receive a
discretionary bonus based on his performance. In addition, for the year ended
December 31, 1996, Mr. Wynn shall receive a bonus equal to 35% of his base
salary upon attaining mutually agreed upon objectives relating to the Company's
performance. Upon termination of his employment without cause, Mr. Wynn shall
receive his base salary for a period of twelve months.

The Company entered into an employment agreement with Dr. Levin as an
Affiliated Physician as of June 30, 1996 in connection with the acquisition of
Derrick. Effective October 1, 1996, the Company entered into an additional
agreement with Dr. Levin pursuant to which Dr. Levin became Chief Operating
Officer of AmPath and amended his employment agreement with AmeriPath Florida,
Inc., the Florida subsidiary of AmPath. The agreements provide for an annual
salary of $255,000, $155,000 of which is paid by AmPath and $100,000 of which is
paid by AmeriPath Florida, Inc. Beginning in 1997, Dr. Levin will be eligible to
receive a bonus of up to $25,000 per year, subject to achievement of performance
objectives of the Company. Upon termination by the Company other than for cause,
Dr. Levin will receive his annual salary for one year. In connection with his
employment as Chief Operating Officer, the Company granted options to purchase
36,000 shares of Common Stock.

In addition to their roles as executive officers and directors of the
Company, Drs. Levin, Demaray and Kilpatrick are also Affiliated Physicians and
have entered into separate employment agreements with the Company that govern
their relationship with the Company as an Affiliated Physician. These agreements
have terms of five years and provide for annual base salaries of $255,000,
$350,000 and $255,000, respectively. Each employment agreement provides for a
covenant not to compete during such Affiliated Physicians' employment with a
subsidiary of AmeriPath and thereafter, for a period of two years with respect
to Drs. Levin and Kilpatrick and 18 months with respect to Dr. Demaray.

Pursuant to their respective employment agreements, Drs. Levin, Demaray and
Kilpatrick have agreed to devote their full business time to providing services
to the Company. The Company expects that Dr. Levin will devote approximately 80%
of his professional time to his responsibilities as Chief Operating Officer,
with the balance of his professional time being devoted to his activities as an
Affiliated Physician. The Company expects that Dr. Demaray will devote
approximately 30% of his professional time to his responsibilities as Executive
Vice President and Medical Director, with the balance of his professional time
being devoted to his activities as an Affiliated Physician.

Certain executive officers hold options to purchase Common Stock granted
under the Option Plan. Such options may be terminated by the Compensation
Committee of the Board of Directors upon: (i) a merger, consolidation or similar
corporate transaction in which ownership of more than 50% of the voting power of
the Company's voting stock is transferred; or (ii) a sale or other disposition
of all or substantially all of the Company's assets.

EMPLOYEE BENEFIT PLAN

The Company established a 401(k) retirement plan (the "401(k) Plan"), which
covers substantially all eligible employees who have reached age 21 and have
completed one year of service (as defined in the 401(k) Plan). Under the terms
of the 401k Plan, employees may contribute up to 15% of their compensation, as
defined. Employer contributions are discretionary. During 1994, 1995 and the
first nine months of 1996, the Company elected not to make a contribution to the
401k Plan.

OPTION PLAN

Under the Option Plan, 1,620,000 shares of Common Stock are reserved for
issuance upon exercise of stock options. The Option Plan is designed to retain
and motivate key employees and consultants or advisors who have an opportunity
to contribute to the success of the Company. After this offering, the
Compensation Committee will administer and interpret the Option Plan and be
authorized to grant options thereunder to all eligible employees of and
consultants or advisors to the Company, except that no incentive stock options
(as

58
<PAGE> 60

defined in Section 422 of the Internal Revenue Code) may be granted to a
consultant or advisor who is not also an employee of the Company or a
subsidiary.

The Option Plan provides for the granting of both incentive stock options
and nonqualified stock options. Options are granted under the Option Plan on
such terms and at such prices as determined by the Compensation Committee,
except that the per share exercise price of incentive stock options cannot be
less than the fair market value of the Common Stock on the date of grant. Each
option is exercisable after the period or periods specified in the option
agreement, but no option may be exercisable after the expiration of ten years
from the date of grant. Options granted to an individual who owns (or is deemed
to own) at least 10% of the total combined voting power of all classes of stock
of the Company or its subsidiary must have an exercise price of at least 110% of
the fair market value of the Common Stock on the date of grant and a term of no
more than five years. Incentive stock options granted under the Option Plan are
not transferable other than by will or by the laws of descent and distribution.
Nonqualified options granted under the Option Plan may be transferred with the
consent of the Compensation Committee, which consent may be given at the time
such options are granted. Unless otherwise determined by the Compensation
Committee, individuals holding options may exercise such options by delivering
cash or Common Stock pursuant to the cashless exercise procedures. The Option
Plan also authorizes the Company to make or guarantee loans to optionees to
enable them to exercise their options. Such loans must: (i) provide for recourse
to the optionee; (ii) bear interest at a rate no less than the prime rate of
interest of the Company's principal lender; and (iii) be secured by the shares
of Common Stock purchased. The Board of Directors and the Compensation Committee
the authority to amend or terminate the Option Plan, provided that no such
action may impair the rights of the holder of any outstanding option without the
written consent of such holder, and provided further that certain amendments of
the Option Plan are subject to stockholder approval. Unless terminated sooner,
the Option Plan will continue in effect until all options granted thereunder
have expired or been exercised, provided that no incentive stock options may be
granted ten years after the effective date of the Option Plan, which is February
15, 1996.

As of December 31, 1996, the Company has outstanding options to purchase an
aggregate of 972,011 shares of Common Stock under the Option Plan at a weighted
average exercise price of $4.13 per share, of which options, to purchase 97,200
shares of Common Stock are currently exercisable at December 31, 1996.

DIRECTOR OPTION PLAN

Under the Director Option Plan, 180,000 shares of Common Stock are reserved
for issuance upon exercise of stock options granted thereunder. The purpose of
the Director Option Plan is to attract and retain qualified and competent
persons to serve as members of the Board of Directors and to provide such
directors with additional incentive to contribute to the success of the Company
by providing them with an opportunity to have an equity interest in the Company.

The Board of Directors or a committee thereof administering the Director
Option Plan, (the "Administrator") is authorized to grant options ("Director
Options") thereunder and to determine the terms and conditions applicable to
such Director Options. Directors who are not employees of the Company are
eligible to receive Director Options. Directors receive an initial grant of an
option to purchase 5,000 shares of Common Stock upon their initial election to
the Board of Directors. Each Director Option is exercisable during the period
specified in the agreement evidencing the grant of such Director Option, but no
option may be exercisable ten years after the day of grant. The Board of
Directors and the Administrator have the authority to amend or terminate the
Director Option Plan without the consent of such optionholder, and provided
further that certain amendments of the Director Option Plan are subject to
stockholder approval. Unless terminated sooner, the Director Option Plan will
continue in effect until all Director Options granted thereunder have expired or
been exercised, provided that no options may be granted ten years after the
effective date of the Director Option Plan, which, subject to stockholder
approval, is November 21, 1996.

No Director Options have been granted as of the date hereof.

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<PAGE> 61

CERTAIN TRANSACTIONS

RECAPITALIZATION

Pursuant to the Recapitalization: (i) ALA acquired substantially all of the
assets and assumed substantially all of the liabilities of PDK for $20.5 million
in cash, $3.5 million principal amount of Senior Notes and $2.5 million
principal amount of ALA Contingent Notes; (ii) Summit and Schroder purchased
3,208,120 shares of the Convertible Preferred Stock for $5.5 million; and (iii)
Drs. Demaray, Poulos and Kowalczyk, the owners of PDK, purchased an aggregate of
1,425,600 shares of ALA common stock for an aggregate purchase price of $1.0
million. Prior to, and immediately following the Recapitalization, Drs. Demaray,
Poulos and Kowalczyk owned 100% of the then issued and outstanding shares of
common stock of ALA. However, as a result of the Recapitalization, the owners of
PDK, after the Recapitalization, held 19.8% of the voting interest, as compared
to 100% prior to the Recapitalization. Additionally, the Company issued an
aggregate $7.5 million principal amount of Junior Notes to Summit and Schroder
and borrowed $7.5 million under its line of credit to finance a portion of the
acquisition of the net assets from PDK. A financing fee of $190,000 was paid to
Summit in connection with these transactions. Summit and Schroder will convert
their shares of Convertible Preferred Stock into an aggregate of 5,558,609
shares of Common Stock prior to consummation of this offering. The Company has
reserved 5,558,609 shares of Common Stock for the conversion of the Convertible
Preferred Stock.

In the Recapitalization, each of Drs. Demaray, Poulos and Kowalczyk
received in exchange for the assets of PDK the following from the Company: (i) a
cash distribution of $6.8 million; (ii) Senior Notes in the principal amounts of
$1.2 million; and (iii) ALA Contingent Notes in the principal amounts of
$833,000. The ALA Contingent Notes were payable in annual installments of
$500,000, plus interest thereon, in years 1994 through 1998, if operating
earnings exceeded a specified annual level. If the specified operating earnings
levels were not achieved, the amounts payable for that year, including the
related accrued interest, were to be canceled. The specified levels of operating
earnings for the years ended December 31, 1995 and 1994 were not achieved;
therefore, $500,000 of the principal amount of the ALA Contingent Notes for each
such year and related accrued interest were canceled. In April 1996, the
remaining obligations under the ALA Contingent Notes were canceled in exchange
for an aggregate of 194,400 shares of Common Stock (64,800 shares to each of
Drs. Demaray, Poulos and Kowalczyk) with an aggregate fair value of $242,000. In
connection with the termination in January 1996 by the Company of the D&P Option
and the acquisition by the Company of substantially all of the assets of D&P,
the Company paid $851,684 to each of Drs. Demaray and Poulos.

In connection with the formation of AmPath in February 1996, each of
Summit, Schroder and Dr. Demaray, Poulos and Kowalczyk exchanged their
respective holdings of Junior Notes, Senior Notes, Convertible Preferred Stock
and common stock of ALA for the same number and type of debt and equity
securities of AmPath.

In February 1996, Summit and Schroder converted, in the aggregate, 120,004
shares of the Convertible Preferred Stock to 216,007 shares of Common Stock and
then sold such shares to Mr. New for an aggregate consideration of $450,000
pursuant to the terms of Mr. New's employment agreement. The consideration paid
approximated the fair value of such shares. In connection with his purchase of
216,007 shares of Common Stock from Summit and Schroder, Mr. New borrowed
$270,000 from the Company, payable in full on January 1, 2001, with interest
accruing at 8% and payable currently. The loan is secured by a pledge of 126,000
shares of the Common Stock.

AGREEMENTS WITH CERTAIN STOCKHOLDERS

The Company leases an outpatient laboratory in Fort Lauderdale, Florida
from an entity owned by the spouses of Drs. Demaray, Poulos and Kowalczyk. The
lease expires on March 31, 1998 and contains options to renew for two additional
five-year periods. The lease requires monthly rental payments of $10,973, plus
sales taxes, property taxes, insurance, utilities and maintenance costs. Rent
paid under this lease was $139,583 in 1995 and $104,687 for the nine months
ended September 30, 1996. The Company believes that the terms of the lease are
comparable to those which would be available to an unaffiliated entity on the
basis of an arms-length negotiation. Certain of the Company's subsidiaries have
entered into other leases with certain of the

60
<PAGE> 62

sellers of the Practices pursuant to the terms of the purchase agreements for
certain of the Recent Acquisitions. Such sellers are Affiliated Physicians who
are not executive officers or directors of the Company. The Company believes
that such leases are on terms comparable to those which would be available to an
unaffiliated entity on the basis of an arms-length negotiation.

Prior to the acquisition of D&P from Drs. Demaray and Poulos, ALA had
entered into certain transactions with D&P. ALA paid D&P a fee for the staffing
of three D&P frozen section laboratories. Such fee paid to the Company was
$120,300 during the year ended December 31, 1995. The Company also provided
certain administrative support services to D&P for which the Company was paid
$2,400 for the year ended December 31, 1995.

SHAREHOLDERS' AGREEMENT

Certain of the current directors were elected to the Board of Directors
pursuant to the terms of a shareholders' agreement among the Company's
stockholders (the "Shareholders' Agreement"). Effective upon the consummation of
this offering, the Shareholders' Agreement will terminate and will no longer
control the selection of the Board of Directors.

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<PAGE> 63
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of the Company's outstanding Common Stock as of December 31, 1996 and
as adjusted to reflect the sale of the Common Stock offered hereby by: (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock; (ii) each director and Named Officer of the
Company; (iii) each Selling Stockholder; and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the persons
listed below have sole voting and investment power with respect to all shares of
Common Stock owned by them, except to the extent such power may be shared with a
spouse.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER THE
OWNED(2) NUMBER OF OFFERING(2)
---------------------- SHARES -------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT(3) OFFERED NUMBER PERCENT
- -------------------------------------------------- --------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Summit(4)......................................... 5,344,816 47.1% 481,000 4,863,816 28.5%
Schroder(5)....................................... 213,792 1.9 19,000 194,792 1.1
James C. New(6)................................... 252,009 2.2 -- 252,009 1.5
Alan Levin, M.D................................... 78,925 * -- 78,925 *
Michael J. Demaray, M.D.(7)....................... 540,000 4.8 -- 540,000 3.2
Robert P. Wynn(8)................................. 86,400 * -- 86,400 *
Annette L. Bell................................... -- -- -- -- --
Timothy M. Kilpatrick, M.D.(9).................... 78,925 * -- 78,925 *
Thomas S. Roberts(4).............................. 5,344,816 47.1 -- 4,863,816 28.5
E. Roe Stamps, IV(4).............................. 5,344,816 47.1 -- 4,863,816 28.5
All directors and executive officers as a group
(9 persons)(4)(6)(8)............................ 6,381,075 55.4 5,900,073 34.3
</TABLE>

- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 7289 Garden Road, Suite 200, Riviera Beach, Florida 33404.
(2) Based on 11,351,354 shares of Common Stock outstanding prior to this
offering and 17,051,356 shares of Common Stock outstanding immediately after
this offering. Pursuant to the rules of the Commission, shares of the Common
Stock which a person has the right to acquire within 60 days of the date
hereof pursuant to the exercise of stock options or the conversion of a
convertible security are deemed to be outstanding for the purpose of
computing the percentage ownership of such person but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(3) Percentages reflect the conversion by Summit and Schroder of an aggregate of
3,088,116 shares of Convertible Preferred Stock into an aggregate of
5,558,609 shares of Common Stock prior to the consummation of this offering.
See "Certain Transactions."
(4) Includes 2,086,029.2, 19,823.6 and 863,490.2 shares of Convertible Preferred
Stock held by Summit Ventures III, L.P., Summit Investors II, L.P. and
Summit Subordinated Debt Fund, L.P., respectively, each of which is a
limited partnership, the general partner of which is Summit Partners, a
general partnership. These shares of Convertible Preferred Stock will be
converted into 5,344,816 shares of Common Stock prior to the consummation of
this offering. In the event the over-allotment option is exercised in full,
Summit will sell an additional 432,900 shares of Common Stock and will own
4,430,916 shares of Common Stock, or 25.7%, after the offering. Thomas S.
Roberts is a director of the Company and is a General Partner of Summit
Partners. E. Roe Stamps is a director of the Company and is Managing General
Partner of Summit Partners. Mr. Roberts and Mr. Stamps both disclaim
beneficial ownership of the shares of Convertible Preferred Stock and Common
Stock. The address of Summit and Messrs. Roberts and Stamps is 600 Atlantic
Avenue, Suite 2800, Boston, Massachusetts 02210-2227.
(5) Includes 47,509, 57,011 and 14,253 shares of Convertible Preferred Stock
held by Schroders Incorporated, Schroders Ventures, L.P., and Schroders
Ventures U.S. Trust, respectively. These shares of Convertible Preferred
Stock will be converted into 213,792 shares of Common Stock prior to
consummation of this offering. In the event the over-allotment option is
exercised in full, Schroder will sell an additional 17,100 shares of Common
Stock and will own 177,692 shares of Common Stock, or 1%, after the
offering.

(6) Includes 72,000 shares subject to stock options exercisable within 60 days.
Excludes 288,011 shares subject to unexercisable options. In the event the
over-allotment option is exercised in full, Mr. New will sell 80,000 shares
of Common Stock and will beneficially own 162,011 shares, or 1.0%, after the
offering.

(7) Includes 180,000 shares held in trust for the benefit of members of Dr.
Demaray's family. Dr. Demaray disclaims beneficial ownership with respect to
such shares. In the event the over-allotment option is exercised in full,
Dr. Demaray will sell 80,000 shares of Common Stock and will own 460,000
shares, or 2.7%, after the offering.

(8) Includes 86,400 shares subject to stock options exercisable within 60 days.
Excludes 129,600 shares subject to unexercisable options. In the event the
over-allotment option is exercised in full, Mr. Wynn will sell 30,000 shares
of Common Stock and will own 56,400 shares, or less than one percent after
the offering.

(9) Includes 36,000 shares held in trust for the benefit of members of Dr.
Kilpatrick's family. Dr. Kilpatrick disclaims beneficial ownership with
respect to such shares.

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<PAGE> 64

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 8,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Convertible
Preferred Stock, par value $.01 per share. As of December 31, 1996, an aggregate
of 5,792,747 shares of Common Stock were outstanding and held of record by 47
stockholders and 3,088,116 shares of Convertible Preferred Stock were
outstanding and held of record by Summit and Schroder. Summit and Schroder are
expected to convert all of the shares of Convertible Preferred Stock into shares
of Common Stock on a 1.8 for one basis prior to the consummation of this
offering. Prior to the consummation of this offering and subsequent to the
conversion by Summit and Schroder of the shares of Convertible Preferred Stock
into Common Stock, the Certificate of Incorporation will be amended to provide
authorized capital of 30,000,000 shares of Common Stock and 2,000,000 shares of
Preferred Stock. Copies of the Certificate of Incorporation and Bylaws have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part and are incorporated herein by reference.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders, including the election of directors. Since
the Common Stock does not have cumulative voting rights, the holders of a
majority of the outstanding shares voting for election of directors can elect
all members of the Board of Directors. A majority vote is also sufficient for
other actions that require the vote or concurrence of stockholders. Dividends
may be paid to holders of Common Stock when and if declared by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." Upon
liquidation or dissolution of the Company, holders of Common Stock will be
entitled to share ratably in the assets of the Company legally available for
distribution to stockholders in the event of liquidation or dissolution.

The holders of Common Stock have no preemptive or conversion rights. The
shares of Common Stock offered hereby will be, when issued and paid for, fully
paid and not liable to further call or assessment.

PREFERRED STOCK

The Convertible Preferred Stock will be converted by Summit and Schroder
into shares of Common Stock on a 1.8 for one basis prior to consummation of this
Offering. Upon any conversion of the Convertible Preferred Stock, all
accumulated and unpaid dividends on the Convertible Preferred Stock, whether or
not declared, since the date of issue up to and including the date of conversion
thereof will become due and payable. See "Use of Proceeds."

Although the Company has no present plans to issue shares of Preferred
Stock, Preferred Stock may be issued from time to time in one or more classes or
series with such designations, powers, preferences, rights, qualifications,
limitations and restrictions as may be fixed by the Board of Directors. The
Board of Directors, without obtaining stockholder approval, could issue the
Preferred Stock with voting and/or conversion rights and thereby dilute the
voting power and equity of the holders of Common Stock and adversely affect the
market price of such stock. Preferred Stock may also be used to delay, defer or
prevent a takeover attempt with respect to the Company. See "Risk
Factors -- Anti-Takeover Provisions; Possible Issuance of Preferred Stock."

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS

The Company is subject to the provisions of Section 203 of the DGCL.
Subject to certain exceptions, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of the Board of Directors or
unless the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting

63
<PAGE> 65

stock. This statute could prohibit or delay the accomplishment of mergers or
other attempts to takeover or change control of the Company and, accordingly,
may discourage attempts to acquire the Company.

In addition, certain provisions of the Certificate of Incorporation and
Bylaws, which will be in effect upon the consummation of this offering and are
summarized in the following paragraphs, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares of Common Stock.

Classified Board of Directors. The Board of Directors will be divided into
three classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected each year.
These provisions, when coupled with the provision of the Certificate of
Incorporation authorizing only the Board of Directors to fill vacant
directorships or increase the size of the Board of Directors, may deter a
stockholder from removing incumbent directors and simultaneously gaining control
of the Board of Directors by filling the vacancies created by such removal with
its own nominees.

Stockholder Action; Special Meeting of Stockholders. The Certificate of
Incorporation provides that stockholders may not take action by written consent,
but only at duly called annual or special meetings of stockholders. The
Certificate of Incorporation further provides that special meetings of
stockholders of the Company be called only by the Chairman of the Board of
Directors, a majority of the Board of Directors or the President of the Company.

Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must provide timely notice
thereof in writing. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Company, not less
than 120 days nor more than 150 days prior to the first anniversary of the date
of the Company's notice of annual meeting provided with respect to the previous
year's annual meeting; provided, that if no annual meeting was held in the
previous year or the date of the annual meeting has been changed to be more than
30 calendar days earlier than or 60 calendar days after such anniversary, notice
by the stockholder, to be timely, must be so received not more than 90 days nor
later than the later of (i) 60 days prior to the annual meeting or (ii) the
close of business on the tenth day following the date on which notice of the
date of the meeting is given to stockholders or made public, whichever first
occurs. The Bylaws also specify certain requirements for a stockholder's notice
to be in proper written form. These provisions may preclude stockholders from
bringing matters before the stockholders at an annual meeting or from making
nominations for directors at an annual meeting.

Authorized But Unissued Shares. The authorized but unissued shares of
Common Stock and Preferred Stock are available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved Common Stock and Preferred Stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby discourage or prevent a change of control of the Company.

The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage. The
Certificate requires the affirmative vote of the holders of at least 80% of the
combined voting power of the outstanding shares of capital stock of the Company
entitled to vote for the election of directors to amend or repeal any of the
Certificate of Incorporation provisions discussed above. Such 80% vote is also
required to amend or repeal any of the Bylaws provisions discussed above,
although such Bylaws provisions may also be amended or repealed by a majority
vote of the entire Board of Directors. Such 80% stockholder vote would be in
addition to any separate class vote that might in the future be required
pursuant to the terms of any Preferred Stock that might be outstanding at the
time any such amendments are submitted to stockholders.

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<PAGE> 66

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Certificate of Incorporation contains certain provisions permitted
under the DGCL relating to the liability of directors. These provisions
eliminate a director's liability for monetary damages for a breach of fiduciary
duty, except in certain circumstances involving certain wrongful acts, such as
the breach of a director's duty of loyalty or acts or omissions which involve
intentional misconduct or a knowing violation of law. The Certificate of
Incorporation also contains provisions indemnifying the directors and officers
of the Company to the fullest extent permitted by the DGCL. The Company believes
that these provisions will assist the Company in attracting and retaining
qualified individuals to serve as directors.

TRANSFER AGENT

The transfer agent and registrar of the Common Stock is American Stock
Transfer and Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that market sales
of shares or the availability of such shares for sale will have on the market
price of the Common Stock. Nevertheless, sales of substantial amounts of Common
Stock in the public market may have an adverse impact of such market price.

Upon consummation of this offering, the Company will have 17,051,356 shares
of Common Stock outstanding, based upon the number of shares outstanding as of
December 31, 1996. Of these shares, the 6,200,000 shares sold in this offering
(7,130,000 shares if the Underwriters over-allotment is exercised in full) will
be freely tradeable without restriction or further registration under the
Securities Act, except for any shares purchased by "affiliates" of the Company,
as that term is defined in Rule 144 ("Rule 144") under the Securities Act
("Affiliates").

SALES OF RESTRICTED SHARES

There are 10,851,356 outstanding shares of Common Stock (the "Restricted
Shares") which are deemed "restricted securities" under Rule 144 and may not be
sold unless they are registered under the Securities Act or unless an exemption,
such as the exemption provided by Rule 144, is available. All of the Restricted
Shares are subject to the lock-up agreements described below (the "Lock-up
Agreements"). All of these shares may be eligible for sale in the public market
in accordance with Rule 144 under the Securities Act, subject to the terms of
the Lock-up Agreements. Certain security holders have the right to have their
Restricted Shares registered by the Company under the Securities Act as
described below.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least two years, is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock (approximately
170,513 shares after this offering) or (ii) the average weekly trading volume in
the Common Stock in the over-the-counter market during the four calendar weeks
preceding the date on which notice of such sale is filed with the Commission. In
addition, under Rule 144(k), a person who is not an Affiliate and has not been
an Affiliate for at least three months prior to the sale and who has
beneficially owned the Restricted Shares for at least three years may resell
such shares without compliance with the foregoing requirements. In meeting the
two and three year holding periods, a holder of Restricted Shares can include
the holding periods of a prior owner who was not an Affiliate. The Commission
has proposed to amend the holding periods under Rule 144 by reducing the two
year period to one year and the three year period to two years. The proposed
amendments have not yet been adopted by the Commission.

OPTIONS

As of December 31, 1996, options to purchase a total of 972,011 shares of
Common Stock were outstanding. All of these shares are subject to the Lock-up
Agreements. The Company intends to file one or

65
<PAGE> 67

more registration statements on Form S-8 under the Securities Act to register
all shares of Common Stock subject to outstanding stock options and Common Stock
issuable pursuant to the Option Plan. The Company expects to file these
registration statements promptly following the consummation of this offering,
and such registration statements are expected to become effective upon filing.
Shares covered by these registration statements will thereupon be eligible for
sale in the public markets, subject to the Lock-up Agreements, to the extent
applicable.

LOCKUP AGREEMENTS

The Company and holders of 10,851,356 shares of Common Stock outstanding
immediately prior to this offering and options to purchase an aggregate of
972,011 shares of Common Stock have agreed not to, directly or indirectly,
without the prior written consent of Dean Witter Reynolds Inc., offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock, or any securities exercisable for or convertible into
Common Stock for a period of 180 days following the date of consummation of this
Offering. See "Underwriting."

REGISTRATION RIGHTS

Following the consummation of this offering, Summit and Schroder will be
entitled to require the Company to register under the Securities Act a total of
5,058,609 shares of outstanding Common Stock (the "Registrable Shares"). Under
certain circumstances and subject to certain limitations, Summit and Schroder
may require the Company, on two occasions, to file a registration statement
under the Securities Act with respect to the Registrable Shares and the Company
must use all commercially reasonable efforts to effect such registration. In
addition, in the event the Company proposes to register any of its securities
under the Securities Act, either for its own account or for the account of a
security holder, Summit and Schroder may be entitled to include the Registrable
Shares in such registration, subject to certain limitations on the number of
shares to be included in the registration by the underwriter of such offering.

Following the consummation of this offering, Drs. Demaray, Poulos and
Kowalczyk will also have the right, under certain circumstances and subject to
certain limitations, to require the Company to register up to an aggregate
1,425,600 shares of Common Stock under the Securities Act. In addition, in the
event the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of a security
holder, these persons may be entitled to include their shares in such
registration, subject to certain limitations on the number of shares to be
included in the registration by the underwriter of such offering. Furthermore,
in the event the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of a security
holder, the Banks may be entitled to include up to 85,999 shares of Common Stock
in such registration, subject to certain limitations on the number of shares to
be included in the registration by the underwriter of such offering.

66
<PAGE> 68

UNDERWRITING

The Underwriters named below, for whom Dean Witter Reynolds Inc., Hambrecht
& Quist, Piper Jaffray Inc. and The Robinson-Humphrey Company, Inc. are acting
as representatives (the "Representatives"), have severally agreed, subject to
the terms and conditions of the Underwriting Agreement (a copy of which has been
filed as an exhibit to the Registration Statement), to purchase from the Company
and the Selling Stockholders the number of shares of Common Stock set forth
opposite their respective names in the table below:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------------------- ----------
<S> <C>
Dean Witter Reynolds Inc.................................................
Hambrecht & Quist........................................................
Piper Jaffray Inc........................................................
The Robinson-Humphrey Company, Inc.......................................

----------
Total.......................................................... 6,200,000
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligation is such that they must purchase all of the shares (other than those
subject to the over-allotment option) if any are purchased.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
through negotiations between the Company, the Selling Stockholders and the
Representatives. Among the factors to be considered in making such determination
are prevailing market conditions and general economic conditions, the market
capitalization of publicly traded companies which the Company, the Selling
Stockholders and the Representatives believe to be comparable to the Company,
the revenues and earnings of the Company in recent periods, the experience of
the Company's management, the economic characteristics of the business in which
the Company competes, estimates of the business potential of the Company, the
present state of the Company's development and other factors deemed relevant.

The Underwriters have advised the Company and the Selling Stockholders that
they propose to offer the shares of Common Stock directly to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain dealers (who may include the Underwriters) at such public offering
price less a concession not to exceed $ per share. Such dealers may
reallow a concession not to exceed $ per share to other dealers. After
the initial public offering, the public offering price may be reduced and
concessions and reallowances to dealers may be changed by the Underwriters. The
Representatives have informed the Company that the Underwriters do not intend to
confirm sales to any account over which they exercise discretionary authority.
The Representatives intend to make a market in the Common Stock after completion
of this offering.

The Company and the Selling Stockholders have granted to the Underwriters
an option, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to an additional 930,000 shares of Common Stock at
the initial public offering price, less underwriting discounts and commissions
to cover over-allotments, if any. After commencement of this offering, the
Underwriters may confirm sales subject to the over-allotment option.

67
<PAGE> 69

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.

The Company, the officers and directors of the Company, the Selling
Stockholders and certain other stockholders have agreed that they will not,
during the period commencing on the date hereof and ending 180 days after the
date of this Prospectus, without the prior written consent of Dean Witter
Reynolds Inc. (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock (whether such shares or
such securities are now owned by such officers, directors, Selling Stockholders
or stockholders or are hereafter acquired); (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of shares of Common Stock whether any transaction
described in clause (i) or (ii) above is to be settled by delivery of shares of
Common Stock or other securities, in cash or otherwise.

At the Company's request, the Representatives have reserved up to 310,000
shares of Common Stock for sale at the initial public offering price to the
Company's employees and other persons having certain business relationships with
the Company. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent these persons purchase such
reserved shares. Any reserved shares not purchased will be offered by the
Underwriters to the general public on the same terms as the other shares offered
hereby. Reserved shares purchased by individuals will, except as restricted by
applicable securities laws, be available for resale following this offering.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, P.A., Miami, Florida. Certain legal matters
will be passed upon for the Underwriters by Latham & Watkins, Washington, D.C.

EXPERTS

The consolidated financial statements and the related consolidated
financial statement schedule of AmeriPath, Inc. as of December 31, 1994 and 1995
and September 30, 1996 and for the years ended December 31, 1993, 1994 and 1995
and the nine months ended September 30, 1996, included in this prospectus and
elsewhere in the registration statement, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing herein and
elsewhere in the Registration Statement, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

The combined financial statements of Clay J. Cockerell, M.D., P.A. and
Freeman-Cockerell Laboratories, Inc. as of December 31, 1994 and 1995 and
September 30, 1996 and for the years ended December 31, 1994 and 1995 and the
nine months ended September 30, 1996, and of Pathology Associates P.S.C. and
Technical Pathology Services, Inc. as of December 31, 1994 and 1995 and July 31,
1996 and for the years ended December 31, 1994 and 1995 and the seven months
ended July 31, 1996, included in this prospectus, have been audited by Deloitte
& Touche, LLP, independent auditors, as stated in their reports appearing
herein, and are included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.

The financial statements of Beno Michel, M.D., Inc., Drs. Seidenstein,
Levine & Associates, P.A. and Volusia Pathology Group, M.D., P.A. as of December
31, 1994 and 1995 and September 30, 1996 and for the years ended December 31,
1994 and 1995 and the nine months ended September 30, 1996, of David R. Barron,
M.D., Inc. and Fernandez and Kalemeris, P.A. as of December 31, 1995 and
September 30, 1996 and for the year ended December 31, 1995 and the nine months
ended September 30, 1996, of SkinPath P.C. as of December 31, 1995 and July 31,
1996 and for the period ended December 31, 1995 and the seven months

68
<PAGE> 70

ended July 31, 1996, of Derrick and Associates Pathology, Inc. and Amazon and
Rosen, M.D., P.A. as of December 31, 1994 and 1995 and June 30, 1996 and for the
years ended December 31, 1994 and 1995 and the six months ended June 30, 1996,
and of Demaray and Poulos, P.A. for the years ended December 31, 1994 and 1995,
included in this prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to
such Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement and incorporated by reference
herein. Copies of the Registration Statement may be obtained from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549,
and the following regional offices of the Commission: Seven World Trade Center,
New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the public
reference section of the Commission at its Washington office upon payment of the
fees prescribed by the Commission, or may be examined without charge at the
offices of the Commission, or accessed through the Commission's Internet address
at http://www.sec.gov.

69
<PAGE> 71

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
THE REGISTRANT
AMERIPATH, INC. AND SUBSIDIARIES
Independent Auditors' Report......................................................... F-4
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
and Pro Forma September 30, 1996 (Unaudited)....................................... F-5
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and the Nine Months Ended September 30, 1995 (Unaudited) and 1996............. F-6
Consolidated Statements of Convertible Preferred Stock and Common Stockholders'
Equity (Deficit) for the years ended December 31, 1993, 1994 and 1995 and the Nine
Months Ended September 30, 1996.................................................... F-7
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the Nine Months Ended September 30, 1995 (Unaudited) and 1996............. F-8
Notes to Consolidated Financial Statements........................................... F-9
ACQUIRED BUSINESSES
DEMARAY AND POULOS, P.A.
Independent Auditors' Report......................................................... F-27
Balance Sheets as of December 31, 1994 and 1995...................................... F-28
Statements of Operations and Retained Earnings for the years ended December 31, 1994
and 1995........................................................................... F-29
Statements of Cash Flows for the years ended December 31, 1994 and 1995.............. F-30
Notes to Financial Statements........................................................ F-31
AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES
Independent Auditors' Report......................................................... F-34
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996.................... F-35
Statements of Operations and Retained Earnings for the years ended December 31, 1994
and 1995 and the Six Months Ended June 30, 1995 (Unaudited) and 1996............... F-36
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and the Six
Months Ended June 30, 1995 (Unaudited) and 1996.................................... F-37
Notes to Financial Statements........................................................ F-38
DERRICK AND ASSOCIATES PATHOLOGY, INC.
Independent Auditors' Report......................................................... F-42
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996.................... F-43
Statements of Operations for the years ended December 31, 1994 and 1995 and the Six
Months Ended June 30, 1995 (Unaudited) and 1996.................................... F-44
Statements of Shareholders' Equity for the years ended December 31, 1994 and 1995 and
the Six Months Ended June 30, 1996................................................. F-45
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and the Six
Months Ended June 30, 1995 (Unaudited) and 1996.................................... F-46
Notes to Financial Statements........................................................ F-47
SKINPATH, P.C.
Independent Auditors' Report......................................................... F-53
Balance Sheets as of December 31, 1995 and July 31, 1996............................. F-54
Statements of Operations and Retained Earnings for the Period from January 5, 1995
(Inception) through December 31, 1995 and Seven Months Ended July 31, 1996......... F-55
Statements of Cash Flows for the Period from January 5, 1995 (Inception) through
December 31, 1995 and the Seven Months Ended July 31, 1996......................... F-56
Notes to Financial Statements........................................................ F-57
</TABLE>

F-1
<PAGE> 72

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PATHOLOGY ASSOCIATES, P.S.C. AND TECHNICAL PATHOLOGY SERVICES, INC.
Independent Auditors' Report......................................................... F-61
Combined Balance Sheets as of December 31, 1994 and 1995 and July 31, 1996........... F-62
Combined Statements of Operations for the years ended December 31, 1994 and 1995 and
the Seven Months Ended July 31, 1995 (Unaudited) and July 31, 1996................. F-63
Combined Statements of Stockholders' Equity for the year ended December 31, 1994 and
1995 and the Seven Months Ended July 31, 1996...................................... F-64
Combined Statements of Cash Flows for the years ended December 31, 1994 and 1995 and
the Seven Months Ended July 31, 1995 (Unaudited) and July 31, 1996................. F-65
Notes to Combined Financial Statements............................................... F-66
VOLUSIA PATHOLOGY GROUP, M.D., P.A.
Independent Auditors' Report......................................................... F-71
Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996............... F-72
Statements of Operations for the years ended December 31, 1994 and 1995 and the Nine
Months Ended September 30, 1995 (Unaudited) and 1996............................... F-73
Statements of Shareholders' Equity for the years ended December 31, 1994 and 1995 and
the Nine Months Ended September 30, 1996........................................... F-74
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and the Nine
Months Ended September 30, 1995 (Unaudited) and 1996............................... F-75
Notes to Financial Statements........................................................ F-76
DAVID R. BARRON, M.D., INC. D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY
Independent Auditors' Report......................................................... F-80
Balance Sheets as of December 31, 1995 and September 30, 1996........................ F-81
Statements of Operations for the year ended December 31, 1995 and the Nine Months
Ended September 30, 1995 (Unaudited) and 1996...................................... F-82
Statements of Stockholders' Equity for the year ended December 31, 1995 and the Nine
Months Ended September 30, 1996.................................................... F-83
Statements of Cash Flows for the year ended December 31, 1995 and the Nine Months
Ended September 30, 1995 (Unaudited) and 1996...................................... F-84
Notes to Financial Statements........................................................ F-85
BENO MICHEL, M.D., INC. D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY
Independent Auditors' Report......................................................... F-88
Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996............... F-89
Statements of Operations for the years ended December 31, 1994 and 1995 and the Nine
Months Ended September 30, 1995 (Unaudited) and 1996............................... F-90
Statements of Stockholders' Equity for the years ended December 31, 1994 and 1995 and
the Nine Months Ended September 30, 1996........................................... F-91
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and the Nine
Months Ended September 30, 1995 (Unaudited) and 1996............................... F-92
Notes to Financial Statements........................................................ F-93
DRS. SEIDENSTEIN, LEVINE & ASSOCIATES, P.A.
Independent Auditors' Report......................................................... F-96
Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996............... F-97
Statements of Operations and Retained Earnings for the years ended December 31, 1994
and 1995 and the Nine Months Ended September 30, 1995 (Unaudited) and 1996......... F-98
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and the Nine
Months Ended September 30, 1995 (Unaudited) and 1996............................... F-99
Notes to Financial Statements........................................................ F-100
</TABLE>

F-2
<PAGE> 73

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
CLAY J. COCKERELL, M.D., P.A. AND FREEMAN-COCKERELL LABORATORIES, INC.
Independent Auditors' Report......................................................... F-104
Combined Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996...... F-105
Combined Statements of Income and Retained Earnings for the years ended December 31,
1994 and 1995 and the Nine Months Ended September 30, 1995 (Unaudited) and 1996.... F-106
Combined Statements of Cash Flows for the years ended December 31, 1994 and 1995 and
the Nine Months Ended September 30, 1995 (Unaudited) and 1996...................... F-107
Notes to Combined Financial Statements............................................... F-108
FERNANDEZ AND KALEMERIS, P.A. D/B/A GULF COAST PATHOLOGY ASSOCIATES
Independent Auditors' Report......................................................... F-112
Balance Sheets as of December 31, 1995 and September 30, 1996........................ F-113
Statements of Operations and Retained Earnings for the year ended December 31, 1995
and the Nine Months Ended September 30, 1995 (Unaudited) and 1996.................. F-114
Statements of Cash Flows for the year ended December 31, 1995 and the Nine Months
Ended September 30, 1995 (Unaudited) and 1996...................................... F-115
Notes to Financial Statements........................................................ F-116
</TABLE>

F-3
<PAGE> 74

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
AmeriPath, Inc.:

We have audited the accompanying consolidated balance sheets of AmeriPath, Inc.
and Subsidiaries (the "Company") as of December 31, 1994 and 1995 and September
30, 1996 and the related consolidated statements of operations, convertible
preferred stock and common stockholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1995 and the nine
months ended September 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1994
and 1995 and September 30, 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 and the
nine months ended September 30, 1996 in conformity with generally accepted
accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida

November 19, 1996 (January 13, 1997, as to the effects of
the 1.8 for 1 stock split discussed in Note 1)

F-4
<PAGE> 75

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996
-------- -------- ------------- -------------
(UNAUDITED)
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 103 $ 58 $ 193 $ 193
Accounts receivable, net............................... 1,741 2,114 7,944 7,944
Inventories............................................ 168 162 142 142
Other current assets................................... 195 130 840 840
-------- -------- -------- --------
Total current assets............................ 2,207 2,464 9,119 9,119
-------- -------- -------- --------
PROPERTY AND EQUIPMENT, NET.............................. 1,011 1,214 3,055 3,055
-------- -------- -------- --------
OTHER ASSETS:
Deferred tax asset..................................... 6,654 6,018
Goodwill, net.......................................... 10,068 10,068
Identifiable intangibles, net.......................... 26,726 26,726
Other.................................................. 392 296 1,825 1,825
-------- -------- -------- --------
Total other assets.............................. 7,046 6,314 38,619 38,619
-------- -------- -------- --------
TOTAL ASSETS.................................... $ 10,264 $ 9,992 $ 50,793 $ 50,793
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses.................. $ 805 $ 894 $ 4,515 $ 4,515
Current portion of long-term debt...................... 782 782
Deferred tax liability................................. 1,152 1,152
-------- -------- -------- --------
Total current liabilities....................... 805 894 6,449 6,449
-------- -------- -------- --------
LONG-TERM DEBT:
Credit Facility........................................ 6,005 4,146 30,844 30,844
Senior Notes due to common stockholders................ 3,500 3,500 3,500 3,500
Junior Notes due to preferred stockholders............. 7,500 7,500 7,500 7,500
Subordinated Notes..................................... 2,058 2,058
DIVIDEND PAYABLE -- CONVERTIBLE PREFERRED STOCK.......... 925
DEFERRED TAX LIABILITY................................... 3,735 3,735
COMMITMENTS AND CONTINGENCIES (Notes 10, 13 and 14)
CONVERTIBLE PREFERRED STOCK
Series A 6% Redeemable Cumulative Convertible Preferred
Stock -- $.01 par value, 5,000 shares authorized;
3,208, 3,208 and 3,088 shares issued and outstanding
at December 31, 1994 and 1995, and September 30,
1996, respectively; $6.2 million minimum aggregate
liquidation preference at September 30, 1996......... 5,735 6,085 6,123
-------- -------- -------- --------
COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 8,000 shares authorized,
1,426, 1,426, 2,916 and 8,475 shares issued and
outstanding at December 31, 1994 and 1995, September
30, 1996 and pro forma (unaudited), respectively..... 14 14 29 85
Additional paid-in capital -- Accumulated deficit
remaining from conversion from Subchapter S
corporation tax status............................... (15,030) (15,030) (13,253) (8,111)
Note receivable from officer........................... (270) (270)
Retained earnings...................................... 1,735 2,883 4,078 4,078
-------- -------- -------- --------
Total common stockholders' deficit.............. (13,281) (12,133) (9,416) (4,218)
-------- -------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT.............. $ 10,264 $ 9,992 $ 50,793 $ 50,793
======== ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 76

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------- ---------------------
1993 1994 1995 1995 1996
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue.................................... $13,419 $14,461 $16,024 $12,176 $20,840
Operating costs:
Cost of services............................. 10,803 6,780 8,271 6,147 10,234
Selling, general and administrative
expense................................... 1,634 2,287 2,644 1,931 4,026
Provision for doubtful accounts.............. 953 1,003 1,161 910 1,655
Amortization expense......................... 357
------- ------- ------- ------- -------
Total operating costs................ 13,390 10,070 12,076 8,988 16,272
------- ------- ------- ------- -------
Income from operations......................... 29 4,391 3,948 3,188 4,568
Interest expense............................... (48) (1,584) (1,504) (1,151) (1,637)
Other income (expense), net.................... 9 (46) (46) (13) (143)
------- ------- ------- ------- -------
Income (loss) before income taxes.............. (10) 2,761 2,398 2,024 2,788
Provision for income taxes..................... 696 900 759 1,075
------- ------- ------- ------- -------
Net income (loss).............................. $ (10) $ 2,065 $ 1,498 $ 1,265 $ 1,713
======= ======= ======= ======= =======

Pro forma net income per share information (unaudited) (Note 18):
Pro forma net income per share............... $ .19 $ .16 $ .20
======= ======= =======
Pro forma common and common equivalent shares
outstanding............................... 8,085 8,085 8,555
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 77

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
CONVERTIBLE PAID-IN-CAPITAL--
PREFERRED STOCK COMMON ACCUMULATED DEFICIT
------------------------------------------- STOCK REMAINING FROM CONVERSION RETAINED
ADDITIONAL ---------------- FROM SUBCHAPTER S EARNINGS
SHARES AMOUNT PAID-IN-CAPITAL TOTAL SHARES AMOUNT CORPORATION TAX STATUS (DEFICIT)
------- ------- --------------- ------ ------ ------ ------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31,
1992..................... $ 1,168
Dividend distribution to
common stockholders.... (246)
Net loss................. (10)
----- --- ------ ------ ----- --- ------ -------
BALANCES, DECEMBER 31,
1993..................... 912
Issuance of common
stock.................. 1,426 $ 14 $ 986
Issuance of Convertible
Preferred Stock........ 3,208 $ 32 $ 5,468 $5,500
Cost of issuance......... (95) (95) (17)
Distribution to common
stockholders in
Recapitalization....... (24,011)
Tax benefit arising from
Recapitalization....... 7,100
Conversion from
Subchapter S
Corporation tax
status................. (23,099) 23,099
Accrued dividends on
Convertible Preferred
Stock.................. 330 330 (330)
Net income............... 2,065
----- --- ------ ------ ----- --- ------ -------
BALANCES, DECEMBER 31,
1994..................... 3,208 32 5,703 5,735 1,426 14 (15,030) 1,735
Accrued dividends on
Convertible Preferred
Stock.................. 350 350 (350)
Net income............... 1,498
----- --- ------ ------ ----- --- ------ -------
BALANCES, DECEMBER 31,
1995..................... 3,208 32 6,053 6,085 1,426 14 (15,030) 2,883
Conversion of Convertible
Preferred Stock to
common stock........... (120) (1) (206) (207) 216 2 205
Dividends paid on
Convertible Preferred
Stock converted........ (31) (31)
Settlement of ALA
Contingent Notes....... 194 2 240 (242)
Stock issued in
connection with
acquisition............ 1,080 11 1,332
Accrued dividends on
Convertible Preferred
Stock.................. 276 276 (276)
Net income............... 1,713
----- --- ------ ------ ----- --- ------ -------
BALANCES, SEPTEMBER 30,
1996..................... 3,088 $ 31 $ 6,092 $6,123 2,916 $ 29 $ (13,253) $ 4,078
===== === ====== ====== ===== === ====== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 78

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- ---------------------
1993 1994 1995 1995 1996
----- ------- ------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ (10) $ 2,065 $ 1,498 $ 1,265 $ 1,713
Adjustments to reconcile net income (loss) to net cash
flows provided by operating activities:
Depreciation and amortization......................... 275 341 329 245 827
(Gain) loss on disposal of assets..................... (10) 28 49
Deferred income taxes................................. 446 636 536 105
Provision for doubtful accounts....................... 953 1,003 1,161 910 1,655
Changes in assets and liabilities:
Increase in accounts receivable..................... (782) (1,354) (1,534) (1,278) (715)
(Increase) decrease in inventories.................. (35) (49) 6 (8) 20
(Increase) decrease in other current assets......... (161) (166) 39 (108) (712)
(Increase) decrease in other assets................. (37) 21 20 (859)
Increase (decrease) in accounts payable, accrued
expenses, and other liabilities.................. 184 86 118 488 170
----- ------- ------- ------- --------
Net cash flows provided by operating
activities..................................... 424 2,325 2,302 2,070 2,253
----- ------- ------- ------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................... (228) (492) (488) (368) (582)
Purchase of subsidiaries, net of cash acquired.......... (27,320)
----- ------- ------- ------- --------
Net cash flows used in investing activities...... (228) (492) (488) (368) (27,902)
----- ------- ------- ------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term credit facility.............. 7,493
Repayments of borrowings under long-term credit
facility.............................................. (1,488) (1,859)
Issuance of common stock................................ 1,000
Issuance of Convertible Preferred Stock................. 5,500
Issuance of Junior Notes................................ 7,500
Debt and stock issuance costs........................... (525)
Principal payments on long-term debt.................... (500) (492) (19) (613)
Proceeds from issuance of long-term debt................ 261
Net borrowings (repayments) under Credit Facility....... 498 (529) (1,758) 26,698
Note receivable from officer............................ (270)
Dividends paid/distributions to common stockholders..... (246) (20,511) (28) (31)
----- ------- ------- ------- --------
Net cash flows provided by (used in) financing
activities..................................... 13 (2,052) (1,859) (1,805) 25,784
----- ------- ------- ------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... 209 (219) (45) (103) 135
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............ 113 322 103 103 58
----- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................. $ 322 $ 103 $ 58 $ $ 193
===== ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 48 $ 1,540 $ 1,504 $ 1,151 $ 1,425
Income taxes............................................ $ $ 409 $ 63 $ 10 $ 961
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE> 79

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. BUSINESS AND ORGANIZATION

AmeriPath, Inc. was incorporated in February 1996 to be the leading
physician practice management company focused on providing anatomic
pathology services. The Company provides physician practice management
services to pathologists in both outpatient and hospital inpatient
laboratories, with particular focus on dermatopathology (pathology related
to diseases of the skin). Unless the context otherwise requires, references
to the Company or AmeriPath include AmeriPath, Inc., its predecessor,
American Laboratory Associates ("ALA") and its subsidiaries.

Such services are provided under contractual arrangements with hospitals
and in free-standing, independent laboratory settings. The contractual
arrangements with hospitals vary, but essentially provide that, in exchange
for physician representatives of the Company serving as the medical
director of a hospital's anatomic and clinical laboratory operations, the
Company is able to bill and collect the professional component of the
charges for medical services rendered by the Company's health care
professionals. In some cases, the Company is also paid an annual fee for
providing the medical director for the hospital laboratory. The Company
also owns and operates outpatient pathology laboratories, for which it is
able to bill patients and third party payors, principally on a
fee-for-service basis, covering both the professional and technical
components of such services. In addition, the Company contracts directly
with national clinical laboratories and managed care organizations,
principally on a fee-for-service basis.

ALA was organized in December 1993 to acquire the net assets of E.G.
Poulos, M.D., M.J. Demaray, M.D. and A.P. Kowalczyk, M.D., P.A. ("PDK"), a
full service reference laboratory providing clinical laboratory testing and
anatomic pathology services, principally dermatopathology services.

Effective January 1, 1994, ALA and PDK entered into a series of
transactions which resulted in a recapitalization (the "Recapitalization").
ALA issued 1,425,600 shares of common stock to the owners of PDK for $1,000
in cash and 3,208,120 shares of voting Series A 6% Redeemable Cumulative
Convertible Preferred Stock (the "Convertible Preferred Stock") to other
investors, primarily Summit Partners, for $5,500 in cash. (See Note 9). In
addition, ALA issued 10% Junior Subordinated Notes due 2001 (the "Junior
Notes") in the amount of $7,500 to the purchasers of the Convertible
Preferred Stock and borrowed $7,493 under a line of credit to finance a
portion of the acquisition of the net assets from PDK. A financing fee of
$190 was paid to Summit.

In connection with the Recapitalization, ALA made distributions of cash of
$20,511 and issued 8% Senior Subordinated Notes due 1998 (the "Senior
Notes") in the principal amount of $3,500 to PDK. The shareholders of PDK
owned 100% of the shares of ALA's outstanding common stock immediately
subsequent to the Recapitalization. Giving effect to the conversion of the
Convertible Preferred Stock to common stock as if a conversion had occurred
at that time, such shareholders' ownership percentage in ALA's common stock
would have been 19.8% immediately following the Recapitalization. Since
there was no change in the common stockholders, and due to the mandatory
redemption features of the Convertible Preferred Stock, the transactions
have been accounted for as a recapitalization for financial accounting
purposes, and the amounts of cash paid, and Senior Notes issued, have been
charged to retained earnings as distributions to the common stockholders.
The assets and liabilities of PDK continued to be accounted for by the
Company at PDK's historical cost. The distributions to the common
stockholders and the balance of PDK's retained earnings, aggregating
$23,099, were transferred from retained earnings (deficit) to additional
paid-in-capital-accumulated deficit remaining from conversion from
Subchapter S corporation tax status.

For income tax purposes, the Recapitalization transaction is treated as a
purchase of assets, with the net assets acquired recorded at their fair
values, and the excess of cost over the fair value of net assets

F-9
<PAGE> 80

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

acquired amortized as a deduction over a period of 15 years as statutorily
required by tax laws and regulations.

Subsequent to the Recapitalization, and in connection with the formation of
the Company in February 1996, the shareholders of ALA and AmeriPath entered
into a series of exchange transactions, whereby the equity interests held
in ALA were exchanged for identical interests in the Company. The
operations of ALA are now conducted through a wholly owned subsidiary of
the Company, AmeriPath Florida, Inc.

On August 1, 1994, the Company effected a 40 for 1 stock split for its
common and preferred stock in the form of a stock dividend. The effect of
such stock split is reflected in all common and preferred share amounts.

On January 13, 1997, the Company effected a 1.8 for 1 stock split for its
common stock in the form of a stock dividend. The effect of such stock
split is reflected in all common share amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of AmeriPath,
Inc. and its wholly owned subsidiaries (collectively, the "Company"). All
significant intercompany accounts and transactions have been eliminated.
The companies included in the consolidation at September 30, 1996 include
the acquisitions through September 30, 1996, listed in Note 3.

PERVASIVENESS OF ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair values of financial instruments that are not actively traded are based
on market prices of similar instruments and/or valuation techniques using
market assumptions. Although management uses its best judgment in
estimating the fair value of these financial instruments, there are
inherent limitations in any estimation technique. Therefore, the fair value
estimates presented herein are not necessarily indicative of the amounts
which the Company could realize in a current transaction.

The Company's consolidated financial instruments consist mainly of cash and
cash equivalents, accounts receivable, accounts payable, the line of credit
and long-term debt. The carrying amounts of the Company's cash and cash
equivalents, accounts receivable and accounts payable approximate fair
value due to the short-term nature of these instruments. The Company's
Credit Facility bears interest at a variable market rate, and thus has a
carrying amount that approximates fair value.

F-10
<PAGE> 81

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The fair value of long-term debt is estimated based on discounted cash
flows using current interest rates for financial instruments with similar
characteristics and maturity. The carrying amount of the Senior Notes and
Junior Notes aggregated $11,000 and the fair value at September 30, 1996
and December 31, 1995 was $10,400.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid instruments with maturities at
the time of purchase of three months or less.

INVENTORIES

Inventories, consisting of laboratory supplies, are stated at the lower of
cost, determined on a first-in-first-out basis, or market.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Equipment under capital leases
is stated at the net present value of the future minimum lease payments at
the inception of the related leases. Routine maintenance and repairs are
charged to expense as incurred, while cost of betterments and renewals are
capitalized.

Depreciation and amortization are calculated on a straight-line basis and
accelerated methods, over the estimated useful lives of the respective
assets which lives range from 3 to 7 years. Leasehold improvements are
amortized over the shorter of the term of the related lease, including
renewal options, or the useful life of the asset (20 years).

INTANGIBLE ASSETS

Identifiable intangible assets include hospital contracts, physician
referral lists and laboratory contracts acquired in connection with
acquisitions. Such assets are recorded at fair value on the date of
acquisition as determined by management based on independent consultants'
reports and are being amortized over the estimated periods to be benefited,
ranging from 10 to 40 years.

Goodwill relates to the excess of cost over the fair value of net assets of
the businesses acquired. Amortization is calculated on a straight line
basis over periods ranging from 15 to 35 years. The overall business
strategy of the Company includes the acquisition and integration of
independent pathology practices and related support services. The Company
believes that this strategy creates synergies, achieves operating
efficiencies and responds to the cost containment objectives of payors, all
of which will provide benefits for the foreseeable future.

Management assesses on an ongoing basis if there has been an impairment in
the carrying value of its intangible assets. If the undiscounted future
cash flows over the remaining amortization period of the respective
intangible asset indicates that the value assigned to the intangible asset
may not be recoverable, the carrying value of the respective intangible
asset will be reduced. The amount of any such impairment would be
determined by comparing anticipated discounted future cash flows from
acquired businesses with the carrying value of the related assets. In
performing this analysis, management considers such factors as current
results, trends and future prospects, in addition to other relevant
factors.

DEFERRED DEBT ISSUANCE COSTS

In connection with the Recapitalization and subsequent financings, the
Company incurred costs in connection with bank financing and issuing other
debt. These costs have been capitalized and are being amortized on a
straight-line basis, which approximates the interest method, over the
respective terms of the related debt (2 and 8 years). Such amounts are
included in other assets in the consolidated balance sheet.

F-11
<PAGE> 82

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

REVENUE RECOGNITION

The Company recognizes revenue at the time services are performed. Unbilled
receivables are recorded for services rendered during, but billed
subsequent to, the reporting period. Net revenue is reported at the
estimated realizable amounts from patients, third-party payors and others
for services rendered. Revenue under certain third-party payor agreements
is subject to audit and retroactive adjustments. Provision for estimated
third-party payor settlements and adjustments are estimated in the period
the related services are rendered and adjusted in future periods as final
settlements are determined. The provision and the related allowance are
adjusted periodically, based upon an evaluation of historical collection
experience with specific payors for particular services, anticipated
collection levels with specific payors for new services, industry
reimbursement trends, and other relevant factors.

Unbilled receivables are recorded for services rendered during, but billed
subsequent to, the reporting period. Such receivables, net of allowances,
as of September 30, 1996 amounted to approximately $941. Unbilled
receivables as of December 31, 1994 and 1995 were insignificant.

INCOME TAXES

The Company's provision for income taxes includes federal and state income
taxes currently payable and changes in deferred tax assets and liabilities.
Deferred income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income
Taxes and represent the estimated future tax effects resulting from
temporary differences between financial and tax reporting bases of assets
and liabilities.

PDK elected to be taxed as a Subchapter S corporation and the taxation of
the earnings thereof was the responsibility of the individual shareholders.
The 1993 and 1994 earnings attributable to the period prior to consummation
of the Recapitalization were allocated to PDK and were not subject to
corporate federal and state income taxes.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. SFAS No. 121 establishes accounting standards for
the impairment of long-lived assets, including identifiable intangible
assets and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of.
SFAS No. 121 requires that long-lived assets, including identifiable
intangible assets held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. Measurement of an impairment
loss for such long-lived assets and identifiable intangibles should be
based on the fair value of the asset. Long-lived assets and certain
identifiable intangibles to be disposed of are required to be reported
generally at the lower of the carrying amount or fair value less cost to
sell. SFAS No. 121 is effective for fiscal years that begin after December
15, 1995. Adoption of the statement did not have a material effect on the
Company's financial statements.

INTERIM FINANCIAL DATA

The unaudited consolidated statements of operations and cash flows for the
nine months ended September 30, 1995 include, in the opinion of management,
all adjustments (consisting of normal recurring adjustments) necessary to
present fairly the Company's consolidated results of operations and cash
flows. The data disclosed in these notes to the consolidated financial
statements for the nine months ended September 30, 1995 is unaudited.
Operating results for the nine month period ended Septem-

F-12
<PAGE> 83

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ber 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.

PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)

The unaudited pro forma consolidated balance sheet at September 30, 1996
gives effect to the planned conversion of 3,088,116 shares of Convertible
Preferred Stock (see Note 18) into common stock as if such conversion had
occurred as of September 30, 1996. Prior to the completion of the offering,
the holders of all outstanding Convertible Preferred Stock will convert
such shares into 5,558,609 shares of common stock of the Company. Accrued
dividends of $925 as of September 30, 1996 will be payable upon conversion
of the Convertible Preferred Stock.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the 1996
presentation.

3. ACQUISITIONS

During 1996, the Company completed eleven acquisitions of or affiliations
with (the "Recent Acquisitions") anatomic pathology practices (the
"Practices"). The consideration given by the Company in the Recent
Acquisitions was a combination of cash, subordinated notes, common stock,
contingent notes and/or contingently issuable common stock. In November
1996, pursuant to Stock Rights Surrender and Restricted Stock Grant
Agreements, the Company issued 1,833,433 shares of its common stock in
exchange for the surrender of all rights to the contingently issuable
common stock. Such shares represent purchase price consideration which is
not based on or related to future earnings. The shares issued pursuant to
such agreements are restricted as to transfer, which restrictions lapse
over three to five years, based solely on the passage of time. The Recent
Acquisitions have been accounted for using the purchase method of
accounting. The aggregate consideration paid, and to be paid, is based on a
number of factors, including each Practice's demographics, size, local
prominence, position in the marketplace and historical cash flows from
operations. Assessment of these and other factors, including uncertainties
regarding the health care environment, resulted in the sellers of each of
the Practices and the Company being unable to reach agreement on the final
purchase price for each of the Practices. The Company agreed to pay a
minimum purchase price and has agreed to pay additional purchase price
consideration to all of the sellers of each of the Practices in proportion
to their respective ownership interest in each Practice. The additional
payments are contingent upon the achievement of stipulated levels of
operating earnings (as defined) by each of the Practices over periods of
three to five years from the date of acquisition as set forth in the
respective agreements, and are not contingent on the continued employment
of the sellers of the Practices. The amount of the payments cannot be
determined until the achievement of the operating earnings levels during
the terms of the respective agreements. If the maximum specified levels of
operating earnings for each Practice are achieved, the Company would make
aggregate maximum payments of $31,278 over three to five years. A lesser
amount of payments would be made if the maximum levels of operating
earnings specified in each acquisition agreement are not met. No amounts
would be paid if the minimum level of operating earnings specified in each
acquisition agreement is not met. Additional payments, if any, under these
agreements, will be accounted for as an additional cost of the Practices.

F-13
<PAGE> 84

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The total consideration paid by the Company in the Recent Acquisitions
included cash of $78,626, subordinated notes in the aggregate principal
amount of $4,511 and 3,870,742 shares of common stock (aggregate value of
$24,829). The following table presents for each Recent Acquisition, the
date of acquisition or affiliation, the total consideration paid, excluding
the contingent payments, if any, the number of shares of Common Stock
issued by the Company, and the maximum contingent payments:

<TABLE>
<CAPTION>
MAXIMUM
COMMON STOCK CONTINGENT
ISSUED (SHARES) PAYMENTS
DATE TOTAL ------------------------ -----------------
ACQUIRED CONSIDERATION AT IN NOVEMBER PERIOD
RECENT ACQUISITIONS: IN 1996 PAID CLOSING 1996 (YEARS) AMOUNT
----------------------------- ----------- ------------- ---------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Through September 30, 1996:
Demaray and Poulos, P.A.... January 1 $ 1,679
Derrick and Associates
Pathology, Inc........... July 1 16,844 1,080,009 5 $8,000
Amazon and Rosen, M.D.,
P.A...................... July 1 6,333 119,999 5 2,000
SkinPath, P.C.............. August 1 5,275 207,000 3 300
Pathology Associates,
P.S.C.................... August 1 6,795 107,399 5 750
Subsequent to September 30,
1996:
Freeman-Cockerell
Laboratories, Inc........ October 1 4,806 90,000 5 1,050
Volusia Pathology Group,
M.D., P.A................ October 3 7,344 11,999 157,815 5 1,841
David R. Barron, M.D.,
Inc...................... October 4 17,700 275,999 180,000 5 3,400
Drs. Seidenstein, Levine &
Associates, P.A.......... October 10 15,657 136,501 341,220 5 5,687
Beno Michel, M.D., Inc..... October 15 8,832 172,800 90,000 3 1,500
Fernandez & Kalemeris,
M.D., P.A................ November 1 16,700 360,000 540,000 5 6,750
</TABLE>

The allocation of the purchase price is preliminary, while the Company
continues to obtain the information to determine the fair value of the
assets acquired and liabilities assumed. Although the allocation of the
purchase price for the above acquisitions and the valuation of the shares
issued subsequent to September 30, 1996, are preliminary and subject to
adjustment when the Company obtains final information, management believes
that any such adjustments will not be material in relation to the Company's
consolidated financial statements. Information with respect to the
amortization periods for intangible assets is presented in Note 6.

The Company does not have technical majority ownership of the common stock
of David R. Barron, M.D., Inc. ("Richfield Labs") and Beno Michel, M.D.,
Inc. ("CPI"). All of the common stock of each of these companies is held in
trust. AmeriPath is the sole beneficiary of each trust and receives all
income from the trusts. The Company, at its sole discretion, can replace
the trustees, withdraw any asset from the trusts, modify the terms of the
trust agreements, or terminate the trusts, and direct the trustees to
distribute income and any asset from the trusts. No assets of the trusts
can be sold or otherwise disposed of without AmeriPath's consent.
Additionally, a wholly-owned subsidiary of the Company entered into 40-year
management agreements with each of Richfield Labs and CPI, under which such
subsidiary provides all management and other non-medical services to
Richfield Labs and CPI for a fee equal to the practice's net revenue less
practice expenses, including physician salaries, which are fixed by
employment agreements, and related professional expenses. Therefore, the
Company is entitled to all of the net income of these practices. Based on
the provisions of the purchase agreements,

F-14
<PAGE> 85

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

trust agreements and management agreements, consolidation of Richfield Labs
and CPI is required to present the Company's financial position and results
of operations in conformity with generally accepted accounting principles
because the Company has the controlling financial interest in Richfield
Labs and CPI by means other than direct record ownership of voting stock.
Accordingly, these acquisitions will be accounted for as purchase business
combinations and consolidated.

In connection with the acquisition of Freeman-Cockerell Laboratories, Inc.,
a wholly-owned subsidiary of the Company, and Clay J. Cockerell, M.D., P.A.
("Cockerell") have entered into a 40-year management service agreement
under which the Company provides, on an exclusive basis, the technical
laboratory services, management and all other non-medical practice services
for Cockerell. The Company employs all of the technical employees and owns
all of the laboratory facilities, testing equipment and other assets used
in connection with the pathology services performed by Cockerell's
physicians. Cockerell's payments to the Company under this management
service agreement are comprised of the reimbursement of the costs and
expenses for providing the technical laboratory services, a base fee and a
performance fee based on the achievement of goals and objectives
established annually. Assuming the wholly-owned subsidiary of the Company
achieves its goals and objectives, such fees will result in the Company
receiving substantially all net revenue less practice expenses of
Cockerell. Practice expenses include physician salaries which are fixed by
employment agreement and related professional expenses. Therefore, the
Company is the direct beneficiary of substantially all of the net income of
Cockerell. Because the Company has a net profits interest in Cockerell, the
net revenues and expenses of Cockerell will be displayed in the Company's
consolidated financial statements.

Under the terms of the acquisition agreement, the sole shareholder of
Cockerell is prohibited from selling, assigning or disposing of the common
stock of Cockerell prior to September 30, 1997, except that at the
direction of the Company, without further consideration, such shareholder
is required to transfer ownership of the shares of Cockerell to, or merge
Cockerell into, a Texas 5.01(a) non-profit corporation (the "5.01(a)
corporation") which the Company is in the process of forming and of which
the Company will be the sole member. The formation of the 5.01(a)
corporation is subject to review by Texas regulatory authorities. Members
of the board of directors of the 5.01(a) corporation will be appointed by,
and can be removed by, the sole member, which will be the Company. The
Company believes that the formation of the 5.01(a) corporation and its
merger with Cockerell prior to September 30, 1997 is virtually assured.
Upon such merger, the Company will have direct voting control over the
5.01(a) corporation and will consolidate it in the Company's consolidated
financial statements.

The accompanying consolidated financial statements include the results of
operations of the Recent Acquisitions that have been made by the Company
from the date acquired through September 30, 1996. The following unaudited
pro forma information presents the combined results of the Company's
operations and the results of operations of all of the Recent Acquisitions
for the year ended December 31, 1995 and the nine months ended September
30, 1996, after giving effect to amortization of goodwill and identifiable
intangible assets, interest expense on the long-term debt incurred in the
Recent Acquisitions, and the reduced level of certain specific operating
expenses (primarily compensation and related expenses attributable to the
former owners) in accordance with the agreements related to the Recent
Acquisitions, as if the acquisitions had been consummated on January 1,
1995. Such unaudited pro forma information is based on the historical
financial information of all of the Recent Acquisitions and does not
include operational or other changes which might have been effected
pursuant to the Company's management.

F-15
<PAGE> 86

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The unaudited pro forma information for the year ended December 31, 1995
and the nine months ended September 30, 1996 presented below is for
illustrative information purposes only and is not necessarily indicative of
results which would have been achieved or results which may be achieved in
the future:

<TABLE>
<CAPTION>
PRO FORMA
------------------------------
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Total net revenue.......................................... $ 81,954 $62,986
========== ==========
Net income................................................. $ 6,066 $ 4,649
========== ==========
Net income per share....................................... $ .50 $ .39
========== ==========
</TABLE>

Common and common equivalent shares used in calculating net income per
share include the effects of the planned conversion of the Convertible
Preferred Stock and the planned stock split as discussed in Note 18.

4. ACCOUNTS RECEIVABLE AND NET REVENUE

Accounts receivable are recorded at net realizable value. The allowance for
contractual and other adjustments and uncollectible accounts is based on
historical experience and judgments about future events. Accordingly, the
actual amounts experienced could vary significantly from the recorded
allowances.

Accounts receivable consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Gross accounts receivable............................. $3,240 $4,037 $17,120
Less allowance for contractual and other adjustments
and uncollectible accounts.......................... (1,499) (1,923) (9,176)
------ ------ -------
Accounts receivable, net.............................. $1,741 $2,114 $ 7,944
====== ====== =======
</TABLE>

The Company grants credit without collateral to individual patients, most
of whom are insured under third party payor agreements. The mix of
receivables from patients and third-party payors at December 31, 1994 and
1995 and September 30, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Government programs....................... 36.4% 45.7% 29.1%
Third-party payors........................ 38.0 27.6 44.3
Private pay patients...................... 20.7 15.3 22.8
Other..................................... 4.9 11.4 3.8
------ ------ ------
100.0% 100.0% 100.0%
============ ============ =============
</TABLE>

F-16
<PAGE> 87

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Net revenue consisted of the following:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ---------------------
1993 1994 1995 1995 1996
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenue.......................... $15,353 $17,027 $19,121 $14,143 $29,102
Less contractual and other
adjustments.......................... (1,934) (2,566) (3,097) (1,967) (8,262)
------- ------- ------- ------- -------
Net revenue.................. $13,419 $14,461 $16,024 $12,176 $20,840
======= ======= ======= ======= =======
</TABLE>

A significant portion of the Company's net revenue is generated by the
hospital-based practices through contracts with 34 hospitals, as of
September 30, 1996, primarily as a result of the Recent Acquisitions
discussed in Note 3. Columbia/HCA Healthcare Corporation owns or manages 14
of these hospitals. Generally, these contracts have remaining terms of less
than five years and contain renewal provisions. Some of the contracts
contain clauses that allow for termination by either party with relatively
short notice. Although the Company, through the Practices, has had
relationships with these hospitals for extended periods of time, the
termination of one or more of these contracts would have a material adverse
effect on the Company's financial position and results of operations.

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
(YEARS) 1994 1995 1996
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Laboratory and data processing......... 5 $ 1,743 $ 1,951 $ 3,196
Leasehold improvements................. 20 372 471 865
Furniture and fixtures................. 7 125 160 327
Mobile lab units....................... 3 99 99 303
Automotive vehicles.................... 3 13 46 99
Construction in progress............... 40 7 82
------- ------- -------
2,392 2,734 4,872
Less accumulated depreciation.......... (1,381) (1,520) (1,817)
------- ------- -------
Property and equipment, net............ $ 1,011 $ 1,214 $ 3,055
======= ======= =======
</TABLE>

Depreciation expense was $275, $275 and $257 for the years ended December
31, 1993, 1994 and 1995, respectively, and $191 and $287 for the nine month
periods ended September 30, 1995 (unaudited) and 1996, respectively.

F-17
<PAGE> 88

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

6. INTANGIBLE ASSETS

Intangible assets and the related accumulated amortization and amortization
periods are as follows:

<TABLE>
<CAPTION>
AMORTIZATION
PERIODS
RECORDED (YEARS)
SUBSEQUENT TO ----------------
SEPTEMBER 30, SEPTEMBER 30, WEIGHTED
1996 1996 RANGE AVERAGE
------------- -------------- ----- --------
<S> <C> <C> <C> <C>
Hospital contracts........................... $15,050 $ 13,900 35-40 36.5
Physician referral lists..................... 11,431 17,500 17-19 18.7
Laboratory contracts......................... 500 1,800 10 10.0
------- -------
26,981 $ 33,200
=======
Accumulated amortization..................... (255)
-------
Balance, net................................. $26,726
=======
Goodwill..................................... $10,145 $ 48,430 15-35 34.2
Accumulated amortization..................... (77)
-------
Balance, net................................. $10,068
=======
</TABLE>

The amortization periods for the identifiable intangible assets were
determined by the Company based on reports of independent consultants. In
determining these lives the Company considered each practice's operating
history, contract renewals, stability of physician referral lists and
industry statistics.

The amortization periods for goodwill were determined by the Company with
consideration given to the lives assigned to the identifiable intangibles,
the reputation of the practice, the length of the practice's operating
history, and the potential of the market in which the acquired practice is
located.

The weighted average amortization period for identifiable intangible assets
and goodwill, is 30.5 years.

The amounts recorded subsequent to September 30, 1996 include the Recent
Acquisitions that were consummated subsequent to September 30, 1996 and the
additional goodwill of $14,260 recorded in connection with the issuance of
1,833,433 shares of Common Stock pursuant to the Stock Rights Surrender and
Restricted Stock Grant Agreements. See Note 3.

7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

<TABLE>
<CAPTION>
DECEMBER
31,
----------- SEPTEMBER 30,
1994 1995 1996
---- ---- -------------
<S> <C> <C> <C>
Accounts payable............................................ $318 $287 $ 1,973
Accrued compensation........................................ 261 432 1,180
Accrued interest............................................ 21
Income taxes payable........................................ 42 227
Other accrued expenses...................................... 226 133 1,114
---- ---- ------
$805 $894 $ 4,515
==== ==== ======
</TABLE>

F-18
<PAGE> 89

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

8. LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Credit Facility..................................... $ 6,005 $ 4,146 $30,844
Senior Notes due to common stockholders, principal
and any unpaid interest thereon, due and payable
on December 31, 1998; interest is payable
currently at the stated rate of 8%................ 3,500 3,500 3,500
Junior Notes due to preferred stockholders,
principal and any unpaid interest thereon, due and
payable on December 31, 2001; interest is payable
currently at the stated rate of 10%............... 7,500 7,500 7,500
Subordinated Notes issued in connection with the
Recent Acquisitions, payable in varying amounts
through 2001, with interest at the rate of 7%..... 2,840
------- ------- -------
17,005 15,146 44,684
Less current portion................................ (782)
------- ------- -------
Long term debt, net of current portion.............. $17,005 $15,146 $43,902
======= ======= =======
</TABLE>

As of September 30, 1996, the maturities of short-term and long-term debt
were as follows (in thousands):

<TABLE>
<S> <C>
1996............................................................ $ 135
1997............................................................ 782
1998............................................................ 35,126
1999............................................................ 3,048
2000............................................................ 2,815
2001............................................................ 2,778
-------
Total........................................................... $44,684
=======
</TABLE>

On May 29, 1996, the Company replaced its line of credit with a new
revolving line of credit (the "Credit Facility") with the First National
Bank of Boston, as lender and agent (the "Agent"), under which the Company
could borrow up to $40 million for working capital and acquisition
purposes. The Credit Facility was amended in October 1996, and the
aggregate amount available was increased to $85 million. Outstanding
advances under the Credit Facility are due and payable on December 31,
1998. Borrowings under the Credit Facility bear interest at variable rates
based, at the Company's option, on the bank's base rate or the sum of 2.50%
plus the Eurodollar rate. The Credit Facility also requires the quarterly
payment of an annual commitment fee equal to 0.375% of the unused portion
of the commitment until the commitment is terminated. Subsequent to
September 30, 1996, the Company issued to the Agent, 85,999 shares of
Common Stock in lieu of commitment fees. Such shares have been recorded at
the estimated fair market value at the date of the respective credit
facility agreement and amendments thereto.

The Credit Facility contains covenants which, among other things, require
the Company to maintain certain financial operating ratios and impose
certain limitations or prohibitions on the Company with respect to the
incidence, guaranty or assumption of indebtedness, the payment of
dividends, cash

F-19
<PAGE> 90

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

distributions, limitations on new debt issuance, sale of assets, leasing
commitments and annual capital expenditures, and contains provisions which
preclude mergers and acquisitions under certain circumstances and places.
All of the Company's assets are pledged as collateral under the agreement.
At September 30, 1996, the effective interest rate was approximately 8.29%.

The Company obtained a waiver from the Agent with respect to noncompliance
with the debt service coverage ratio requirements for the year ended
December 31, 1995. The Company believes that it is in compliance with all
of its existing covenants at September 30, 1996.

9. CONVERTIBLE PREFERRED STOCK

The Convertible Preferred Stock has an annual dividend rate of 6% of the
original purchase price and such dividends are cumulative from the date of
original issuance and payable when and as declared by the Company's Board
of Directors. In the event of liquidation or dissolution of the Company,
the amount distributed for each share is the greater of (i) $1.71 which is
subject to adjustment for certain capital transactions, plus unpaid
dividends (the "Liquidation Amount") or (ii) such amount as would have been
payable had the shares been converted to common stock. The Convertible
Preferred Stock is convertible into common stock of the Company at any
time, at the option of the holders at a conversion rate of 1.8 shares of
common stock for each share, subject to adjustment for certain capital
transactions. Upon conversion, all accumulated and unpaid dividends, up to
the date of conversion are payable in cash.

During the nine months ended September 30, 1996 the Company paid accrued
dividends in the amount of $31 on the 120,004 shares converted into 216,007
shares of common stock by the holders of the Convertible Preferred Stock in
connection with the acquisition of shares of common stock by the Company's
Chief Executive Officer (See Note 14).

The preferred stockholders have voting rights equal to the number of shares
of common stock into which their shares may be converted. At the election
of the holders of at least 51% of the Convertible Preferred Stock, the
Company shall redeem, for the Liquidation Amount, all of the Convertible
Preferred Stock in 1999, 2000, and 2001. Also, if prior to the earlier of
the liquidation, merger, sale or change in control (as defined) of the
Company or December 31, 2001, the Company has not consummated a qualified
public offering (as defined), the owners of not less than 20% of the
Convertible Preferred Stock may require the Company to redeem their stock
for fair market value, but not less than the original purchase price. These
redemption requirements terminate upon consummation of a qualified public
offering. Since the Company believes that it is probable that the preferred
shares will not be redeemed, accretion in excess of accumulated dividends
has not been recorded.

The holders of the Convertible Preferred Stock have certain preemptive
rights in the event of the issuance of common stock, and certain
registration rights with expenses to be borne by the Company. As of
September 30, 1996, the Company has reserved 5,558,609 shares of common
stock for the conversion of the Convertible Preferred Stock.

F-20
<PAGE> 91

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

10. LEASE COMMITMENTS

The Company leases various office and laboratory space, and certain
equipment pursuant to operating lease agreements. The following information
includes the related party leases discussed in Note 14. Future minimum
lease commitments consisted of the following at September 30, 1996:

<TABLE>
<S> <C>
1996............................................................. $ 133
1997............................................................. 511
1998............................................................. 490
1999............................................................. 452
2000............................................................. 437
2001............................................................. 404
Thereafter....................................................... $1,180
------
$3,607
======
</TABLE>

Rent expense under operating leases for 1993, 1994, and 1995 was $153,
$170, and $205 respectively, and $147 and $248 for the nine months ended
September 30, 1995 (unaudited) and 1996, respectively.

11. OPTION PLAN

The Company's Stock Option Plan (the "Option Plan") provides for the grant
of options to purchase shares of common stock to key employees and others.
The plan provides that the option price shall not be less than the fair
market value of the shares on the date of the grant. At September 30, 1996,
912,611 shares of common stock are reserved for issuance pursuant to
options granted under the Option Plan. All options granted have 10 year
terms and vest and become exercisable at the rate of 20% a year, following
the date of grant.

The Company's Director Option Plan provides for the grant of options to
purchase shares of common stock to Directors who are not employees of the
Company. All options to be granted under the Director Option Plan will have
10 year terms and become exercisable during the period specified in the
agreement evidencing the grant of such Director Option. As of September 30,
1996, no options have been granted under the Director Option Plan.

The Company has elected to follow APB No. 25, "Accounting for Stock Issued
to Employees" ("APB 25"), and the related interpretations in accounting for
its employee stock options because, as discussed below, the alternative
fair value accounting provided for under SFAS No. 123, "Accounting for
Stock-Based Compensation," requires use of option valuation models that
were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options
approximates the fair value of the underlying stock on the date of grant,
no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
that Statement. The fair value for these options was estimated at the date
of grant using the Black-Scholes Option Pricing Model with the following
weighted-average assumptions for 1995 and 1996: risk-free interest rates
ranging from 5.18% to 6.85%; no volatility factors of the expected market
price of the Company's common stock has been included because the Company
was a private entity when the options were granted; and a weighted average
expected life of the option of 4.1 years. The estimated fair value of the
options was immaterial at the dates of grant, and therefore, the Company
has not provided pro forma net income or earnings per share information.

F-21
<PAGE> 92

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The Black-Scholes Option Pricing Model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require highly
subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different than those of traded options, and because changes
in the assumptions can materially affect the fair value estimate, in
management's opinion, the existing models may not necessarily provide a
reliable single measure of the fair value of its employee stock options.

A summary of the Company's stock option activity, and related information
is as follows:

<TABLE>
<CAPTION>
OPTION PRICE PER SHARE
NUMBER -----------------------------
OF SHARES LOW HIGH WEIGHTED
--------- ----- ------ --------
<S> <C> <C> <C> <C>
Granted 1994............................... 234,000 $1.11 $ 1.11 $ 1.11
-------
Outstanding December 31, 1994.............. 234,000 1.11 1.11 1.11
Granted in 1995............................ 18,000 1.67 1.67 1.67
-------
Outstanding December 31, 1995.............. 252,000 1.11 1.67 1.15
Granted in first quarter 1996.............. 360,011 1.67 1.67 1.67
Granted in second and third quarters
1996..................................... 300,600 8.33 10.00 8.73
-------
Outstanding September 30, 1996............. 912,611 $1.11 $10.00 $ 3.85
======= ===== ====== ======
</TABLE>

Options to purchase 90,000 shares are exercisable at September 30, 1996.
The weighted-average remaining contractual life of those options
outstanding at September 30, 1996 is 9.1 years.

During October 1996, 59,400 options were granted with an exercise price of
$8.33 per share.

12. EMPLOYEE BENEFIT PLANS

The Company established a 401(k) retirement plan (the "401(k) Plan") which
covers substantially all eligible employees as defined in the 401(k) Plan.
Under the terms of the 401(k) Plan, employees may contribute up to 15% of
their compensation, as defined. Employer contributions are discretionary.
During the years ended December 31, 1993, 1994 and 1995, and the nine
months ended September 30, 1996, the Company elected not to make
contributions to the 401(k) Plan.

In addition, in connection with the Recent Acquisitions completed through
September 30, 1996, the Company has assumed the obligations under certain
defined contribution plans which cover substantially all eligible employees
of the acquired practices. The Company has not made any contributions from
the dates of acquisition through September 30, 1996. The Company is in the
process of establishing a uniform benefit plan for all employees.

13. COMMITMENTS AND CONTINGENCIES

Liability Insurance -- The Company is insured with respect to general
liability and medical malpractice risks on a claims made basis. The Company
has not accrued a loss for unreported incidents or for losses in excess of
insurance coverage, as the amount, if any, cannot be reasonably estimated
and the probability of an adverse outcome cannot be determined at this
time. It is the opinion of management that the ultimate resolution of any
unasserted claims will not have a material adverse effect on the Company's
financial position or results of operations.

ALA Contingent Notes -- In connection with the Recapitalization, the
Company issued Subordinated Contingent notes in the amount of $2,500 which
have an interest rate of 8% (the "ALA Contingent

F-22
<PAGE> 93

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Notes"). The ALA Contingent Notes are payable in annual installments of
$500, plus interest thereon, in years 1994 through 1998, if operating
earnings (as defined) exceed a specified annual level. If the specified
operating earnings levels are not achieved, the amounts payable for that
year, including the related accrued interest, would be canceled. Operating
earnings for the years ended December 31, 1994 and 1995 were not achieved,
therefore, the ALA Contingent Notes of $500 and related accrued interest
for 1995 and 1994 were canceled.

In April 1996, the Company issued 194,400 shares of its common stock, with
a fair value of $242 to redeem and cancel the Company's contingent
obligation under the ALA Contingent Notes, which had a remaining principal
balance of $1,500. The remaining contingent obligation under the ALA
Contingent Notes of $1,500 and related accrued interest of approximately
$270 would have become payable in the future only if operating earnings (as
defined) of ALA were to have exceeded a specified annual level in 1996,
1997 and 1998.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue for the years ended December 31, 1993, 1994 and 1995 and the nine
months ended September 30, 1996 is from payments by government-sponsored
health care programs, principally Medicare and Medicaid, and is subject to
audit and adjustments by applicable regulatory agencies. Failure to comply
with any of these laws or regulations, the results of regulatory audits and
adjustments, or changes in the amounts payable for the Company's services
under these programs could have a material adverse effect on the Company's
financial position and results of operations.

14. RELATED PARTY TRANSACTIONS

Operating Leases -- The Company leases its Fort Lauderdale laboratory
facilities from an entity beneficially owned by three of the Company's
common stockholders. The present term of the lease expires March 31, 1998
and contains options to renew for two additional five-year periods. The
lease requires monthly rental payments of $11, plus sales tax, and the
Company is also obligated to pay property taxes, insurance, utilities, and
maintenance. Lease payments made under the lease were $134, $140 and $140
in 1993, 1994 and 1995, respectively, and $105 and $105 during the nine
months ended September 30, 1995 (unaudited) and 1996, respectively.

Note Receivable from Officer -- In connection with the employment of the
Company's Chief Executive Officer, the Company provided financing of $270
to facilitate the purchase of 216,007 shares of the Company's issued and
outstanding stock from certain holders of the Convertible Preferred Stock.
The note is payable in full on January 1, 2001 and bears interest at the
rate of 8%, which is payable currently. A portion of the underlying shares
purchased (126,000 shares) are pledged as collateral.

Shareholders' compensation -- Cost of services include $4,445 in 1993 of
compensation paid to ALA's shareholders in excess of the compensation of
such individuals following the Recapitalization.

F-23
<PAGE> 94

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

15. INCOME TAXES

The provision for income taxes for the years ended December 31, 1994 and
1995, and for the periods ended September 30, 1995 (unaudited) and 1996
consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
----------- --------------------
1994 1995 1995 1996
---- ---- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal............................................. $214 $224 $ 189 $ 845
State............................................... 36 40 34 125
---- ---- ---- ------
Total current............................... 250 264 223 970
---- ---- ---- ------
Deferred:
Federal............................................. 381 541 456 85
State............................................... 65 95 80 20
---- ---- ---- ------
Total deferred.............................. 446 636 536 105
---- ---- ---- ------
Total provision for income taxes............ $696 $900 $ 759 $1,075
==== ==== ==== ======
</TABLE>

PDK elected to be taxed as a Subchapter S corporation for federal income
tax purposes and, accordingly, there is no provision for income taxes for
1993 and for the portion of taxable income for 1994 attributable to PDK
prior to the Recapitalization. As a result of the Recapitalization, the
Company became a taxable Subchapter C corporation.

The effective tax rate on income before income tax is reconciled to
statutory federal income tax rates as follows:

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------- -------------------
1994 1995 1995 1996
----- ----- ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Statutory federal rate............................. 34.0% 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit.......................................... 2.4 3.7 3.7 3.4
Subchapter S corporation earnings attributable to
PDK.............................................. (11.1)
Other.............................................. (0.1) (0.2) (0.2) 1.2
----- ----- ---- ----
Effective rate..................................... 25.2% 37.5% 37.5% 38.6%
===== ===== ==== ====
</TABLE>

F-24
<PAGE> 95

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The following is a summary of the deferred income tax assets and
liabilities as of December 31, 1994 and 1995 and September 30, 1996:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Deferred Tax Assets:
Amortizable tax basis of intangibles arising in
Recapitalization.................................... $6,294 $5,757 $ 5,340
Property and equipment................................. 297 133 10
Allowance for doubtful accounts........................ 77 142 285
Accrued liabilities.................................... 224
Other.................................................. 28 20
------ ------ -------
Total Deferred Tax Assets................................ 6,696 6,052 5,859
------ ------ -------
Deferred Tax Liabilities:
Change from cash to accrual basis by Acquisitions...... $ (1,662)
Identifiable intangible assets acquired................ (9,038)
Other.................................................. $ (42) $ (34) (46)
------ ------ -------
Total Deferred Tax Liabilities........................... (42) (34) (10,746)
------ ------ -------
Net Deferred Tax Asset/(Liability)............. $6,654 $6,018 $ (4,887)
====== ====== =======
</TABLE>

The Recapitalization discussed in Note 1 is treated for income tax purposes
as the purchase of assets. A deferred tax benefit of $7,100 was recorded in
connection with the Recapitalization, which amount represents management's
best estimate of the tax effect of deductions in future income tax returns
of the amortization of the increase in tax basis of the assets over the
historical amounts used for financial accounting purposes.

16. SUPPLEMENTAL CASH FLOW INFORMATION

The following supplemental information presents the non-cash impact on the
balance sheet of assets acquired and liabilities assumed in the Recent
Acquisitions consummated during the nine months ended September 30, 1996:

<TABLE>
<S> <C>
Assets acquired............................................................ $47,886
Liabilities assumed........................................................ (14,729)
Debt issued................................................................ (2,975)
Common stock issued........................................................ (1,344)
-------
Cash paid.................................................................. 28,838
Less cash acquired......................................................... (1,518)
-------
Net cash paid.................................................... $27,320
=======
</TABLE>

F-25
<PAGE> 96

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

17. CLINICAL PATHOLOGY OPERATIONS OF AMERICAN LABORATORY ASSOCIATES

In May 1996, the Company ceased the clinical pathology operations of
American Laboratory Associates. The following summarizes the amounts of net
revenue and operating costs, including in 1996 a loss of $184 on exiting
the activity, included in the accompanying consolidated statements of
income:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ----------------------
1993 1994 1995 1995 1996
------ ------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues....................... $2,159 $1,712 $2,385 $ 1,938 $1,046
Operating costs.................... 1,883 2,179 2,814 2,142 1,376
</TABLE>

18. PRO FORMA NET INCOME PER SHARE INFORMATION (UNAUDITED)

The Company is planning to issue shares of its common stock in an initial
public offering early in 1997. Immediately prior to the offering, the
outstanding shares of Convertible Preferred Stock will be converted into
5,558,609 of shares of common stock. In view of the planned conversion of
the Convertible Preferred Stock, historical net income per share is not
presented. Pro forma net income per share is presented giving effect to the
conversion of the Convertible Preferred Stock. The following presents the
calculation of pro forma common shares and common equivalent shares
outstanding for each period (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
AND
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------- -------------
<S> <C> <C>
Shares outstanding at beginning of period.......... 1,426 1,426
Effects of shares subsequently issued:
Conversion of Convertible Preferred Stock in
January 1996.................................. 216
Settlement of ALA Contingent Notes in April
1996(1)....................................... 194 194
Recent Acquisitions completed through September
30, 1996...................................... 470
Effects of stock options(1)........................ 690 690
----- -----
2,310 2,996
Planned conversion of Convertible Preferred
Stock............................................ 5,775 5,559
----- -----
Pro forma common and common equivalent shares
outstanding...................................... 8,085 8,555
===== =====
</TABLE>

- ---------------

(1) Pursuant to the requirements of the Securities and Exchange Commission
(the "Commission"), common stock issued by the Company during the 12
months immediately preceding the initial filing of the registration
statement with the Commission, plus the effects of common stock
equivalents relating to the grant of options during the same period
using the treasury stock method and an assumed initial public offering
price of $14.00 per share, have been included in the calculation of pro
forma number of common and common stock equivalents outstanding for all
periods presented.

F-26
<PAGE> 97

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Demaray and Poulos, P.A.:

We have audited the accompanying balance sheets of Demaray and Poulos, P.A. (the
"Company") as of December 31, 1994 and 1995 and the related statements of
operations and retained earnings and of cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1994 and
1995, and the results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida

September 27, 1996

F-27
<PAGE> 98

DEMARAY AND POULOS, P.A.

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 1,831 $ 3,211
Accounts receivable (net of allowances for contractual adjustments
and doubtful accounts of $884,068 and $990,282 at December 31,
1994 and 1995, respectively)...................................... 478,177 479,746
-------- --------
Total current assets......................................... 480,008 482,957
PROPERTY AND EQUIPMENT, NET (Note 3)................................... 1,961 1,151
OTHER ASSETS:
Cash surrender value of life insurance............................... 87,166
Other assets......................................................... 36
-------- --------
TOTAL........................................................ $569,171 $484,108
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable..................................................... $ 43,216 $ 17,172
Accrued compensation................................................. 24,325 28,016
Deferred compensation liability (Note 7)............................. 87,166
-------- --------
Total current liabilities.................................... 154,707 45,188
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 200 shares authorized, issued and
outstanding....................................................... 200 200
Retained earnings.................................................... 414,264 438,720
-------- --------
Total shareholders' equity................................... 414,464 438,920
-------- --------
TOTAL........................................................ $569,171 $484,108
======== ========
</TABLE>

See accompanying notes to financial statements.

F-28
<PAGE> 99

DEMARAY AND POULOS, P.A.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
NET REVENUE (Note 4).................................................. $2,936,977 $2,547,908
---------- ----------
COSTS OF SERVICES:
Physician compensation -- owners.................................... 654,000 528,000
Physician compensation -- other..................................... 1,142,784 1,157,890
Consulting -- second opinions....................................... 163,447 88,544
Other............................................................... 222,438 197,296
---------- ----------
Total costs of services..................................... 2,182,669 1,971,730
---------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Administration...................................................... 9,210 11,575
Deferred compensation plan.......................................... 9,387 17,447
Billing service..................................................... 226,462 195,257
Bad debt expense.................................................... 426,347 357,566
---------- ----------
Total general and administrative expenses................... 671,406 581,845
---------- ----------
OPERATING INCOME (LOSS)............................................... 82,902 (5,667)
OTHER INCOME, NET..................................................... 5,174 30,123
---------- ----------
NET INCOME............................................................ 88,076 24,456
RETAINED EARNINGS, BEGINNING OF YEAR.................................. 326,188 414,264
---------- ----------
RETAINED EARNINGS, END OF YEAR........................................ $ 414,264 $ 438,720
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-29
<PAGE> 100

DEMARAY AND POULOS, P.A.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 88,076 $ 24,456
Adjustments to reconcile net income to net cash flows provided by
operating activities:
Depreciation and amortization..................................... 590 810
Changes in assets and liabilities:
Increase in accounts receivable................................. (145,314) (1,569)
Increase (decrease) in accounts payable, accrued compensation
and deferred compensation liability............................ 43,173 (109,519)
Decrease in other assets........................................ 14,419 87,202
--------- ---------
Net cash provided by operating activities.................... 944 1,380
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................................ (2,331)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................... (1,387) 1,380
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR........................... 3,218 1,831
--------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR................................. $ 1,831 $ 3,211
========= =========
</TABLE>

See accompanying notes to financial statements.

F-30
<PAGE> 101

DEMARAY AND POULOS, P.A.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1995

1. ORGANIZATION AND BUSINESS

Demaray and Poulos, P.A. (the "Company") is a firm of licensed physicians
in Fort Lauderdale, Florida organized in January 1982 as a Florida
Professional Association to provide hospital-based pathology services. The
Company generates substantially all of its revenue through contracts with
three hospitals in South Florida. Two of these hospitals, representing
approximately 50% of the Company's revenues, are owned by Columbia/HCA
Healthcare Corporation. The arrangements with hospitals are contracts
whereby the hospitals agree, in exchange for the Company's services, to
authorize the Company and its healthcare professionals to bill and collect
the professional component of the charges for medical services rendered by
the Company's healthcare professionals. These contracts have terms of less
than two years and contain clauses that allow termination without cause by
either party with sixty days notice. The Company has had relationships with
the hospitals for approximately ten years; however, the termination of one
or more of these agreements would have a material adverse effect on the
Company's financial position and results of operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash Equivalents -- The Company considers all cash and any highly liquid
debt instruments purchased with a maturity of three months or less to be
cash equivalents.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets, ranging from 5
to 7 years, using accelerated methods.

Revenue Recognition -- The Company recognizes revenue at the time services
are performed. The Company provides services to certain patients covered by
various third-party payor programs including the federal Medicare program.
Revenue under certain third-party arrangements is subject to audit and
retroactive adjustment. Billings for services reimbursed by third-party
payors are included in revenues net of allowances for the estimated
differences between the amounts billed and the allowable program rates.
Adjustments to the estimated payment amounts are recorded based on the
final payment settlement with the third-party payors.

Unbilled receivables are recorded for services rendered during, but billed
subsequent, to the reporting period. Such receivables, net of allowances,
as of December 31, 1994 and 1995 amounted to $216,000 and $112,000,
respectively.

Income Taxes -- The Company has elected to be taxed as a Subchapter S
corporation for federal income tax purposes. There is no provision for
income taxes since those taxes are the responsibility of the individual
shareholders.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

Fair Value of Financial Instruments -- The carrying amounts of cash and
cash equivalents, accounts receivable and accounts payable approximate fair
value due to their short-term maturity.

F-31
<PAGE> 102

DEMARAY AND POULOS, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1995 was as follows:

<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Medical equipment.................................................... $9,856 $9,856
Less accumulated depreciation........................................ (7,895) (8,705)
------ ------
Property and equipment, net.......................................... $1,961 $1,151
====== ======
</TABLE>

4. NET REVENUE

Net revenue consists of gross charges, net of contractual, charity, and
other adjustments. Contractual adjustments are based on the difference
between charges at established rates and amounts estimated by management to
be collected under Medicare and Medicaid programs, and public and private
insurance and managed care contracts under applicable laws, regulations,
and program instructions. Collectable amounts are generally less than the
established rates. Final determination of certain amounts earned for
certain patients is subject to review by appropriate program
representatives. Charity and other adjustments represent services provided
to patients for which fees are not expected to be collected at the time the
service is provided.

Net revenue consists of the following for the years ended December 31, 1994
and 1995:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Gross charges at established rates............................ $5,191,975 $4,863,912
Less allowances for contractual, charity and other
adjustments................................................. (2,254,998) (2,316,004)
---------- ----------
Net revenue......................................... $2,936,977 $2,547,908
========== ==========
</TABLE>

5. CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of accounts receivable.
The Company grants credit without collateral to its patients, most of whom
are local residents and are insured under third party payor agreements. The
mix of receivables from patients and third-party payors at December 31,
1994 and 1995 are as follows:

<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Medicare................................................................. 23% 18%
Medicaid................................................................. 1 1
Humana managed care...................................................... 14 11
Third-party payors, including other managed care......................... 59 65
Private pay patients..................................................... 3 5
--- ---
100% 100%
=== ===
</TABLE>

6. RELATED PARTY TRANSACTIONS

The Company has entered into certain transactions with American Laboratory
Associates, Inc., a wholly owned subsidiary of AmeriPath, Inc., a majority
of whose common stock is owned by the Company's shareholders. American
Laboratory Associates, Inc. operates three "frozen section" laboratories
which are staffed by physician employees of the Company. Revenue recognized
by the Company under this arrangement amounted to $115,800 and $120,300
during the years ended December 31, 1994 and 1995, respectively. American
Laboratory Associates, Inc. also provides certain administrative support
services

F-32
<PAGE> 103

DEMARAY AND POULOS, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

for which the Company paid $200 per month during the years ended December
31, 1994 and 1995. (See Note 9).

7. EMPLOYEE BENEFIT PLANS

401(k) Plan -- The Company established a 401(k) retirement plan (the
"Plan"), which covers substantially all eligible employees who have reached
age 21 and have completed one year of service (as defined in the Plan).
Under the terms of the Plan, employees may contribute up to 15% of their
compensation, as defined. Employer contributions are discretionary. During
the years ended December 31, 1994 and 1995, the Company elected not to make
a contribution to the Plan.

Deferred Compensation Plan -- The Company established a non-qualified
deferred compensation plan in 1989. The plan is funded by the purchase of
insurance policies owned by the Company on the lives of key employees. Each
year deferred compensation expense was recorded for the premiums paid and
adjusted by the change in cash surrender value of the policies for the
year. Deferred compensation expense was $9,387 and $17,447 for the years
ended December 31, 1994 and 1995. In accordance with the plan, the Company
was ultimately obligated to transfer ownership of policies to the key
employees. During 1995, the plan was terminated and the ownership of the
remaining insurance policies was distributed to the employees.

8. COMMITMENTS AND CONTINGENCIES

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored health care programs,
principally Medicare and Medicaid, and are subject to audit and adjustment
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

Liability Insurance -- The Company is insured with respect to general
liability and medical malpractice risks on a claims made basis. Management
is not aware of any claims against the Company. In addition, the Company
has not accrued a loss for unreported incidents or for losses in excess of
insurance coverage, as the amount, if any, cannot be reasonably estimated
and the probability of an adverse outcome cannot be determined at this
time. It is the opinion of management that the ultimate resolution of any
claims that may be asserted will not have a material adverse effect on the
financial position or results of operations of the Company.

9. SUBSEQUENT EVENT

Effective January 1, 1996, the Company sold all of its assets and
liabilities to a wholly-owned subsidiary of AmeriPath, Inc.

F-33
<PAGE> 104

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Amazon and Rosen, M.D., P.A. d/b/a Florida Pathology Associates:

We have audited the accompanying balance sheets of Amazon and Rosen, M.D., P.A.
d/b/a Florida Pathology Associates (the "Company") as of December 31, 1994 and
1995 and June 30, 1996, and the related statements of operations and retained
earnings and of cash flows for the years ended December 31, 1994 and 1995 and
the six months ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1994 and 1995
and June 30, 1996, and the results of its operations and its cash flows for the
years ended December 31, 1994 and 1995 and the six months ended June 30, 1996,
in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida

September 27, 1996

F-34
<PAGE> 105

AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996

<TABLE>
<CAPTION>
DECEMBER DECEMBER JUNE 30,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 1,141 $ 2,480 $ 15,541
Accounts receivable (net of allowances for contractual
adjustments and doubtful accounts of $464,381, $660,318
and $716,992 at December 31, 1994 and 1995 and June 30,
1996, respectively)....................................... 447,298 504,333 500,064
-------- -------- --------
Total current assets................................. 448,439 506,813 515,605
-------- -------- --------
PROPERTY AND EQUIPMENT, NET (Note 3)........................... 28,936 20,765 16,612
OTHER ASSETS................................................... 757 50 50
-------- -------- --------
TOTAL................................................ $478,132 $527,628 $532,267
======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $ 36,228 $ 33,656 $ 19,817
Due to shareholders.......................................... 21,166 19,056 17,056
Note payable to bank......................................... 35,683 9,372
Income taxes payable (Note 6)................................ 11,404 13,853
Deferred tax liability (Note 6).............................. 158,475 181,563 185,254
-------- -------- --------
Total current liabilities............................ 251,552 255,051 235,980
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 100 shares authorized, issued and
outstanding............................................... 100 100 100
Additional paid-in capital................................... 1,900 1,900 1,900
Retained earnings............................................ 224,580 270,577 294,287
-------- -------- --------
Total shareholders' equity........................... 226,580 272,577 296,287
-------- -------- --------
TOTAL................................................ $478,132 $527,628 $532,267
======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-35
<PAGE> 106

AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1995 1996
------------ ------------ ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE (Note 4)........................... $2,390,016 $3,055,092 $ 1,542,224 $1,781,192
---------- ---------- ---------- ----------
COSTS OF SERVICES:
Physician compensation -- owners............. 1,132,400 1,618,800 766,263 914,500
Physician compensation -- other.............. 314,640 359,776 171,998 182,586
Other........................................ 264,003 306,826 147,810 154,159
---------- ---------- ---------- ----------
Total costs of services.............. 1,711,043 2,285,402 1,086,071 1,251,245
---------- ---------- ---------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Administration............................... 79,492 87,977 45,295 79,065
Billing service.............................. 174,654 221,885 129,939 123,431
Bad debt expense............................. 160,778 380,260 239,391 286,642
---------- ---------- ---------- ----------
Total general and administrative
expenses........................... 414,924 690,122 414,625 489,138
---------- ---------- ---------- ----------
OPERATING INCOME............................... 264,049 79,568 41,528 40,809
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense............................. (3,535) (1,711) (1,103) (241)
Other income................................. 3,410 2,632 2,367 686
---------- ---------- ---------- ----------
Total other (expense) income, net.... (125) 921 1,264 445
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES....... 263,924 80,489 42,792 41,254
PROVISION FOR INCOME TAXES..................... 104,172 34,492 16,090 17,544
---------- ---------- ---------- ----------
NET INCOME..................................... 159,752 45,997 26,702 23,710
RETAINED EARNINGS, BEGINNING OF PERIOD......... 64,828 224,580 224,580 270,577
---------- ---------- ---------- ----------
RETAINED EARNINGS, END OF PERIOD............... $ 224,580 $ 270,577 $ 251,282 $ 294,287
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-36
<PAGE> 107

AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1995 1996
------------ ------------ ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 159,752 $ 45,997 $ 26,702 $ 23,710
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation................................ 20,092 19,073 11,246 4,153
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable............................. (286,407) (57,035) (20,999) 4,269
Increase (decrease) in accounts payable,
income tax payable and due to
shareholders........................... 27,404 6,722 (5,463) (13,390)
Increase in deferred income tax
liability.............................. 104,172 23,088 11,525 3,691
(Increase) decrease in other assets....... (494) 708 707
--------- -------- -------- --------
Net cash provided by operating
activities........................... 24,519 38,553 23,718 22,433
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.......... (10,903) (5,360)
--------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt........... (24,486) (26,311) (12,907) (9,372)
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... 33 1,339 5,451 13,061
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD... 1,108 1,141 1,141 2,480
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD......... $ 1,141 $ 2,480 $ 6,592 $ 15,541
========= ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................... $ 3,535 $ 1,711 $ 1,103 $ 241
========= ======== ======== ========
Income Taxes................................ $ $ 2,340 $ $ 9,771
========= ======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-37
<PAGE> 108

AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND SIX MONTHS ENDED JUNE 30, 1996

1. ORGANIZATION AND BUSINESS

Amazon and Rosen, M.D., P.A. d/b/a Florida Pathology Associates (the
"Company") is a firm of licensed physicians in Miami, Florida organized in
August 1988 as a Florida Professional Association to provide hospital-based
pathology services. The Company generates substantially all of its revenues
through a contract with one hospital in South Florida. This contract has a
term of five years through September 1999. Under the contract, the hospital
agrees, in exchange for the Company's services, to authorize the Company
and its healthcare professionals to bill and collect the professional
component of the charges for medical services rendered by the Company's
healthcare professionals.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash Equivalents -- The Company considers all cash and any highly liquid
debt instruments purchased with a maturity of three months or less to be
cash equivalents.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets, ranging from 3
to 7 years, using accelerated methods.

Income Taxes -- The Company's provision for income taxes includes federal
and state income taxes currently payable and changes in deferred tax assets
and liabilities. Deferred income taxes are accounted for in accordance with
Statement of Financial Accounting Standards No. 109, and represents the
estimated future tax effects resulting from temporary differences between
financial and tax reporting bases of assets and liabilities.

Fair Value of Financial Instruments -- The carrying amounts of cash and
cash equivalents, accounts receivable, accounts payable and notes payable
approximate fair value due to their short-term maturity.

Interim Financial Data -- The unaudited statements of operations and
retained earnings and of cash flows for the six months ended June 30, 1995
include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Company's
results of operations and cash flows. Operating results for the six month
period ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996.

F-38
<PAGE> 109

AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1995 and June 30, 1996 was
as follows:

<TABLE>
<CAPTION>
DECEMBER DECEMBER JUNE 20,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Furniture, fixtures and equipment....................... $95,185 $106,087 $106,087
Less accumulated depreciation........................... (66,249) (85,322) (89,475)
------- ------- -------
Property and equipment, net............................. $28,936 $ 20,765 $ 16,612
======= ======= =======
</TABLE>

4. NET REVENUE

Net revenue consists of the following for the years ended December 31, 1994
and 1995 and the six months ended June 30, 1996:

<TABLE>
<CAPTION>
DECEMBER DECEMBER JUNE 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Gross charges at established rates................. $2,760,935 $4,243,300 $2,541,450
Less allowances for contractual, charity and other
adjustments...................................... (550,919) (1,368,208) (850,258)
---------- ---------- ----------
2,210,016 2,875,092 1,691,192
Medical director fees.............................. 180,000 180,000 90,000
---------- ---------- ----------
Net revenue........................................ $2,390,016 $3,055,092 $1,781,192
========== ========== ==========
</TABLE>

5. CONCENTRATIONS OF CREDIT RISK

<TABLE>
<CAPTION>
DECEMBER DECEMBER JUNE 30,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Medicare.............................................. 54% 48% 48%
Medicaid.............................................. 1 2 2
Third-party payors, including managed care............ 22 32 33
Private pay patients.................................. 23 18 17
--- --- ---
100% 100% 100%
=== === ===
</TABLE>

F-39
<PAGE> 110

AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

The provision for income taxes in the accompanying statements of operations
for the years ended December 31, 1994 and 1995 and the six months ended
June 30, 1996 consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------ ------------ --------
<S> <C> <C> <C>
Current:
Federal........................................ $ 10,093 $ 12,147
State.......................................... 1,311 1,706
------- -------
11,404 13,853
------- -------
Deferred:
Federal........................................ $ 89,319 19,796 3,165
State.......................................... 14,853 3,292 526
-------- ------- -------
104,172 23,088 3,691
-------- ------- -------
Total.................................. $104,172 $ 34,492 $ 17,544
======== ======= =======
</TABLE>

The Company's effective tax rate differs from the statutory federal income
tax rate for the following reasons:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1994 1995 1996
---- ---- -------------
<S> <C> <C> <C>
Statutory federal income tax rate........................ 34.0% 34.0% 34.0%
State income taxes, net of federal income tax benefit.... 3.7% 3.8% 3.6%
Other.................................................... 1.8% 5.1% 4.9%
---- ---- ----
Effective tax rate..................................... 39.5% 42.9% 42.5%
==== ==== ====
</TABLE>

The significant components of the net deferred income tax liability at
December 31, 1994 and 1995 and June 30, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
------------ ------------ ---------
<S> <C> <C> <C>
Deferred tax assets (liabilities):
Allowance for contractuals and bad debts....... $ 179,135 $ 254,718 $ 276,580
Tax cash basis items........................... (337,610) (436,281) (461,834)
--------- --------- ---------
$ (158,475) $ (181,563) $(185,254)
========= ========= =========
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustment
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

F-40
<PAGE> 111

AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the Company has not accrued a loss for unreported incidents or for losses
in excess of insurance coverage, as the amount, if any, cannot be
reasonably estimated and the probability of an adverse outcome cannot be
determined at this time. It is the opinion of management that the ultimate
resolution of any claims that may be asserted will not have a material
adverse effect on the financial position or results of operations of the
Company.

8. SUBSEQUENT EVENT

Effective July 1, 1996, the Company's shareholders sold all of the
Company's issued and outstanding common stock to AmeriPath, Inc.

F-41
<PAGE> 112

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Derrick and Associates Pathology, Inc.:

We have audited the accompanying balance sheets of Derrick and Associates
Pathology, Inc. (the "Company") as of December 31, 1994 and 1995 and June 30,
1996, and the related statements of operations, shareholders' equity, and cash
flows for the years ended December 31, 1994 and 1995 and the six months ended
June 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

Deloitte & Touche LLP
Certified Public Accountants
Orlando, Florida

October 1, 1996

F-42
<PAGE> 113

DERRICK AND ASSOCIATES PATHOLOGY, INC.

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $1,199,117 $1,105,141 $ 723,801
Investments (Note 3)..................................... 757,243 955,817
Accounts receivable (net of allowances for contractual
adjustments and doubtful accounts of $4,822,221,
$5,053,200, and $5,188,251 at December 31, 1994 and
1995 and June 30, 1996, respectively)................. 4,067,442 4,780,539 4,648,363
Amounts receivable from shareholders..................... 196,887
Prepaid expenses and other current assets................ 337,766 264,138 493,521
---------- ---------- ----------
Total current assets............................. 6,361,568 7,105,635 6,062,572
PROPERTY AND EQUIPMENT, NET (Note 4)....................... 805,044 880,911 1,056,457
OTHER ASSETS............................................... 82,900 98,200 67,488
---------- ---------- ----------
TOTAL............................................ $7,249,512 $8,084,746 $7,186,517
========== ========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit (Note 2)............................. $1,750,100 $1,600,100
Current portion of long-term debt (Note 6)............... 190,671 $ 96,974
Accounts payable......................................... 190,821 218,164 380,427
Accrued liabilities (Note 5)............................. 354,859 366,884 381,009
Accrued profit sharing contribution...................... 564,357 545,006 200,612
Deferred income taxes (Note 11).......................... 1,423,000 1,708,000 1,680,000
---------- ---------- ----------
Total current liabilities........................ 4,283,137 4,628,825 2,739,022
---------- ---------- ----------
LONG-TERM DEBT (Note 6).................................... 217,440
COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS' EQUITY: (Note 8)
Common stock:
Class A common stock, $1.00 par value, 2,000 shares
authorized, 1,300 shares issued and outstanding at
December 31, 1994, 1,200 shares issued and
outstanding at December 31, 1995, and 1,300 shares
issued and outstanding at June 30, 1996............. 1,300 1,200 1,300
Class B non-voting common stock, $1.00 par value,
1,000 shares authorized, 30 shares issued and
outstanding at June 30, 1996........................ 30
Additional paid-in capital............................... 1,275,599 1,232,804 2,459,122
Retained earnings........................................ 1,742,130 2,004,477 1,987,043
---------- ---------- ----------
3,019,029 3,238,481 4,447,495
Less note receivable from shareholder.................... (52,654)
---------- ---------- ----------
Total shareholders' equity....................... 2,966,375 3,238,481 4,447,495
---------- ---------- ----------
TOTAL............................................ $7,249,512 $8,084,746 $7,186,517
========== ========== ==========
</TABLE>

See notes to financial statements.

F-43
<PAGE> 114

DERRICK AND ASSOCIATES PATHOLOGY, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------- ---------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE (Note 9):
Hospital net revenue (net of allowances for
contractual, charity, and other adjustments
of $11,042,842, $11,739,344, $5,986,271, and
$7,554,196 for the years ended December 31,
1994 and 1995 and the six months ended June
30, 1995 (unaudited) and 1996,
respectively)............................... $11,714,580 $12,654,421 $ 6,352,212 $ 5,914,302
Histology net revenue (net of allowances for
contractual, charity, and other adjustments
of $1,319,158, $1,026,590, $514,088, and
$516,059 for the years ended December 31,
1994 and 1995 and the six months ended June
30, 1995 (unaudited) and 1996,
respectively)............................... 7,525,119 7,607,769 3,642,315 4,306,770
Cytology net revenue (net of allowances for
contractual, charity, and other adjustments
of $207,122, $71,340, $47,642, and $28,092
for the years ended December 31, 1994 and
1995 and the six months ended June 30, 1995
(unaudited) and 1996, respectively)......... 1,366,047 1,320,007 670,741 539,536
Other......................................... 88,019 124,127 114,157 42,183
----------- ----------- ----------- -----------
Total net revenue...................... 20,693,765 21,706,324 10,779,425 10,802,791
----------- ----------- ----------- -----------
COSTS AND EXPENSES (Notes 7 and 10):
Cost of services rendered..................... 15,361,591 13,854,132 7,691,438 7,381,725
Selling, billing, and administrative
expenses.................................... 3,204,069 3,473,635 1,384,846 1,929,293
Provision for uncollectible accounts (net of
recoveries of $553,531, $666,251, $369,816,
and $270,867 for the years ended December
31, 1994 and 1995 and the six months ended
June 30, 1995 (unaudited) and 1996,
respectively)............................... 2,405,646 3,618,851 1,758,610 1,504,914
Interest expense.............................. 32,081 36,091 34,217 12,493
----------- ----------- ----------- -----------
Total costs and expenses............... 21,003,387 20,982,709 10,869,111 10,828,425
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES......................................... (309,622) 723,615 (89,686) (25,634)
PROVISION (BENEFIT) FOR INCOME TAXES (Note
11)........................................... (132,534) 290,000 (4,500) (8,200)
----------- ----------- ----------- -----------
NET INCOME (LOSS)............................... $ (177,088) $ 433,615 $ (85,186) $ (17,434)
=========== =========== =========== ===========
</TABLE>

See notes to financial statements.

F-44
<PAGE> 115

DERRICK AND ASSOCIATES PATHOLOGY, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
NOTE
CLASS CLASS RECEIVABLE
A B ADDITIONAL FROM
COMMON COMMON PAID-IN RETAINED SHAREHOLDER
STOCK STOCK CAPITAL EARNINGS (NOTE 8) TOTAL
------ ------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1994................. $1,300 $ $1,275,599 $1,919,218 $ (107,923) $3,088,194
Net loss...................... (177,088) (177,088)
Principal payments received on
note receivable from
shareholder................ 55,269 55,269
------ ------ ---------- ---------- ----------- ----------
DECEMBER 31, 1994............... 1,300 1,275,599 1,742,130 (52,654) 2,966,375
Net income.................... 433,615 433,615
Issuance of common stock (Note
8)......................... 100 193,848 193,948
Repurchase and retirement of
common stock (Note 8)...... (200) (236,643) (171,268) (408,111)
Principal payments received on
note receivable from
shareholder................ 52,654 52,654
------ ------ ---------- ---------- ----------- ----------
DECEMBER 31, 1995............... 1,200 1,232,804 2,004,477 3,238,481
Net loss...................... (17,434) (17,434)
Issuance of Class A common
stock (Note 8)............. 100 193,848 193,948
Issuance of Class B non voting
common stock (Note 8)...... 30 1,032,470 1,032,500
------ ------ ---------- ---------- ----------- ----------
JUNE 30, 1996................... $1,300 $ 30 $2,459,122 $1,987,043 $ $4,447,495
====== ====== ========== ========== =========== ==========
</TABLE>

See notes to financial statements.

F-45
<PAGE> 116

DERRICK AND ASSOCIATES PATHOLOGY, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------- -------------------------
1994 1995 1995 1996
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income................................................. $ (177,088) $ 433,615 $ (85,186) $ (17,434)
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation...................................................... 386,255 347,286 162,716 187,039
Deferred income taxes............................................. 8,000 290,000 (12,500) 3,000
(Gain) loss on disposition of fixed assets........................ (823) 13,906 3,161 9,570
Amortization of original issue discount........................... (7,374) (30,707) (21,053) (7,864)
Shareholders' compensation related to stock bonus................. 972,500
(Increase) decrease in:
Accounts receivable............................................. (271,512) (713,097) (333,383) 132,176
Amounts receivable from shareholders............................ (196,887)
Prepaid expenses and other current assets....................... (130,343) 68,628 47,792 (229,383)
Other assets.................................................... (288)
Increase (decrease) in:
Accounts payable................................................ (7) 27,343 661,218 162,263
Accrued liabilities............................................. (98,625) 12,025 1,991,261 14,125
Accrued profit sharing contribution............................. 545,163 (19,351) (253,507) (344,394)
---------- ---------- ----------- -----------
Net cash provided by operating activities................... 253,646 429,648 2,160,519 684,423
---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities held to maturity........................... (749,870) (942,867) (508,179)
Proceeds from redemption of securities held to maturity........... 775,000 510,000 963,681
Proceeds from sale of equipment................................... 1,425 25,365 7,060 4,580
Purchases of property and equipment............................... (216,825) (462,424) (306,352) (376,735)
Increase in other assets.......................................... (13,860) (15,300)
---------- ---------- ----------- -----------
Net cash provided by (used in) investing activities......... (979,130) (620,226) (297,471) 591,526
---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.......................................... 193,948 253,948
Net (payments) proceeds from bank line of credit.................. 250,100 (150,000) (1,750,000) (1,600,100)
Note principal payments received from shareholders................ 55,269 52,654 32,011
Payments on long-term debt........................................ (311,137)
---------- ---------- ----------- -----------
Net cash (used in) provided by financing activities......... 305,369 96,602 (1,717,989) (1,657,289)
---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH..................................... (420,115) (93,976) 145,059 (381,340)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................... 1,619,232 1,199,117 1,199,117 1,105,141
---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................... $1,199,117 $1,105,141 $1,344,176 $ 723,801
========== ========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments (receipts) during the period for:
Interest........................................................ $ 13,473 $ 24,951 $ 7,543 $ 22,181
========== ========== =========== ===========
Income taxes.................................................... $ 139,345 $ 4,740 $ (137,395) $
========== ========== =========== ===========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:

The Company purchased and retired 200 shares of common stock through the
issuance of $408,111 of long-term debt during the year ended December 31, 1995.

The Company purchased and retired 100 shares of common stock through the
issuance of $193,948 of long-term debt during the six months ended June 30,
1995.

See notes to financial statements.

F-46
<PAGE> 117

DERRICK AND ASSOCIATES PATHOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND THE SIX MONTHS ENDED JUNE 30, 1996

1. ORGANIZATION AND BUSINESS

Derrick and Associates Pathology, Inc. (the "Company") (f/k/a Derrick and
Associates Pathology, P.A.) is engaged in providing hospital-based
pathology services to various hospitals as well as pathology laboratory
services to hospitals, clinics, physicians, and others throughout Central
and South Florida. On May 23, 1996, the Company's shareholders executed an
agreement to sell their interests in the Company to AmeriPath Florida, Inc.
The transaction was completed as of June 26, 1996, with an effective date
of July 1, 1996.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash Equivalents -- The Company considers all cash and any highly liquid
debt instruments purchased with a maturity of three months or less at time
of purchase to be cash equivalents.

Investments -- Marketable debt securities are classified as held to
maturity, available for sale or trading depending upon the intent and
ability of the Company. Held to maturity investments are recorded at
amortized cost; trading securities are recorded at fair value with
unrealized gains and losses included in earnings; and available for sale
securities are recorded at fair value with unrealized gains and losses
included as a separate component of shareholders' equity. The Company has
classified all of its investments as held to maturity. Accordingly, all
such investments have been recorded at amortized cost.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets (ranging from 3
to 10 years) using accelerated methods.

Bank Line of Credit -- The Company had a $2,500,000 line of credit with a
bank which was due on demand, bore interest at the prime rate plus 0.5%.
The note was collateralized by accounts receivable and inventory. In May
1996, the line of credit agreement was terminated by the Company and the
assets encumbered thereunder were released by the bank.

Revenue Recognition -- The Company recognizes revenue at the time services
are performed. The Company provides services to certain patients covered by
various third-party payor programs including the federal Medicare program.
Revenue under certain third-party arrangements is subject to audit and
retroactive adjustment. Billings for services reimbursed by third-party
payors are included in revenue net of allowances for the estimated
differences between the amounts billed and the allowable program rates.
Adjustments to the estimated payment amounts are recorded based on the
final payment settlement with the third-party payors.

Income Taxes -- Deferred income taxes are provided on elements of income
that are recognized for financial accounting purposes in periods different
than when such items are recognized for income tax purposes.

The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributed to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.

F-47
<PAGE> 118

DERRICK AND ASSOCIATES PATHOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.

Fair Value of Financial Instruments -- Regarding cash and cash equivalents,
accounts receivable, accounts payable, and note payable, the carrying
amounts approximate fair value.

Reclassifications -- Certain amounts shown in the 1994 and 1995 financial
statements have been reclassified to conform to the June 30, 1996
presentation.

Interim Financial Data -- The unaudited statements of operations and cash
flows for the six months ended June 30, 1995 include, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Company's results of operations and cash
flows. Operating results for the six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1996.

3. INVESTMENTS

The amortized cost of securities held to maturity approximates their fair
value at December 31, 1994 and 1995. Securities held to maturity consist of
the following at December 31, 1994 and 1995:

<TABLE>
<CAPTION>
MATURITY AMORTIZED
RATE DATE COST
---- -------- ---------
<S> <C> <C> <C>
1994
Bankers Acceptance......................................... 5.25 02/13/95 $ 198,717
Federal Home Loan Bank note................................ 5.60 05/23/95 303,153
Federal Home Loan Bank note................................ 5.80 08/14/95 255,373
---------
$ 757,243
=========
1995
Bankers Acceptance......................................... 5.60 01/08/96 $ 399,558
Federal Home Loan Bank note................................ 6.42 04/24/96 263,620
Bankers Acceptance......................................... 5.20 06/17/96 292,639
---------
$ 955,817
=========
</TABLE>

F-48
<PAGE> 119

DERRICK AND ASSOCIATES PATHOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1995 and June 30, 1996 was
as follows:

<TABLE>
<CAPTION>
DECEMBER 31
------------------------- JUNE 30,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Laboratory and data processing equipment........ $ 1,707,159 $ 1,966,081 $ 2,148,099
Automotive vehicles............................. 260,708 322,624 343,554
Leasehold improvements.......................... 157,578 170,258 185,747
Furniture and fixtures.......................... 135,599 142,611 145,516
----------- ----------- -----------
2,261,044 2,601,574 2,822,916
Less accumulated depreciation................... (1,456,000) (1,720,663) (1,766,459)
----------- ----------- -----------
Property and equipment, net..................... $ 805,044 $ 880,911 $ 1,056,457
=========== =========== ===========
</TABLE>

5. ACCRUED LIABILITIES

Accrued liabilities at December 31, 1994 and 1995 and June 30, 1996 were as
follows:

<TABLE>
<CAPTION>
DECEMBER 31
------------------- JUNE 30,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Payroll................................................ $280,874 $286,171 $280,291
Group insurance........................................ 65,000 65,000 71,225
Other.................................................. 8,985 15,713 29,493
-------- -------- --------
$354,859 $366,884 $381,009
======== ======== ========
</TABLE>

6. LONG-TERM DEBT

Long-term debt at December 31, 1995 and June 30, 1996 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------- --------
<S> <C> <C>
Note payable to a former shareholder in annual instalments of
$96,974, including interest at 7.19%, matures March 1997.... $ 193,948 $ 96,974
Note payable to a former shareholder in annual instalments of
$40,156, including interest at 5.91%, fully repaid in
1996........................................................ 214,163
-------- --------
408,111 96,974
Less current portion.......................................... (190,671) (96,974)
-------- --------
Total long-term debt.......................................... $ 217,440 $
======== ========
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases its principal facility under a
noncancelable agreement which expires in December 2002. The lease requires
monthly rental payments of $11,571, plus sales taxes, and the Company is
also obligated to pay insurance, utilities, and normal maintenance. The
rent is subject to an annual increase based upon the consumer price index.
The Company also leases other facilities from other unrelated parties. Rent
expense was approximately $147,000 and $153,000 for the years ended
December 31, 1994 and 1995, respectively, and $85,000 for the six months
ended June 30, 1996.

Future minimum rental payments required for the next five years and
thereafter under operating leases, that have initial or remaining
noncancelable lease terms in excess of one year as of June 30, 1996 amount
to $131,160 per year through December 2002.

F-49
<PAGE> 120

DERRICK AND ASSOCIATES PATHOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Employment Agreements -- The Company has entered into employment agreements
with each of its physicians and one other employee. These employment
agreements generally provide for certain annual base salaries and renew
annually unless written notice is given by either party.

Stock Purchase Agreement -- The Company was obligated under a Stock
Restriction and Purchase Agreement with its stockholders to purchase all of
the common stock owned by a shareholder upon his death, disability, normal
retirement, or withdrawal from the Company. The purchase price was
determined by an annual valuation. In connection with the sale of the
Company (see Note 1), these agreements were terminated.

Professional Liability Insurance Coverage -- The Company maintains
professional liability coverage for the Company and its physicians and
employees with a commercial insurance company on a claims-made basis. The
Company has procedures in place to monitor coverage and incidents of
significance. Management believes that an accrual for incurred but not
reported claims is not necessary at June 30, 1996.

Legal Proceedings -- The Company is subject to a number of lawsuits
relating to matters arising in the ordinary course of its business. The
claims are insured but subject to deductibles. The amount of liability, if
any, from the litigation cannot be determined with certainty; however,
management is of the opinion that the outcome of the litigation will not
have a material adverse impact on the Company's financial position or
results of operations.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides, are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustment
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

8. SHAREHOLDERS' EQUITY

At December 31, 1994, the Company had a note receivable from a shareholder
totaling $52,654. The note was classified as a reduction in shareholders'
equity, bore interest at 8.5% and matured on July 7, 1995.

During the year ended December 31, 1995, 200 shares of common stock were
repurchased by the Company for $408,011. As of December 31, 1995, these
shares were canceled and retired. In addition, 100 shares of common stock
were issued for $193,948.

During the six months ended June 30, 1996, the Company issued 100 shares of
Class A common stock for $193,948 and 30 shares of Class B non-voting
common stock valued at $1,032,500 were issued to six employees for cash
consideration of $60,000 with the remainder as a bonus.

9. NET REVENUE

Net revenue consists of gross charges, net of contractual, charity, and
other adjustments. Contractual adjustments are based on the difference
between charges at established rates and amounts estimated by management to
be reimbursable by Medicare and Medicaid programs, and public and private
insurance contracts under applicable laws, regulations, and program
instructions. Reimbursable amounts are generally less than the established
gross charges. Final determination of certain amounts earned for certain
patients is subject to review by appropriate program representatives.
Charity and other adjust-

F-50
<PAGE> 121

DERRICK AND ASSOCIATES PATHOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

ments represent services provided to patients for which fees are not
expected to be collected at the time the service is provided.

Net revenue attributable to SmithKline Beecham PLC was $2,271,652,
$2,113,904, and $1,239,676 for the years ended December 31, 1994 and 1995
and the six months ended June 30, 1996, respectively.

10. EMPLOYEE BENEFIT PLAN

The Company maintains a qualified profit sharing plan (the "Plan") for all
of its eligible employees. The Plan includes a 401(k) feature, which allows
participants to make pretax contributions and provides for matching and
discretionary contributions by the Company. Contributions by the Company
for the years ended December 31, 1994 and 1995 and the six months ended
June 30, 1996 totaled approximately $564,000, $545,000, and $201,000,
respectively.

11. INCOME TAXES

The provision (benefit) for income taxes in the accompanying statements of
operations for the years ended December 31, 1994 and 1995 and the six
months ended June 30, 1996 consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1994 1995 1996
--------- -------- --------
<S> <C> <C> <C>
Federal income taxes:
Current.......................................... $(140,534) $ $(11,200)
Deferred......................................... 8,000 290,000 3,000
--------- -------- --------
Total provision (benefit) for income
taxes.................................. $(132,534) $290,000 $ (8,200)
========= ======== ========
</TABLE>

The Company's effective tax (benefit) rate differs from the statutory
federal income tax rate for the following reasons:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1994 1995 1996
----- ---- --------
<S> <C> <C> <C>
Statutory federal income tax (benefit) rate................. (34.0)% 34.0% (34.0)%
State income taxes, net of federal tax benefits............. (3.6) 3.6 (3.6)
Benefit of net operating loss carryforwards................. 5.7
Other....................................................... (5.2) 2.4
----- ---- -----
Effective tax (benefit) rate................................ (42.8)% 40.0% (31.9)%
===== ==== =====
</TABLE>

The sources and amounts of deferred income tax assets and liabilities at
December 31, 1994 and 1995 and June 30, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
1994 1995 JUNE 30, 1996
--------------------------- --------------------------- ---------------------------
CURRENT ASSETS NONCURRENT CURRENT ASSETS NONCURRENT CURRENT ASSETS NONCURRENT
(LIABILITIES) ASSETS (LIABILITIES) ASSETS (LIABILITIES) ASSETS
-------------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Use of cash basis
of accounting
for income tax
purposes........ $ (1,443,000) $ $ (1,725,000) $ $ (1,697,000) $
Net operating loss
carryforwards
and tax
credits......... 20,000 58,000 17,000 53,000 17,000 22,000
----------- ------- ----------- ------- ----------- -------
Total... $ (1,423,000) $ 58,000 $ (1,708,000) $ 53,000 $ (1,680,000) $ 22,000
=========== ======= =========== ======= =========== =======
</TABLE>

F-51
<PAGE> 122

DERRICK AND ASSOCIATES PATHOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

12. CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of accounts receivable.
The Company grants credit without collateral to its patients, most of whom
are local residents and are insured under third-party payor agreements. The
mix of receivables from patients and third-party payors at December 31,
1994 and 1995 and June 30, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1994 1995 1996
---- ---- --------
<S> <C> <C> <C>
Medicare...................................................... 18% 15% 21%
Medicaid...................................................... 14 11 9
Humana........................................................ 8 5 3
Third-party payors and other managed care..................... 30 40 40
Private-pay patients.......................................... 24 23 19
Other......................................................... 6 6 8
--- --- ---
100% 100% 100%
=== === ===
</TABLE>

F-52
<PAGE> 123

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
SkinPath, P.C.:

We have audited the accompanying balance sheets of SkinPath, P.C. (the
"Company") as of December 31, 1995 and July 31, 1996, and the related statements
of operations and retained earnings and of cash flows for the period January 5,
1995 (inception) through December 31, 1995 and the seven months ended July 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and July
31, 1996, and the results of its operations and its cash flows for the period
January 5, 1995 (inception) through December 31, 1995 and the seven months ended
July 31, 1996, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida

October 15, 1996

F-53
<PAGE> 124

SKINPATH, P.C.

BALANCE SHEETS
DECEMBER 31, 1995 AND JULY 31, 1996

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1995 1996
------------ --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................ $257,509 $ 68,676
Accounts receivable (net of allowances for contractual adjustments
and doubtful accounts of $41,762 and $122,578 at December 31, 1995
and July 31, 1996, respectively).................................. 230,423 316,196
-------- --------
Total current assets......................................... 487,932 384,872
PROPERTY AND EQUIPMENT, NET (Note 3)................................. 432,180 433,522
-------- --------
TOTAL........................................................ $920,112 $818,394
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................................... $ 41,540 $ 15,552
Accrued expenses..................................................... 208,802 97,394
Dividends payable.................................................... 59,282
Current portion of long-term debt (Note 4)........................... 278,818 119,837
-------- --------
Total current liabilities.................................... 588,442 232,783
-------- --------
Long-term debt (Note 4).............................................. 136,182 293,001
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 500 shares authorized, issued and
outstanding....................................................... 500 500
Additional paid in capital........................................... 4,500 4,500
Retained earnings.................................................... 190,488 287,610
-------- --------
Total stockholders' equity................................... 195,488 292,610
-------- --------
TOTAL........................................................ $920,112 $818,394
======== ========
</TABLE>

See accompanying notes to the financial statements.

F-54
<PAGE> 125

SKINPATH, P.C.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
PERIOD FROM JANUARY 5, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995 AND
SEVEN MONTHS ENDED JULY 31, 1996

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1995 1996
------------ ----------
<S> <C> <C>
NET REVENUE (Note 5)................................................. $1,846,939 $1,468,475
------------ ----------
COST OF SERVICES:
Physician compensation -- owner.................................... 473,376 497,465
Physician compensation -- other.................................... 254,855 308,803
Other.............................................................. 307,097 194,190
------------ ----------
Total cost of services..................................... 1,035,328 1,000,458
------------ ----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Marketing.......................................................... 29,244 43,138
Administration..................................................... 132,010 107,226
Patient accounts................................................... 125,555 78,790
Bad debt expense................................................... 31,558 76,198
Depreciation and amortization...................................... 38,759 47,613
------------ ----------
Total general and administrative expenses.................. 357,126 352,965
------------ ----------
OPERATING INCOME..................................................... 454,485 115,052
INTEREST EXPENSE..................................................... 23,715 17,930
------------ ----------
NET INCOME........................................................... 430,770 97,122
DIVIDENDS............................................................ 240,282
RETAINED EARNINGS, BEGINNING OF PERIOD............................... 190,488
------------ ----------
RETAINED EARNINGS, END OF PERIOD..................................... $ 190,488 $ 287,610
============ ==========
</TABLE>

See accompanying notes to financial statements.

F-55
<PAGE> 126

SKINPATH, P.C.

STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 5, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995 AND
SEVEN MONTHS ENDED JULY 31, 1996

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1995 1996
------------ ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 430,770 $ 97,122
Adjustments to reconcile net income to net cash flows provided by
operating activities:
Depreciation and amortization.................................. 38,759 47,613
Changes in assets and liabilities:
Increase in accounts receivable.............................. (230,423) (85,773)
Increase (decrease) in accounts payable and accrued
expenses.................................................... 250,342 (137,395)
-------- --------
Net cash flows provided by (used in) operating
activities.............................................. 489,448 (78,433)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment............................. (470,939) (48,956)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock............................ 5,000
Borrowings from banks............................................. 655,000 335,000
Re-payments of amounts borrowed from banks........................ (240,000) (337,162)
Dividends paid to stockholders.................................... (181,000) (59,282)
-------- --------
Net cash flows provided by (used in) financing
activities.............................................. 239,000 (61,444)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................................... 257,509 (188,833)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................... 257,509
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................ $ 257,509 $ 68,676
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................................ $ 23,715 $ 17,930
======== ========
</TABLE>

See accompanying notes to financial statements.

F-56
<PAGE> 127

SKINPATH, P.C.

NOTES TO FINANCIAL STATEMENTS
PERIOD FROM JANUARY 5, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995 AND
SEVEN MONTHS ENDED JULY 31, 1996

1. ORGANIZATION AND BUSINESS

SkinPath, P.C. (the "Company") is a firm of licensed physicians in
Birmingham, Alabama organized in January 1995 as an Alabama Professional
Corporation to provide outpatient dermatopathology services. Operations
commenced in April 1995. The Company generates substantially all of its
revenue from patient referrals from referring dermatologists and other
physicians. Approximately 55% and 53% of gross revenues were from referrals
by 10 physicians for the period January 5, 1995 (inception) through
December 31, 1995 and the seven months ended July 31, 1996, respectively.
Approximately, 11% and 9% of gross revenues were from referrals by one
physician for the period January 5, 1995 (inception) through December 31,
1995 and the seven months ending July 31, 1996, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash Equivalents -- The Company considers all cash and any highly liquid
debt instruments purchased with a maturity of three months or less to be
cash equivalents.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets, ranging from 3
to 7 years, using the straight line method. Leasehold improvements are
amortized over the term (9 years) of the lease, including renewal periods.

Revenue Recognition -- The Company recognizes revenue at the time services
are performed. The Company provides services to certain patients covered by
various third-party payor programs including the federal Medicare program.
Revenue under certain third-party arrangements is subject to audit and
retroactive adjustments. Billings for services reimbursed by third-party
payors are included in revenues net of allowances for the estimated
differences between the amounts billed and the allowable program rates.
Adjustments to the estimated payment amounts are recorded based on the
final payment settlement with the third-party payors.

Income Taxes -- The Company has elected Subchapter S corporation status
under the Internal Revenue Code. There is no provision for income taxes
since those taxes are the responsibility of the individual stockholders.

Fair Value of Financial Instruments -- The carrying amounts of cash and
cash equivalents, accounts receivable, accounts payable and notes payable
to bank approximate fair value due to their short-term maturity.

F-57
<PAGE> 128

SKINPATH, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 and July 31, 1996 consists of
the following:

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1995 1996
------------ --------
<S> <C> <C>
Furniture and fixtures......................................... $ 44,735 $ 49,000
Laboratory and data processing equipment....................... 247,042 280,270
Leasehold improvements......................................... 179,162 190,624
-------- --------
470,939 519,894
Less Accumulated Depreciation and Amortization................. (38,759) (86,372)
-------- --------
Property and equipment, net.......................... $432,180 $433,522
======== ========
</TABLE>

Depreciation expense was $38,759 and $47,613 for the period January 5, 1995
(inception) through December 31, 1995 and the seven months ended July 31,
1996, respectively.

4. LONG-TERM DEBT

Long-term debt at December 31, 1995 and July 31, 1996 consists of the
following:

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1995 1996
------------ --------
<S> <C> <C>
Notes payable to bank.......................................... $415,000 $412,838
Less current portion........................................... (278,818) (119,837)
-------- --------
Long-term debt....................................... $136,182 $293,001
======== ========
</TABLE>

During 1995, the Company entered into three loan agreements with a bank. In
April 1995, the Company entered into a $240,000 line of credit bearing an
interest rate of 8.75% which was repaid December 1995. In December 1995,
the Company borrowed $240,000 bearing an interest rate of 7.60%, which was
repaid in July 1996. Additionally, in December of 1995 the Company borrowed
$175,000 bearing an interest rate of 7.75%. Principal and interest on this
loan are due in equal monthly payments for a term of 48 months. This loan
was subsequently repaid August 1996. The outstanding loans at December 31,
1995 were secured by all leasehold improvements, fixtures, equipment and
accounts receivable.

During 1996, the Company entered into two loan agreements with a bank. In
April 1996, the Company borrowed $75,000 bearing an interest rate of 8.25%
which was repaid July 1996. Additionally, in July 1996 the Company borrowed
$260,000 bearing an interest rate of 8.75%. Principal and interest on this
loan were due in equal monthly installments for a term of 36 months. This
loan was repaid in August 1996.

5. NET REVENUE

F-58
<PAGE> 129

SKINPATH, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Net revenue consists of the following for the period January 5, 1995
(inception) through December 31, 1995 and the seven months ended July 31,
1996:

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1995 1996
------------ ----------
<S> <C> <C>
Gross charges at established rates........................... $1,923,477 $1,523,710
Less allowances for contractual, charity and other
adjustments................................................ (76,538) (55,235)
---------- ----------
Net revenue........................................ $1,846,939 $1,468,475
========== ==========
</TABLE>

6. CONCENTRATIONS OF CREDIT RISK

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Medicare................................................................. 36% 15%
Blue Cross............................................................... 20 22
Managed Care............................................................. 8 11
Other third-party payors................................................. 17 16
Private pay patients..................................................... 19 36
--- ---
100% 100%
=== ===
</TABLE>

7. RELATED PARTY TRANSACTIONS

The Company has entered into certain transactions with J & R Leasing, Inc.,
a majority of whose common stock is owned by the Company's stockholders.
The Company leases certain equipment from J & R Leasing, Inc. The total
lease payments for the period January 5, 1995 (inception) through December
31, 1995 and the seven months ended July 31, 1996 were $8,700 and $13,550,
respectively (See Note 9).

8. EMPLOYEE BENEFIT PLANS

The Company established the Money Purchase Pension Plan (the "Plan"), a
defined contribution plan, which covers substantially all eligible
employees who have reached age 21 and have completed one year of service
(as defined in the Plan). The Company makes annual contributions to the
Plan according to a formula as defined in the Plan. Employees are fully
vested after 6 years of service. During the period January 5, 1995
(inception) through December 31, 1995 and the seven months ended July 31,
1996, the Company contributed approximately $52,000 and $47,000,
respectively, to the Plan.

F-59
<PAGE> 130

SKINPATH, P.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases office space, certain equipment and
an automobile under agreements expiring at various dates through 2003.
Approximate future minimum lease payments for operating leases at ended
July 31, 1996 are as follows:

<TABLE>
<CAPTION>
12 MONTHS FUTURE MINIMUM
ENDED JULY 31, LEASE PAYMENTS
--------------- --------------
<S> <C>
1997............................................................... $ 52,060
1998............................................................... 44,665
1999............................................................... 34,800
2000............................................................... 34,800
2001............................................................... 40,800
Thereafter......................................................... 81,600
--------
Total....................................................... $288,725
========
</TABLE>

The office lease is for 3 years with two 3 year renewal options.
Additionally, the Company has the option to purchase the building for a
fixed price until July 1, 1997.

Rental Expense -- Rental expense was approximately $49,600 and $39,100 for
the period January 5, 1995 (inception) through December 31, 1995 and the
seven months ended July 31, 1996, respectively. Included in rental expense
are amounts paid to related parties (see Note 5 -- Related Party
Transactions).

Liability Insurance -- The Company is insured with respect to general
liability and medical malpractice risks on a claims made basis. Management
is not aware of any claims against the Company. In addition, the Company
has not accrued a loss for unreported incidents or for losses in excess of
insurance coverage, as the amount, if any, cannot be reasonably estimated
and the probability of an adverse outcome cannot be determined at this
time. It is the opinion of management that the ultimate resolution of any
claims that may be asserted will not have a material adverse effect on the
Company's financial position or results of operations.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustments
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

10. SUBSEQUENT EVENT

Effective August 1, 1996, the Company's stockholders sold all of the
Company's issued and outstanding common stock to AmeriPath, Inc.

F-60
<PAGE> 131

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Pathology Associates, P.S.C. and Technical Pathology Services, Inc.:

We have audited the accompanying combined balance sheets of Pathology
Associates, P.S.C. and Technical Pathology Services, Inc. (collectively, the
"Company") as of December 31, 1994, 1995 and July 31, 1996, and the related
combined statements of operations, stockholders' equity, and cash flows for the
years ended December 31, 1994 and 1995 and the seven months ended July 31, 1996.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1994, 1995 and July 31, 1996, and the results of its operations and its cash
flows for the years ended December 31, 1994 and 1995 and the seven months ended
July 31, 1996, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Cincinnati, Ohio

October 2, 1996

F-61
<PAGE> 132

PATHOLOGY ASSOCIATES, P.S.C AND
TECHNICAL PATHOLOGY SERVICES, INC.

COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND JULY 31, 1996

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JULY 31,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................................................... $ 207,858 $ 159,558 $ 413,697
Marketable securities (Note 3)........................... 237,195 281,921 293,543
Accounts receivable (net of allowances for contractual
adjustments and doubtful accounts of $400,000 (1994)
and $350,000 (1995 and 1996).......................... 896,927 881,510 826,402
Income taxes receivable (Note 9)......................... 10,920 64,082
Prepaid expenses and other current assets................ 27,416 14,636 54,430
---------- ---------- ----------
Total current assets............................. 1,380,316 1,401,707 1,588,072
PROPERTY AND EQUIPMENT, NET (Note 4)....................... 154,790 104,709 84,019
DEFERRED TAX BENEFIT (Note 9).............................. 18,308
OTHER INVESTMENTS.......................................... 55,000 55,000 52,000
---------- ---------- ----------
TOTAL............................................ $1,608,414 $1,561,416 $1,724,091
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable......................................... $ 41,882 $ 47,567 $ 27,385
Current portion of note payable (Note 5)................. 62,508
Accrued vacation......................................... 36,202 35,905 40,616
Income taxes payable (Note 9)............................ 91,515
Accrued liabilities...................................... 106,487 77,896 199,942
Accrued profit sharing contribution (Note 8)............. 35,480 28,246 14,000
Deferred tax liability (Note 9).......................... 315,712
---------- ---------- ----------
Total current liabilities........................ 535,763 189,614 435,966
---------- ---------- ----------
NOTE PAYABLE (Note 5)...................................... 65,000
---------- ---------- ----------
DEFERRED TAX LIABILITY (Note 9)............................ 296,188 198,588
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 6).....................
STOCKHOLDERS' EQUITY (Note 8):
Common stock (Note 10)................................... 48,327 48,327 48,327
Treasury stock, at cost (Note 10)........................ (605) (605) (605)
Unrealized gain on marketable securities (Note 3)........ 7,512 44,976 56,598
Retained earnings........................................ 1,017,417 917,916 985,217
---------- ---------- ----------
Total stockholders' equity....................... 1,072,651 1,010,614 1,089,537
---------- ---------- ----------
TOTAL............................................ $1,608,414 $1,561,416 $1,724,091
========== ========== ==========
</TABLE>

See notes to combined financial statements.

F-62
<PAGE> 133

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
SEVEN MONTHS ENDED JULY 31, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
----------------------- ------------------------
1994 1995 1995 1996
---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE (Note 7):
Net pathology revenue (net of allowance for
contractual, charity and other adjustments
of $1,320,327 (1994), $857,874 (1995) and
$646,109 (1996))........................... $4,193,719 $4,084,770 $ 2,370,833 $2,446,961
Medical director fees......................... 802,888 849,047 415,988 466,015
---------- ---------- ---------- ----------
Total net revenue..................... 4,996,607 4,933,817 2,786,821 2,912,976
---------- ---------- ---------- ----------
COSTS AND EXPENSES (Notes 6, 8):
Cost of services.............................. 1,706,280 1,822,165 997,664 960,068
Physician compensation -- owner............... 945,000 626,885 286,347 416,827
Physician compensation -- other............... 882,080 1,004,083 516,807 630,980
Selling, billing, and administrative
expenses................................... 1,549,744 1,319,147 712,681 718,991
Provision for uncollectible accounts (net of
recoveries of $88,341 (1994), $101,307
(1995) and $71,765 (1996).................. 156,371 232,403 147,479 127,325
---------- ---------- ---------- ----------
Total costs and expenses.............. 5,239,475 5,004,683 2,660,978 2,854,191
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS................... (242,868) (70,866) 125,843 58,785
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense.............................. (647) (8,342) (5,297)
Investment income............................. 477,805 118,142 25,436 5,072
Miscellaneous income, net..................... 9,664 1,804 2,612 19,422
---------- ---------- ---------- ----------
Total other income.................... 486,822 111,604 28,048 19,197
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES......................................... 243,954 40,738 153,891 77,982
PROVISION FOR INCOME TAXES (Note 9)............. 37,125 19,239 11,985 10,681
---------- ---------- ---------- ----------
NET INCOME............................ $ 206,829 $ 21,499 $ 141,906 $ 67,301
========== ========== ========== ==========
</TABLE>

See notes to combined financial statements.

F-63
<PAGE> 134

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
SEVEN MONTHS ENDED JULY 31, 1996

<TABLE>
<CAPTION>
COMMON TREASURY UNREALIZED
STOCK STOCK GAIN ON
(NOTE (NOTE MARKETABLE RETAINED
10) 10) SECURITIES EARNINGS TOTAL
------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1993........................... $48,327 $ (605) $ 855,588 $ 903,310
Dividends................................. (45,000) (45,000)
Unrealized gain........................... $ 7,512 7,512
Net income................................ 206,829 206,829
------- ------ ------- -------- ----------
DECEMBER 31, 1994........................... 48,327 (605) 7,512 1,017,417 1,072,651
Dividends................................. (121,000) (121,000)
Unrealized gain........................... 37,464 37,464
Net income................................ 21,499 21,499
------- ------ ------- -------- ----------
DECEMBER 31, 1995........................... 48,327 (605) 44,976 917,916 1,010,614
Unrealized gain........................... 11,622 11,622
Net income................................ 67,301 67,301
------- ------ ------- -------- ----------
JULY 31, 1996............................... $48,327 $ (605) $ 56,598 $ 985,217 $1,089,537
======= ====== ======= ======== ==========
</TABLE>

See notes to combined financial statements.

F-64
<PAGE> 135

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
SEVEN MONTHS ENDED JULY 31, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JULY 31, JULY 31,
1994 1995 1995 1996
------------ ------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $ 206,829 $ 21,499 $141,906 $ 67,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................. 63,049 77,194 27,238 28,766
Deferred income taxes........................ 5,143 (1,216) (97,600)
(Increase) decrease in:
Accounts receivable........................ 7,342 15,417 182,094 55,108
Prepaid expenses and other assets.......... 20,455 (40,382) (1,942) 24,288
Increase (decrease) in:
Accounts payable........................... 3,477 5,685 15,613 (20,182)
Accrued liabilities........................ (46,910) (28,888) (21,418) 218,272
Accrued profit sharing contribution........ 20,480 (7,234) (13,982) (14,246)
--------- --------- --------- ---------
Net cash provided by operating
activities............................ 279,865 42,075 329,509 261,707
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities.......................... (200,436) (7,262)
Proceeds from sale of other investments......... 3,000
Purchases of property and equipment............. (51,021) (27,113) (8,076)
--------- --------- --------- ---------
Net cash used in investing activities... (251,457) (34,375) (5,076)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of note payable.......... 200,000
Payments on notes payable....................... (42,605) (135,000) (2,492)
Dividends....................................... (45,000) (121,000)
--------- --------- --------- ---------
Net cash used in financing activities... (87,605) (56,000) (2,492)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH................... (59,197) (48,300) 329,509 254,139
CASH AT BEGINNING OF PERIOD....................... 267,055 207,858 207,858 159,558
--------- --------- --------- ---------
CASH AT END OF PERIOD............................. $ 207,858 $ 159,558 $537,367 $413,697
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments during the period for:
Interest..................................... $ 647 $ 8,342 $ 5,297
========= ========= ========= =========
Income taxes (net of refunds received)....... $ 95,815 $ 72,401 $(38,114)
========= ========= ========= =========
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

A valuation adjustment, increasing the value of marketable securities to
market, of $7,512 was established in 1994. This amount represents the unrealized
gain on the securities in 1994. This valuation adjustment was increased in 1995
by $37,464 and in 1996 by $11,622.

See notes to combined financial statements.

F-65
<PAGE> 136

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND THE
SEVEN MONTHS ENDED JULY 31, 1996

1. ORGANIZATION AND BUSINESS

Pathology Associates, P.S.C. is a professional association of licensed
physicians engaged in providing hospital-based pathology services to
various hospitals as well as pathology laboratory services to hospitals,
clinics, physicians, and others throughout Kentucky. Combined with these
statements are the financial statements of Technical Pathology Services,
Inc., a company owned and controlled by the majority owner of Pathology
Associates, P.S.C. All significant intercompany balances and transactions
have been eliminated. Pathology Associates, P.S.C. and Technical Pathology
Services, Inc. are collectively referred to as the "Company" throughout
these financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Marketable Securities -- Marketable securities are to be classified as held
to maturity, available for sale or trading, based upon the intent and
ability of the Company to hold such investments. The Company has classified
all of its investments as available for sale. Accordingly, they are
recorded at fair value with unrealized gains and losses included as a
separate component of stockholders' equity. Cost of each investment is
determined on the specific identification method. See Note 3.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets using the
straight line method, generally over 5 years.

Fair Value of Financial Instruments -- Regarding cash, accounts receivable,
accounts payable, and notes payable, the carrying amounts approximate fair
value.

Other Investments -- Other investments consist of units owned in several
companies related to the pathology industry which are accounted for at
historical cost, as there is not a readily determinable market value for
these units.

Interim Financial Data -- The unaudited combined statements of operations
and cash flows for the seven months ended July 31, 1995 include, in the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the Company's combined results of
operations and cash flows. Operating results for the seven month period
ended July 31, 1996 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996.

F-66
<PAGE> 137

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. MARKETABLE SECURITIES

The cost, market value and unrealized gains (losses) for the securities
available for sale at December 31, 1994, 1995 and July 31, 1996 are as
follows:
<TABLE>
<CAPTION>
UNREALIZED
MARKET GAIN
1994 COST VALUE (LOSS)
------------------------------------------------------- -------- -------- ----------
<S> <C> <C> <C>
Tax Free Mutual Fund................................... $200,000 $197,360 $ (2,640)
Equity securities...................................... 29,683 39,835 10,152
-------- -------- --------
Total........................................ $229,683 $237,195 $ 7,512
======== ======== ========

<CAPTION>
1995
-------------------------------------------------------
<S> <C> <C> <C>
Tax Free Mutual Fund................................... $207,262 $225,270 $ 18,008
Equity securities...................................... 29,683 56,651 26,968
-------- -------- --------
Total........................................ $236,945 $281,921 $ 44,976
======== ======== ========
<CAPTION>
1996
-------------------------------------------------------
<S> <C> <C> <C>
Tax Free Mutual Fund................................... $207,262 $237,206 $ 29,944
Equity securities...................................... 29,683 56,337 26,654
-------- -------- --------
Total........................................ $236,945 $293,543 $ 56,598
======== ======== ========
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994, 1995 and July 31, 1996 is as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Laboratory and data processing equipment............... $423,195 $438,443 $446,519
Automotive vehicles.................................... 21,235 21,235 21,235
Leasehold improvements................................. 32,078 32,078 32,078
Computer software...................................... 4,850 12,815 12,815
Furniture and fixtures................................. 34,177 38,077 38,077
-------- -------- --------
515,535 542,648 550,724
Less accumulated depreciation.......................... (360,745) (437,939) (466,705)
-------- -------- --------
Property and equipment, net............................ $154,790 $104,709 $ 84,019
======== ======== ========
</TABLE>

5. NOTES PAYABLE

Notes payable at December 31, 1994, 1995 and July 31, 1996 consist of the
following:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Note payable to a bank, interest due monthly at the bank's prime
rate of interest (8.25% at July 31, 1996 and 8.5% at December 31,
1995), matures September 1996.................................... $65,000 $62,508
======= =======
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases office facilities under
noncancelable agreements which expire at various dates through January
1999. The leases require monthly rental payments of $5,574, plus sales
taxes, and the Company is also obligated to pay insurance, utilities, and
normal maintenance. One of the leases has annual rent increases based on
the increase in the Consumer Price Index or 5%, whichever is

F-67
<PAGE> 138

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

less. The Company also leases two automobiles under noncancelable
agreements which expire at various dates through October 1998. Rent paid
under these leases amounted to $75,412, $77,600 and $47,446 for the years
ended December 31, 1994 and 1995 and the seven months ended July 31, 1996,
respectively.

Future minimum rental payments required for the next five years under these
operating leases, that have initial or remaining noncancelable lease terms
in excess of one year as of December 31, 1995 are as follows:
1996 -- $80,286; 1997 -- $49,630, 1998 -- $33,254; and 1999 -- $2,542.

Liability Insurance -- The Company is insured with respect to general
liability and medical malpractice risks on a claims made basis. In
addition, the Company has not accrued a loss for unreported incidents or
for losses in excess of insurance coverage, as the amount, if any, cannot
be reasonably estimated and the probability of an adverse outcome cannot be
determined at this time. It is the opinion of management that the ultimate
resolution of any claims that may be asserted will not have a material
adverse effect on the Company's financial position or results of
operations.

Legal Proceedings -- The Company is subject to a number of lawsuits
relating to matters arising in the ordinary course of its business. The
claims are insured but subject to deductibles. The amount of liability, if
any, from the litigation cannot be determined with certainty; however,
management is of the opinion that the outcome of the litigation will not
have a material adverse effect on the Company's financial position or
results of operations.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustment
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

7. NET REVENUE

Net revenue consists of gross charges, net of contractual, charity, and
other adjustments. Contractual adjustments are based on the difference
between charges at established rates and amounts estimated by management to
be reimbursable by Medicare and Medicaid programs, and public and private
insurance contracts under applicable laws, regulations, and program
instructions. Reimbursable amounts are generally less than the established
gross charges. Final determination of certain amounts earned for certain
patients is subject to review by appropriate program representatives.
Charity and other adjustments represent services provided to patients for
which fees are not expected to be collected at the time the service is
provided.

The Company also has contracts with certain laboratories to provide medical
director services.

8. EMPLOYEE BENEFIT PLAN

F-68
<PAGE> 139

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

ended December 31, 1994 and 1995 and for the seven months ended July 31,
1996 totaled $37,200, $27,800 and $14,000, respectively.

9. INCOME TAXES

As of January 1, 1995, the Company elected to be taxed as a Subchapter S
corporation for federal income tax purposes and consequently, is not liable
for federal and most state income taxes, but rather, the stockholders'
proportionate share of the Company's net income or loss is included in the
stockholders taxable income for those jurisdictions. However, at the date
of change, there were certain built in gains for which the Company remains
liable.

Deferred tax assets at December 31, 1994 of $18,308 result from temporary
differences arising from differing book and tax treatment for one of the
Company's other investments. Deferred tax liabilities at December 31, 1994
of $315,712 result from temporary differences as the Company is a cash
basis tax payor. As of January 1, 1995, deferred tax assets and liabilities
were reassessed as a result of the election to be taxed as a Subchapter S
corporation. The remaining deferred tax liability at December 31, 1995 and
at July 31, 1996 relates to the built in gains that existed at the date of
the election and will be paid out over a ten year period.

The provision for income taxes in the accompanying statements of operations
for the years ended December 31, 1994 and 1995 and the seven months ended
July 31, 1996 consists of the following:

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Federal:
Current................................................ $27,079 $19,524 $ 97,600
Deferred............................................... 5,143 (1,216) (97,600)
State.................................................... 4,903 931 10,681
------- ------- --------
Total.......................................... $37,125 $19,239 $ 10,681
======= ======= ========
</TABLE>

10. COMMON STOCK

Common stock of Pathology Associates, P.S.C. consists of two classes of
stock; Class A is no par, non-voting stock with 2,000 shares authorized and
none outstanding; Class B is no par, voting stock with 5,000 shares
authorized, 450 shares issued and outstanding.

Common stock of Technical Pathology Services, Inc. consists of no par value
stock, with 2,000 shares authorized, 1,000 issued and 960 shares
outstanding.

F-69
<PAGE> 140

PATHOLOGY ASSOCIATES, P.S.C. AND
TECHNICAL PATHOLOGY SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

11. CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of accounts receivable.
The Company grants credit without collateral to its patients, most of whom
are local residents and are insured under third-party payor agreements. The
mix of receivables from patients and third-party payors at December 31,
1994, 1995 and July 31, 1996 are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Medicare........................................................ 13% 12% 14%
Medicaid........................................................ 17 15 12
Third-party payors and other managed care....................... 67 68 70
Private pay patients............................................ 3 5 4
--- --- ---
100% 100% 100%
=== === ===
</TABLE>

12. SUBSEQUENT EVENT

Effective August 1, 1996, the Company's stockholders sold all of the
Company's issued and outstanding common stock to AmeriPath, Inc.

F-70
<PAGE> 141

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Volusia Pathology Group, M.D., P.A.:

We have audited the accompanying balance sheets of Volusia Pathology Group,
M.D., P.A. (the "Company") as of December 31, 1994 and 1995 and September 30,
1996, and the related statements of operations, shareholders' equity, and cash
flows for the years ended December 31, 1994 and 1995 and the nine months ended
September 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1994 and 1995
and September 30, 1996, and the results of its operations and its cash flows for
the years ended December 31, 1994 and 1995 and the nine months ended September
30, 1996, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Orlando, Florida

November 1, 1996

F-71
<PAGE> 142

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1994 1995 1996
-------- ---------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $124,274 $ 272,904 $ 38,458
Accounts receivable (net of allowances for contractual
adjustments and doubtful accounts of $814,752,
$939,960, and $1,192,323, respectively)............... 576,242 678,924 757,452
Prepaid expenses and other current assets................ 21,082 20,205 24,379
-------- ---------- -------------
Total current assets............................. 721,598 972,033 820,289
PROPERTY AND EQUIPMENT, NET (Note 3)....................... 29,050 28,096 46,388
OTHER ASSETS............................................... 6,995 4,495 4,495
-------- ---------- -------------
TOTAL............................................ $757,643 $1,004,624 $ 871,172
======== ========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......................................... $ 28,763 $ 28,892 $ 26,186
Accrued liabilities...................................... 283,496 420,771 475,612
Accrued profit sharing contribution...................... 48,289 40,005
Income tax payable....................................... 35,679 92,962 17,692
Deferred tax liability (Note 8).......................... 92,492 79,023 105,292
-------- ---------- -------------
Total current liabilities........................ 488,719 661,653 624,782
-------- ---------- -------------
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Class A common stock, voting, $1 par value, 400 shares
authorized; 244.16 issued............................. 244 244 244
Class B common stock, nonvoting, $1 par value, 600 shares
authorized; 555.84 issued............................. 556 556 556
Retained earnings........................................ 268,124 342,171 253,014
-------- ---------- -------------
268,924 342,971 253,814
Treasury stock, Class A common stock, voting, 132.16
shares and Class B common stock, nonvoting, 22.82
shares................................................ (7,424)
-------- ---------- -------------
Total shareholders' equity....................... 268,924 342,971 246,390
-------- ---------- -------------
TOTAL............................................ $757,643 $1,004,624 $ 871,172
======== ========== =============
</TABLE>

See notes to financial statements.

F-72
<PAGE> 143

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996
---------- ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE (Note 6):
Hospital net revenue (net of allowances for
contractual, charity and other
adjustments of $1,374,656, $1,471,307,
$1,135,917 (unaudited) and $958,369,
respectively)............................ $4,722,295 $4,892,462 $ 3,675,355 $ 3,804,589
Histology net revenue (net of allowances for
contractual, charity, and other
adjustments of $229,208, $280,459,
$216,527 (unaudited) and $193,638,
respectively)............................ 787,387 932,599 690,747 768,713
---------- ---------- ---------- ----------
Total net revenue................... 5,509,682 5,825,061 4,366,102 4,573,302
COSTS AND EXPENSES (Notes 5 and 7):
Physicians' Compensation-Owner.............. 3,100,500 3,130,500 2,089,000 2,293,497
Cost of services rendered................... 829,066 955,271 762,677 865,747
Selling, billing, and administrative
expenses................................. 829,663 826,101 626,181 759,766
Provisions for uncollectible amounts (net of
recoveries of $40,679, $42,392, $30,238
(unaudited) and $32,180, respectively)... 709,947 793,876 609,431 792,450
---------- ---------- ---------- ----------
Total costs and expenses............ 5,469,176 5,705,748 4,087,289 4,711,460
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES....................................... 40,506 119,313 278,813 (138,158)
PROVISION (BENEFIT) FOR INCOME TAXES (Note
8).......................................... 14,950 45,266 107,081 (49,001)
---------- ---------- ---------- ----------
NET INCOME (LOSS)............................. $ 25,556 $ 74,047 $ 171,732 $ (89,157)
========== ========== ========== ==========
</TABLE>

See notes to financial statements.

F-73
<PAGE> 144

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
CLASS CLASS
A B
COMMON COMMON RETAINED TREASURY
STOCK STOCK EARNINGS STOCK TOTAL
------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
JANUARY 1, 1994................................. $244 $556 $242,568 $ $243,368
Net income.................................... 25,556 25,556
---- ---- -------- ------- --------
DECEMBER 31, 1994............................... 244 556 268,124 268,924
Net income.................................... 74,047 74,047
---- ---- -------- ------- --------
DECEMBER 31, 1995............................... 244 556 342,171 342,971
Repurchase of Class B common stock............ (1,093) (1,093)
Repurchase of Class A common stock............ (6,331) (6,331)
Net loss...................................... (89,157) (89,157)
---- ---- -------- ------- --------
SEPTEMBER 30, 1996.............................. $244 $556 $253,014 $ (7,424) $246,390
==== ==== ======== ======= ========
</TABLE>

See notes to financial statements.

F-74
<PAGE> 145

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996
-------- --------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................... $ 25,556 $ 74,047 $ 171,732 $ (89,157)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation........................... 11,080 6,744 5,058 6,708
Deferred income taxes.................. (11,562) (13,469) 54,392 26,269
(Increase) decrease in:
Accounts receivable.................. (75,993) (102,682) (58,147) (78,528)
Prepaid expenses..................... 5,771 877 (8,127) (4,174)
Increase (decrease) in:
Accounts payable..................... (26,432) 129 (3,763) (2,706)
Accrued liabilities.................. 151,911 137,275 (39,980) 54,841
Accrued profit sharing
contribution...................... (22,228) (8,284) (42,822) (40,005)
Income tax payable................... 26,512 57,283 51,237 (75,270)
-------- --------- --------- ---------
Net cash provided by (used in)
operating activities............ 84,615 151,920 129,580 (202,022)
-------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (25,333) (5,790) (5,790) (25,000)
Increase (decrease) in other assets....... (4,200) 2,500
-------- --------- --------- ---------
Net cash used in investing
activities...................... (29,533) (3,290) (5,790) (25,000)
-------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock................ (7,424)
-------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH............. 55,082 148,630 123,790 (234,446)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD.................................... 69,192 124,274 124,274 272,904
-------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD.................................... $124,274 $ 272,904 $ 248,064 $ 38,458
======== ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -- Income taxes paid.......... $ $ 1,452 $ 1,452 $
======== ========= ========= =========
</TABLE>

See notes to financial statements.

F-75
<PAGE> 146

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996

1. ORGANIZATION AND BUSINESS

Volusia Pathology Group, M.D., P.A. (the "Company") is a professional
association of licensed physicians engaged in providing hospital-based
pathology services to various hospitals as well as pathology laboratory
services to hospitals, clinics, physicians, and others in Volusia County,
Florida.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash Equivalents -- The Company considers all cash and any highly liquid
debt instruments purchased with a maturity of three months or less at time
of purchase to be cash equivalents.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets, which range from
5 to 39 years, using accelerated methods.

Concentrations of Credit Risk -- Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist principally
of cash and cash equivalents and accounts receivable. The Company places
its cash and cash equivalents with high credit quality institutions.
Concentrations of credit risk with respect to accounts receivable is
limited due to the large number and geographic distribution of patients,
third-party payors, and clients.

F-76
<PAGE> 147

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The mix of receivables from patients and third-party payors at December 31,
1994 and 1995 and September 30, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- SEPTEMBER 30,
1994 1995 1996
----- ----- -------------
<S> <C> <C> <C>
Medicare........................................... 15.2% 11.5% 9.7%
Medicaid........................................... 3.4 2.8 2.7
Third-party payors and other managed care.......... 49.7 56.3 54.7
Private pay patients............................... 31.7 29.4 32.9
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>

Fair Value of Financial Instruments -- Regarding cash and cash equivalents,
accounts receivable, and accounts payable, the carrying amounts approximate
fair value.

Interim Financial Data -- The unaudited statements of operations and cash
flows for the nine months ended September 30, 1995 include, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Company's results of operations and cash
flows. Operating results for the nine months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1995 and September 30, 1996
was as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Laboratory and data processing equipment............. $126,188 $131,978 $ 156,978
Automotive vehicles.................................. 10,885 10,885 10,885
Leasehold improvements............................... 5,631 5,631 5,631
-------- -------- --------
142,704 148,494 173,494
Less accumulated depreciation........................ (113,654) (120,398) (127,106)
-------- -------- --------
Property and equipment, net.......................... $ 29,050 $ 28,096 $ 46,388
======== ======== ========
</TABLE>

4. ACCRUED LIABILITIES

Accrued liabilities at December 31, 1994 and 1995 and September 30, 1996
were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Accrued compensation................................. $124,589 $272,731 $ 86,170
Accrued vacation..................................... 158,760 147,794 240,922
Deferred compensation................................ 145,867
Other................................................ 147 246 2,653
-------- -------- --------
$283,496 $420,771 $ 475,612
======== ======== ========
</TABLE>

F-77
<PAGE> 148

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases its principal facility and other
equipment under noncancelable agreements which expire on dates ranging from
March 1998 to June 2001.

Future minimum rental payments required for the next five years and
thereafter under operating leases, that have initial or remaining
noncancelable lease terms in excess of one year as of September 30, 1996
are as follows: 1997 -- $60,719; 1998 -- $59,136; 1999 -- $20,384;
2000 -- $1,467; and 2001 -- $1,221.

Rent expense was approximately $56,000, $53,000 and $37,000 for the years
ended December 31, 1994 and 1995 and the nine months ended September 30,
1996, respectively.

Employment Agreements -- The Company has entered into employment agreements
with each of its physicians. These employment agreements generally provide
for certain annual base salaries and renew annually unless written notice
is given by either party.

In April 1996, the Company entered into an employment agreement obligating
the Company to pay approximately $4,400 per month for services through
October 1998. As part of the agreement, the Company has pledged 66.08
shares of the Class A voting common stock and 22.82 shares of the Class B
nonvoting common stock it owns as collateral for such payments.

In April 1996, the Company entered into an employment agreement obligating
the Company to pay approximately $5,500 per month through April 1998 for
services previously rendered. The balance payable as of September 30, 1996
is included in accrued liabilities. As part of the agreement, the Company
pledged 66.08 shares of the Class A voting common stock it owns as
collateral for such payments.

Professional Liability Insurance Coverage -- The Company is insured with
respect to general liability and medical malpractice risks on a claims made
basis. Management is not aware of any claims pending against the Company.
In addition, the Company has not accrued a loss for unreported incidents or
for losses in excess of insurance coverage, as the amount, if any, cannot
be reasonably estimated and the probability of an adverse outcome cannot be
determined at this time. It is the opinion of management that the ultimate
resolution of any claims that may be asserted will not have a material
adverse effect on the Company's financial position or results of
operations.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustment
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

6. NET REVENUE

Net revenue consists of gross charges, net of contractual, charity, and
other adjustments. Contractual adjustments are based on the difference
between charges at established rates and amounts estimated by management to
be reimbursable by Medicare and Medicaid programs, and public and private
insurance contracts under applicable laws, regulations, and program
instructions. Reimbursable amounts are generally less than the established
gross charges. Final determination of certain amounts earned for certain
patients is subject to review by appropriate program representatives.
Charity and other adjustments represent services provided to patients for
which fees are not expected to be collected at the time the service is
provided.

F-78
<PAGE> 149

VOLUSIA PATHOLOGY GROUP, M.D., P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. EMPLOYEE BENEFIT PLAN

The Company sponsored a qualified profit sharing plan (the "Plan") for all
of its eligible employees. The Plan included a 401(k) feature, which
allowed participants to make pretax contributions and provided for matching
and discretionary contributions by the Company. Contributions by the
Company for the years ended December 31, 1994 and 1995 and the nine months
ended September 30, 1996 totaled approximately $152,000, $196,000, and
$141,000, respectively.

On September 18, 1996, the Board of Directors elected to terminate the Plan
as a result of the Company's pending acquisition by AmeriPath, Inc. In
accordance with the terms of the Plan, the account balances of all
participating employees became fully vested.

8. INCOME TAXES

The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Federal income taxes:
Current............................................ $ 26,512 $ 58,735 $ (75,270)
Deferred........................................... (11,562) (13,469) 26,269
-------- -------- --------
Total provision (benefit) for income
taxes.................................... $ 14,950 $ 45,266 $ (49,001)
======== ======== ========
</TABLE>

The Company's effective tax (benefit) rate differs from the statutory
federal income tax rate for the following reasons:

<TABLE>
<CAPTION>
DECEMBER 31,
------------ SEPTEMBER 30,
1994 1995 1996
---- ---- -------------
<S> <C> <C> <C>
Statutory federal income tax (benefit) rate................ 34.0% 34.0% (34.0)%
State income taxes, net of federal tax benefits............ 3.6 3.6 (3.6)
Other...................................................... (.7) .3 2.1
---- ---- ----
Effective tax (benefit) rate..................... 36.9% 37.9% (35.5)%
==== ==== ====
</TABLE>

The only temporary difference which gives rise to deferred tax liabilities
is the use of the accrual basis of accounting for financial statement
purposes and the cash basis of accounting for income tax purposes.

9. SUBSEQUENT EVENT

On October 3, 1996, the Company was acquired by AmeriPath, Inc. for cash,
notes, and common stock aggregating $6,037,000 and other contingent
consideration to be determined over the next five years.

F-79
<PAGE> 150

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
David R. Barron, M.D., Inc.
d/b/a Richfield Laboratory of Dermatopathology:

We have audited the accompanying balance sheets of David R. Barron, M.D., Inc.
d/b/a Richfield Laboratory of Dermatopathology (the "Company") as of December
31, 1995 and September 30, 1996 and the related statements of operations,
stockholders' equity and cash flows for the year ended December 31, 1995 and the
nine months ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
September 30, 1996 and the results of its operations and its cash flows for the
year ended December 31, 1995 and the nine months ended September 30, 1996, in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Cincinnati, Ohio

November 8, 1996

F-80
<PAGE> 151

DAVID R. BARRON, M.D., INC.
D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY

BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................ $1,561,785 $ 1,788,977
Accounts receivable (net of allowance for doubtful accounts of
$232,852 and $194,977)........................................ 1,350,733 1,009,977
Prepaid expenses and other current assets........................ 28,778 21,490
------------ ------------
Total current assets..................................... 2,941,296 2,820,444
PROPERTY AND EQUIPMENT, NET (Note 3)............................... 177,960 216,967
------------ ------------
TOTAL.................................................... $3,119,256 $ 3,037,411
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable................................................. $ 50,649 $ 12,280
Accrued payroll taxes............................................ 1,641,102
Accrued compensation............................................. 198,233 63,099
Accrued liabilities.............................................. 33,540
------------ ------------
Total current liabilities................................ 282,422 1,716,481
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 4).............................

STOCKHOLDERS' EQUITY:
Common stock (no par value, 500 shares authorized, 50 shares
issued and outstanding)....................................... 3,970 3,970
Retained earnings................................................ 2,852,864 1,336,960
------------ ------------
2,856,834 1,340,930
Less treasury stock.............................................. (20,000) (20,000)
------------ ------------
Total stockholders' equity............................... 2,836,834 1,320,930
------------ ------------
TOTAL.................................................... $3,119,256 $ 3,037,411
============ ============
</TABLE>

See notes to financial statements.

F-81
<PAGE> 152

DAVID R. BARRON, M.D., INC.
D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
NET REVENUE (Note 5):
Pathology net revenue.................................. $6,202,016 $ 4,538,044 $ 4,396,487
Other.................................................. 15,761
---------- ---------- ----------
Total net revenue.............................. 6,202,016 4,538,044 4,412,248
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of services rendered.............................. 1,307,411 925,379 1,121,118
Physician compensation -- owners....................... 2,577,307 2,002,445 2,636,000
Physician compensation -- other........................ 42,308 21,154 163,847
Selling, general and administrative.................... 629,373 530,251 579,280
---------- ---------- ----------
Total costs and expenses....................... 4,556,399 3,479,229 4,500,245
---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS............................ 1,645,617 1,058,815 (87,997)
Other income............................................. 32,449 28,714 2,140
---------- ---------- ----------
NET INCOME (LOSS).............................. $1,678,066 $ 1,087,529 $ (85,857)
========== ========== ==========
</TABLE>

See notes to financial statements.

F-82
<PAGE> 153

DAVID R. BARRON, M.D., INC.
D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
COMMON TREASURY RETAINED
STOCK STOCK EARNINGS TOTAL
------ -------- ----------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994................................. $3,970 $(20,000) $ 2,854,117 $ 2,838,087
Distributions to stockholders................... (1,679,319) (1,679,319)
Net income...................................... 1,678,066 1,678,066
------ -------- ----------- -----------
DECEMBER 31, 1995................................. 3,970 (20,000) 2,852,864 2,836,834
Distributions to stockholders................... (1,430,047) (1,430,047)
Net loss........................................ (85,857) (85,857)
------ -------- ----------- -----------
SEPTEMBER 30, 1996................................ $3,970 $(20,000) $ 1,336,960 $ 1,320,930
====== ======== =========== ===========
</TABLE>

See notes to financial statements.

F-83
<PAGE> 154

DAVID R. BARRON, M.D., INC.
D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY

STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........ 1,506,476 1,506,476 1,561,785
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............. $ 1,561,785 $ 2,596,504 $ 1,788,977
=========== =========== ===========
</TABLE>

See notes to the financial statements.

F-84
<PAGE> 155

DAVID R. BARRON, M.D., INC.
D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY

NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1996

1. ORGANIZATION AND BUSINESS

David R. Barron, M.D., Inc. d/b/a Richfield Laboratory of Dermatopathology
(the "Company") is a corporation engaged in providing dermatological
pathology services to various hospitals, clinics, physicians, and others
throughout the Midwest and Eastern United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash Equivalents -- The Company considers all cash and any highly liquid
debt instruments purchased with a maturity of three months or less at time
of purchase to be cash equivalents.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets using accelerated
methods. Estimated useful lives range between 5 and 7 years.

Fair Value of Financial Instruments -- Regarding cash and cash equivalents,
accounts receivable and accounts payable, the carrying amounts approximate
fair value.

Income Taxes -- The Company elected to be taxed as a Subchapter S
corporation for federal income tax purposes. Upon election, the Company is
no longer liable for federal and state income taxes, but rather the
stockholders' proportionate share of the Company's net income or loss is
includable in the stockholders' taxable income for those jurisdictions.

F-85
<PAGE> 156

DAVID R. BARRON, M.D., INC.
D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 and September 30, 1996 is as
follows:

<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Laboratory and data processing equipment....................... $193,025 $ 221,493
Land improvements.............................................. 2,057 2,057
Leasehold improvements......................................... 13,525 13,525
Furniture and fixtures......................................... 144,108 204,592
-------- ---------
352,715 441,667
Less accumulated depreciation.................................. (174,755) (224,700)
-------- ---------
Property and equipment, net.................................... $177,960 $ 216,967
======== =========
</TABLE>

4. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases its principal facility from the
majority stockholder under a noncancelable agreement which expires in
December 2002. The lease requires monthly rental payments of $6,375 and the
Company is also obligated to pay insurance, utilities, and normal
maintenance. The rent is subject to an annual increase based upon the
consumer price index. Rent paid under this lease amounted to approximately
$82,000 and $64,000 for the year ended December 31, 1995 and the nine
months ended September 30, 1996, respectively.

Future minimum rental payments required for the next five years and
thereafter under operating leases, that have initial or remaining
noncancelable lease terms in excess of one year are as follows: 1996 --
$19,000; 1997 through 2002 -- $77,000 annually.

Employment Agreements -- The Company has entered into employment agreements
with four of its physicians. These employment agreements generally provide
for certain annual base salaries and renew annually.

Liability Insurance -- The Company is insured with respect to general
liability and medical malpractice risks on a claims made basis. In
addition, the Company has not accrued a loss for unreported incidents or
for losses in excess of insurance coverage as the amount, if any, cannot be
reasonably estimated and the probability of an adverse outcome cannot be
determined at this time. It is the opinion of management that the ultimate
resolution of any claims that may be asserted will not have a material
adverse effect on the Company's financial position or results of
operations.

Legal Proceedings -- The Company is subject to several lawsuits relating to
matters arising in the ordinary course of its business. The claims are
insured but subject to deductibles. The amount of liability, if any, from
the litigation cannot be determined with certainty; however, management is
of the opinion that the outcome of the litigation will not have a material
adverse effect on the Company's financial position or results of
operations.

F-86
<PAGE> 157

DAVID R. BARRON, M.D., INC.
D/B/A RICHFIELD LABORATORY OF DERMATOPATHOLOGY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. NET REVENUE

Net revenue consists of gross charges, net of contractual, charity, and
other adjustments. Contractual adjustments are based on the difference
between charges at established rates and amounts estimated by management to
be reimbursable by Medicare and Medicaid programs, and public and private
insurance contracts under applicable laws, regulations, and program
instructions. Reimbursable amounts are generally less than the established
gross charges. Final determination of certain amounts earned for certain
patients is subject to review by appropriate program representatives.
Charity and other adjustments represent services provided to patients for
which fees are not expected to be collected at the time the service is
provided.

Net revenue attributable to a major customer was approximately $1,066,000
and $750,000 for the year ended December 31, 1995 and the nine months ended
September 30, 1996, respectively.

6. EMPLOYEE BENEFIT PLAN

The Company maintains a qualified profit sharing plan for all of its
eligible employees. The plan includes a 401(k) feature, which allows
participants to make pretax contributions and provides for discretionary
contributions by the Company. Contributions by the Company were
approximately $60,000 and $55,000 for the year ended December 31, 1995 and
the nine months ended September 30, 1996, respectively.

7. CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and accounts
receivable. The Company grants credit without collateral to its patients,
most of whom are local residents and are insured under third party payor
agreements. The mix of receivables from patients and third-party payors at
September 30, 1996 is as follows:

<TABLE>
<S> <C>
Third-party payors and other managed care....................................... 38%
Private pay patients............................................................ 33%
Physicians...................................................................... 29%
</TABLE>

The December 31, 1995 mix of receivables is not presented herein as it was
not readily attainable due to the Company not retaining this information.

8. SUBSEQUENT EVENT

Effective October 1, 1996, the Company's stockholders executed an agreement
to sell their interests in the Company to AmeriPath, Inc.

F-87
<PAGE> 158

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Beno Michel, M.D., Inc.
d/b/a Cutaneous Pathology & Immunofluorescense Laboratory:

We have audited the accompanying balance sheets of Beno Michel, M.D., Inc. d/b/a
Cutaneous Pathology & Immunofluorescense Laboratory (the "Company") as of
December 31, 1994 and 1995 and September 30, 1996, and the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1994 and 1995 and the nine months ended September 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

Deloitte & Touche LLP
Certified Public Accountants
Cincinnati, Ohio

November 1, 1996

F-88
<PAGE> 159

BENO MICHEL, M.D., INC.
D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------- -------------
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................. $102,517 $ 89,574 $ 270,999
Accounts receivable (net of allowances for contractual
adjustments and doubtful accounts of $154,452, $180,906
and $185,325 at 1994, 1995 and 1996, respectively)
(Notes 4 and 7)......................................... 568,330 740,699 767,513
Prepaid expenses and other current assets.................. 4,496 5,006 13,009
-------- -------- ----------
Total current assets............................... 675,343 835,279 1,051,521
PROPERTY AND EQUIPMENT, NET (Note 3)......................... 105,636 61,811 27,543
OTHER ASSETS................................................. 8,597 8,597 8,597
-------- -------- ----------
TOTAL.............................................. $789,576 $905,687 $ 1,087,661
-------- -------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................... $ 7,950 $ 8,251 $ 30,593
Current portion of long term debt (Note 6)................. 16,648
Accrued compensation....................................... 53,630 70,116 113,902
Other accrued liabilities.................................. 135,620 96,872 76,066
Deferred tax liability (Note 5)............................ 111,179
Income taxes payable (Note 5).............................. 1,500 127,679 4,642
-------- -------- ----------
Total current liabilities.......................... 326,527 302,918 225,203
-------- -------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8).......................
STOCKHOLDERS' EQUITY (Note 9):
Common stock, (no par value, 500 shares authorized, 100
shares issued and outstanding).......................... 500 500 500
Retained earnings.......................................... 462,549 602,269 861,958
-------- -------- ----------
Total stockholders' equity......................... 463,049 602,769 862,458
-------- -------- ----------
TOTAL.............................................. $789,576 $905,687 $ 1,087,661
======== ======== ==========
</TABLE>

See notes to financial statements.

F-89
<PAGE> 160

BENO MICHEL, M.D., INC.
D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY

STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------- --------------------------
1994 1995 1995 1996
---------- ---------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE (Note 4):
Practice net revenue......................... $ 919,391 $1,222,909 $ 902,906 $ 999,620
Laboratory net revenue....................... 2,321,272 2,575,105 1,852,390 2,033,002
---------- ---------- ---------- ----------
Total net revenue.................... 3,240,663 3,798,014 2,755,296 3,032,622
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of services rendered.................... 584,564 687,082 489,358 618,313
Physician compensation -- owner.............. 1,645,000 960,000 720,000 540,000
Physician compensation -- other.............. 618,577 872,085 611,450 704,886
Selling, billing and administrative
expenses.................................. 267,284 267,421 211,869 279,000
Marketing expenses........................... 34,554 37,679 26,804 42,493
Interest (income) expense, net............... (69) 72 (211) 12,344
---------- ---------- ---------- ----------
Total costs and expenses............. 3,149,910 2,824,339 2,059,270 2,197,036
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES....... 90,753 973,675 696,026 835,586
PROVISION FOR INCOME TAXES (Note 5)............ 19,552 15,000 9,500 13,000
---------- ---------- ---------- ----------
NET INCOME........................... $ 71,201 $ 958,675 $ 686,526 $ 822,586
========== ========== ========== ==========
</TABLE>

See notes to financial statements.

F-90
<PAGE> 161

BENO MICHEL, M.D., INC.
D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ --------- ---------
<S> <C> <C> <C>
JANUARY 1, 1994................................................ $500 $ 391,348 $ 391,848
Net income................................................... 71,201 71,201
---- --------- ---------
DECEMBER 31, 1994.............................................. 500 462,549 463,049
Net income................................................... 958,675 958,675
Stockholder distribution..................................... (818,955) (818,955)
---- --------- ---------
DECEMBER 31, 1995.............................................. 500 602,269 602,769
Net income................................................... 822,586 822,586
Stockholder distribution..................................... (562,897) (562,897)
---- --------- ---------
SEPTEMBER 30, 1996............................................. $500 $ 861,958 $ 862,458
==== ========= =========
</TABLE>

See notes to financial statements.

F-91
<PAGE> 162

BENO MICHEL, M.D., INC.
D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------------------
1994 1995 1995 1996
------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 71,201 $ 958,675 $ 686,526 $ 822,586
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................. 60,465 57,469 48,596 41,422
Deferred income taxes.................... 18,052 (111,179)
(Increase) decrease in:
Accounts receivable.................... (106,188) (172,369) (92,684) (26,814)
Prepaid expenses and other assets...... 132 (510) (52,230) (8,003)
Increase (decrease) in:
Accounts payable....................... (5,680) 301 2,023 22,288
Accrued liabilities and income taxes
payable............................. 33,454 103,917 (69,208) (100,003)
--------- --------- --------- ---------
Net cash provided by operating
activities........................ 71,436 836,304 523,023 751,476
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment......... (13,644) (7,154)
--------- --------- --------- ---------
Net cash used in investing
activities........................ (13,644) (7,154)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders............... (818,955) (552,740) (562,897)
Payments on long term debt.................. (52,347) (16,648) (16,648)
--------- --------- --------- ---------
Net cash provided by financing
activities........................ (52,347) (835,603) (569,388) (562,897)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 19,089 (12,943) (46,365) 181,425
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD...................................... 83,428 102,517 102,517 89,574
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.... $ 102,517 $ 89,574 $ 56,152 $ 270,999
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments during the period for:
Interest................................. $ 2,962 $ 283 $ $ 13,722
========= ========= ========= =========
Income taxes............................. $ $ $ $ 111,179
========= ========= ========= =========
</TABLE>

See notes to financial statements.

F-92
<PAGE> 163

BENO MICHEL, M.D., INC.
D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY

NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996

1. ORGANIZATION AND BUSINESS

Beno Michel, M.D., Inc. d/b/a Cutaneous Pathology & Immunofluorescense
Laboratory (the "Company"), located in Beachwood, Ohio, a suburb of
Cleveland, is a professional association of licensed physicians engaged in
the practice of dermatology as well as serving as an independent laboratory
specializing in skin pathology and immunofluoresence testing. The
dermatology practice serves patients in the greater Cleveland area while
the laboratory serves the northern and southern Ohio, Connecticut,
Massachusetts and New York state markets.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash Equivalents -- The Company considers all cash and money market
accounts to be cash equivalents.

Property and Equipment -- Property and equipment are recorded at cost and
depreciated over the estimated useful lives of the assets using the
straight-line method, ranging from 4 to 10 years.

Fair Value of Financial Instruments -- Regarding cash and cash equivalents,
accounts receivable, accounts payable, and notes payable, the carrying
amounts approximate fair value

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of net revenue and
expenses during the reporting period. Actual results could differ from
those estimates.

Interim Financial Data -- The unaudited statements of operations and cash
flows for the nine months ended September 30, 1995 include, in the opinion
of management, all adjustment (consisting of normal recurring adjustments)
necessary to present fairly the Company's results of operations and cash
flows. Operating results for the nine months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.

F-93
<PAGE> 164

BENO MICHEL, M.D., INC.
D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994, 1995 and September 30, 1996 is
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
Laboratory and data processing equipment........... $ 215,123 $ 227,162 $ 234,316
Furniture and fixtures............................. 69,674 71,279 71,279
Leasehold improvements............................. 69,582 69,582 69,582
--------- --------- ---------
354,379 368,023 375,177
Less accumulated depreciation...................... (248,743) (306,212) (347,634)
--------- --------- ---------
Property and equipment, net........................ $ 105,636 $ 61,811 $ 27,543
========= ========= =========
</TABLE>

4. NET REVENUE

Net revenue consists of gross charges, net of contractual, charity, and
other adjustments. Contractual adjustments are based on the difference
between charges at established rates and amounts estimated by management to
be reimbursable by Medicare and Medicaid programs, and public and private
insurance contracts under applicable laws, regulations, and program
instructions. Reimbursable amounts are generally less than the established
gross charges. Final determination of certain amounts earned for certain
patients is subject to review by appropriate program representatives.
Charity and other adjustments represent services provided to patients for
which fees are not expected to be collected at the time the service is
provided.

5. INCOME TAXES

As of January 1, 1995 the Company elected to be taxed as a Subchapter S
corporation for federal income tax purposes and consequently, is not liable
for federal and most state income taxes, but rather, the stockholders'
proportionate share of the Company's net income or loss is included in the
stockholders' taxable income for those jurisdictions. However, at the date
of the change, there were certain built-in gains for which the Company
remains liable. The remaining tax liability at December 31, 1995 relates to
the built in gains that existed at the date of the election and were paid
in 1996.

Deferred tax liabilities at December 31, 1994 of $111,179 result from
temporary differences as the Company is a cash basis tax payor. As of
January 1, 1995, deferred tax liabilities were reassessed as a result of
the election to be taxed as a Subchapter S corporation.

The provision for income taxes for the years ended December 31, 1994 and
1995 and the nine months ended September 30, 1996 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- --------- -------------
<S> <C> <C> <C>
Federal:
Current.......................................... $ 111,179
Deferred......................................... $18,052 (111,179)
Local.............................................. 1,500 15,000 $13,000
------- --------- -------
Total.................................... $19,552 $ 15,000 $13,000
======= ========= =======
</TABLE>

F-94
<PAGE> 165

BENO MICHEL, M.D., INC.
D/B/A CUTANEOUS PATHOLOGY & IMMUNOFLUORESCENSE LABORATORY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG TERM DEBT

At December 31, 1994, the Company had a balance remaining on a note payable
to a bank. The note originated in April, 1990 and was payable in monthly
installments of $4,167 over 5 years, with interest of 8.5%. The balance of
the note was paid in 1995.

7. CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of accounts receivable.
The Company grants credit without collateral to its patients, most of whom
are local residents and are insured under third-party payor agreements. The
major third-party payors are Medicare, Medicaid, and various commercial
insurance companies.

8. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases its principal office facility under
a noncancelable agreement which expires in April, 1999. The lease requires
monthly rental payments of $8,597, plus sales taxes, and the Company is
also obligated to pay insurance, utilities, and normal maintenance. Rent
paid under this lease amounted to approximately $77,300, $103,100 and
$77,300 for the years ended December 31, 1994 and 1995 and the nine months
ended September 30, 1996, respectively.

Future minimum rental payments required under this operating lease are as
follows: 1996 -- $103,100; 1997 -- $103,100; 1998 -- $103,100, and
1999 -- $34,400.

Legal Proceedings -- The Company is subject to one lawsuit relating to
matters arising in the ordinary course of its business. The claims are
insured but subject to deductibles. The amount of liability, if any, from
the litigation cannot be determined with certainty; however, management is
of the opinion that the outcome of the litigation will not have a material
adverse effect on the Company's financial position or results of
operations.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustment
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

9. SUBSEQUENT EVENT

Effective October 1, 1996, the Company's stockholder executed an agreement
to sell its interest in the Company to AmeriPath, Inc.

F-95
<PAGE> 166

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Drs. Seidenstein, Levine and Associates, P.A.:

We have audited the accompanying balance sheets of Drs. Seidenstein, Levine and
Associates, P.A. (the "Company") as of December 31, 1994 and 1995 and September
30, 1996 and the related statements of operations and retained earnings and of
cash flows for the years ended December 31, 1994 and 1995 and the nine months
ended September 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1994 and 1995
and September 30, 1996 and the results of its operations and its cash flows for
the years ended December 31, 1994 and 1995 and the nine months ended September
30, 1996 in conformity with generally accepted accounting principles.

Deloitte & Touche, LLP
Certified Public Accountants
Fort Lauderdale, Florida

October 19, 1996

F-96
<PAGE> 167

DRS. SEIDENSTEIN, LEVINE AND ASSOCIATES, P.A.

BALANCE SHEETS
DECEMBER 31, 1994 AND 1995, AND SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1994 1995 1996
---------- ---------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 22,740 $ 479 $ 439,052
Investments (Note 3)................................. 11,000 11,000 72,875
Accounts receivable (net of allowance for contractual
adjustments and doubtful accounts of $2,822,682,
$2,337,359 and $2,747,338 at December 31, 1994,
1995, and September 30, 1996, respectively)....... 1,458,199 1,329,508 1,321,103
Prepaid expenses and other assets.................... 59,214 110,714 103,573
---------- ---------- ----------
Total current assets......................... 1,551,153 1,451,701 1,936,603
---------- ---------- ----------
PROPERTY AND EQUIPMENT, NET (Note 4)................... 40,285 130,789 180,657
---------- ---------- ----------
TOTAL........................................ $1,591,438 $1,582,490 $ 2,117,260
========== ========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities.................................. $ 68,965 $ 118,112 $ 581,299
Accrued profit sharing (Note 5)...................... 199,195 216,733 191,288
Income taxes payable (Note 9)........................ 185,911
Deferred tax liability (Note 9)...................... 429,719 405,000 236,330
---------- ---------- ----------
Total current liabilities.................... 697,879 739,845 1,194,828
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Common stock, $1.00 par value, 100 shares authorized,
issued and outstanding............................ 100 100 100
Retained earnings.................................... 893,459 842,545 860,457
Unrealized gain on available for sale securities..... 61,875
---------- ---------- ----------
Total shareholders' equity................... 893,559 842,645 922,432
---------- ---------- ----------
TOTAL........................................ $1,591,438 $1,582,490 $ 2,117,260
========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-97
<PAGE> 168

DRS. SEIDENSTEIN, LEVINE AND ASSOCIATES, P.A.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996
---------- ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE -- (Note 6)....................... $5,692,348 $6,181,074 $ 4,617,160 $ 5,480,005
---------- ---------- ---------- ----------
Costs and expenses:
Cost of services rendered................... 3,920,890 4,476,193 3,031,332 3,425,686
Selling, billing and administrative
expenses................................. 991,341 1,410,973 968,967 1,260,481
Provision for bad debts..................... 407,011 369,541 336,162 758,685
---------- ---------- ---------- ----------
Total costs and expenses............ 5,319,242 6,256,707 4,336,461 5,444,852
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES....................................... 373,106 (75,633) 280,699 35,153
PROVISION (BENEFIT) FOR INCOME TAXES.......... 142,696 (24,719) 169,100 17,241
---------- ---------- ---------- ----------
NET INCOME (LOSS)............................. 230,410 (50,914) 111,599 17,912
RETAINED EARNINGS, BEGINNING OF PERIOD........ 663,049 893,459 893,459 842,545
---------- ---------- ---------- ----------
RETAINED EARNINGS, ENDING OF PERIOD........... $ 893,459 $ 842,545 $ 1,005,058 $ 860,457
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-98
<PAGE> 169

DRS. SEIDENSTEIN, LEVINE AND ASSOCIATES, P.A.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------- ----------------------
1994 1995 1995 1996
--------- --------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $ 230,410 $ (50,914) $ 111,599 $ 17,912
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................ 20,768 35,787 25,899 36,276
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable.............................. (446,049) 128,691 (39,758) 8,405
(Increase) decrease in prepaid expenses and
other assets............................ (10,012) (51,500) (28,621) 7,141
Increase (decrease) in accounts payable,
accrued liabilities, and accrued
profit-sharing.......................... 64,201 66,685 (41,567) 437,742
Increase (decrease) in deferred income
taxes................................... 142,696 (24,719) 80,100 (168,670)
Increase in income taxes payable........... 89,000 185,911
--------- --------- -------- ---------
Net cash provided by operating
activities............................ 2,014 104,030 196,652 524,717

CASH FLOWS FROM INVESTING ACTIVITY:
Acquisition of property and equipment........... (2,569) (126,291) (86,488) (86,144)
--------- --------- -------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS..................................... (555) (22,261) 110,164 438,573
CASH AND CASH EQUIVALENTS, BEGINNING.............. 23,295 22,740 22,740 479
--------- --------- -------- ---------
CASH AND CASH EQUIVALENTS, ENDING................. $ 22,740 $ 479 $ 132,904 $439,052
========= ========= ======== =========
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Unrealized gain on available for sale
securities................................... $ 61,875
=========
</TABLE>

See accompanying notes to financial statements.

F-99
<PAGE> 170

DRS. SEIDENSTEIN, LEVINE & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996

1. ORGANIZATION AND BUSINESS

Drs. Seidenstein, Levine and Associates, P.A. (the "Company") was
incorporated in Florida on January 4, 1984 for the purpose of providing
hospital-based pathology, diagnostic, and laboratory services. The Company
employs nine pathologists which staff five contracted hospitals and three
contracted surgery centers all of which are owned by Columbia/HCA
Healthcare Corporation ("Columbia"). The Company also provides managing and
billing services for the Columbia Hospital Outreach Program. All of the
Company's revenue is derived from the agreements with Columbia and its
affiliated hospitals, surgery and outreach centers. The contracts with the
hospitals and centers vary in length from 1 to 5 years. A number of the
contracts also contain cancellation clauses which allow either party to
terminate the agreement without cause with a 180-day notification period.
Termination of the agreements would have a material adverse effect on the
financial position or results of operations of the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash and Cash Equivalents -- The Company considers all cash and any highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents.

Investments -- Marketable equity securities are classified as available for
sale or trading depending upon the intent and ability of the Company.
Trading securities are recorded at fair value with unrealized gains and
losses included in earnings; and available for sale securities are recorded
at fair value with unrealized gains and losses included as a separate
component of shareholders' equity. The Company has classified all of its
investments as available for sale. Accordingly, all such investments have
been recorded at fair value with unrealized gains and losses included as a
separate component of stockholders' equity.

Property and Equipment -- Property and equipment is stated at cost less
accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets which
range from three to seven years. Expenditures for routine maintenance and
repairs are charged to expense as incurred.

Income Taxes -- The Company accounts for income taxes using the asset and
liability method. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the future tax consequences attributed
to differences between the financial statement carrying amounts of assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

Revenue Recognition -- The Company recognizes revenue at the time services
are performed. The Company provides services to certain patients covered by
various third-party payor programs including the federal Medicare program.
Revenue under certain third-party arrangements is subject to audit and
retroactive adjustments. Billings for services reimbursed by third-party
payors are included in revenues net of allowances for the estimated
differences between the amounts billed and the allowable program rates.
Adjustments to the estimated payment amounts are recorded based on the
final payment settlement with the third-party payors.

Unbilled receivables are recorded for services rendered during, but billed
subsequent to, the reporting period. Such receivables, net of allowances,
as of December 31, 1994 and 1995 and for the nine months ended September
30, 1996 amounted to $75,268, $127,230 and $79,006, respectively.

F-100
<PAGE> 171

DRS. SEIDENSTEIN, LEVINE & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

Fair Value of Financial Instruments -- The carrying amounts of cash and
cash equivalents, accounts receivable, accounts payable, and accrued
expenses approximate fair value.

Concentrations of Credit Risk -- Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist principally
of cash and cash equivalents and accounts receivable. The Company places
its cash and cash equivalents with high credit quality institutions. With
respect to accounts receivable, the Company grants credit without
collateral to its patients, most of whom are local residents and are
insured under third party-payor agreements. Concentrations of credit risk
with respect to accounts receivable is limited due to the large number and
geographic distribution of patients, third-party payors, and clients.

Interim Financial Data -- The unaudited statements of operations and
retained earnings and of cash flows for the nine months ended September 30,
1995 include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Companies'
results of operations and cash flows. Operating results for the nine month
period ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.

3. INVESTMENTS

Investments securities consist of one stock that was classified as
available for sale for purposes of SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities. The security's cost is $11,000
and did not have a readily determinable market value until 1996. The
security's fair value as of September 30, 1996 is $72,875 with a unrealized
gain of $61,875 included in shareholders' equity.

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1995, and September 30,
1996 of each year consisted of the following:

<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Furniture and fixtures................................. $119,710 $246,001 $332,145
Less accumulated depreciation.......................... (79,425) (115,212) (151,488)
-------- -------- --------
Property and equipment, net............................ $ 40,285 $130,789 $180,657
======== ======== ========
</TABLE>

Depreciation expense totaled $20,766, $35,787 and $36,276 for the years
ended December 31, 1994 and 1995, and the nine months ended September 30,
1996, respectively.

5. EMPLOYEE PROFIT SHARING PLAN

The Company has a profit sharing plan covering all full-time employees who
meet eligibility requirements. Employer contributions are made to the plan
at the discretion of the Company's Board of Directors. Contributions of
$199,195, $216,733 and $191,288 were made for the years ended December 31,
1994 and 1995, and the nine months ended September 30, 1996, respectively.

F-101
<PAGE> 172

DRS. SEIDENSTEIN, LEVINE & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. NET REVENUE

Net revenue consists of gross charges, net of contractual, charity, and
other adjustments. Contractual adjustments are based on the difference
between charges at established rates and amounts estimated by management to
be reimbursable by Medicare and Medicaid programs, and public and private
insurance and managed care contracts under applicable laws, regulations,
and program instructions. Collectible amounts are generally less than the
established rates. Final determination of certain amounts earned for
certain patients is subject to review by appropriate program
representatives. Charity and other adjustments represent services provided
to patients for which fees are not expected to be collected at the time the
service is provided.

Net revenue consists of the following for the years ended December 31, 1994
and 1995, and the nine months ended September 30, 1996:

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Gross charges at established rates................. $6,507,565 $7,416,632 $6,919,592
Less allowances for contractual, charity and other
adjustments...................................... (815,217) (1,235,558) (1,439,587)
---------- ---------- ----------
Net revenue.............................. $5,692,348 $6,181,074 $5,480,005
========== ========== ==========
</TABLE>

7. RELATED PARTY TRANSACTIONS

The Company's shareholders are employed by the Company as physicians and
accordingly, receive compensation for their services to the Company. The
compensation included in cost of services rendered for these individuals
was $2,736,999, $3,099,000 and $2,188,125 for the years ended December 31,
1994 and 1995, and for the nine months ended September 30, 1996,
respectively. Of this amount, $397,125 is included in accounts payable and
accrued liabilities as of September 30, 1996.

The Company leases part of its office facilities from a partnership whose
partners are the Company's shareholders. Rent expense for this lease was
$55,200 for the years ended December 31, 1994 and 1995 and $41,400 for the
nine months ended September 30, 1996, exclusive of any sales taxes.

8. COMMITMENTS AND CONTINGENCIES

Lease Commitments -- As discussed in Note 7, the Company leases part of its
office facilities from a partnership whose partners consist of the
Company's shareholders. The building is located adjacent to the South West
Florida Regional Medical Center and is organized as a professional
condominium. The Company also leases additional office space in the same
professional condominium from an unrelated party. The lease expires
February 28, 2003 and requires minimum monthly payments of $1,063. This
lease includes a provision allowing the lessee to cancel the lease after
December 31, 1996 with 60 days notice. Rent expense was $55,968, $69,775
and $54,021 for the years ended December 31, 1994 and 1995, and the nine
months ended September 30, 1996, respectively.

Contingency -- A former employee of the Company who resigned in May 1996
allegedly violated the terms of the restrictive covenant contained in her
employment agreement. The former employee has threatened litigation for
wrongful termination if a breach of contract action is pursued. The Company
has elected not to contest the breach of contract issue at this time. No
accrual for any liabilities that may result from this matter has been
included in the accompanying financial statements.

F-102
<PAGE> 173

DRS. SEIDENSTEIN, LEVINE & ASSOCIATES, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED)

as the amounts, if any, cannot be reasonably estimated and the probability
of an adverse outcome cannot be determined at this time. It is the opinion
of management that the ultimate resolution of any claims that may be
asserted will not have a material adverse effect on the Company's financial
position or results of operations.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustments
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

9. INCOME TAXES

The provision for income taxes in the accompanying statements of operations
for the years ended December 31, 1994 and 1995 and for the nine months
ended September 30, 1996 consists of the following:

<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Federal and state income taxes:
Current.............................................. $185,911
Deferred............................................. $142,696 $(24,719) (168,670)
------- ------- --------
$142,696 $(24,719) $ 17,241
======= ======= ========
</TABLE>

The Company's effective tax rate differs from the statutory federal income
tax rate for the following reasons:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate.............................. 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefits................ 3.7 3.1 7.2
Other.......................................................... 0.6 (4.4) 7.8
---- ---- ----
Effective tax rate............................................. 38.3% 32.7% 49.0%
==== ==== ====
</TABLE>

The sources and amounts of deferred income tax assets and liabilities at
December 31, 1994 and 1995 and September 30, 1996 are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
CURRENT ASSETS CURRENT ASSETS CURRENT
(LIABILITIES) (LIABILITIES) (LIABILITIES)
-------------- -------------- -------------
<S> <C> <C> <C>
Use of cash basis of accounting for income
tax purposes............................... $ (470,653) $ (415,954) $ (236,330)
Net operating loss carryforward and tax
credits.................................... 40,934 10,954
--------- --------- ---------
Total.............................. $ (429,719) $ (405,000) $ (236,330)
========= ========= =========
</TABLE>

10. SUBSEQUENT EVENT

Effective October 10, 1996, the Company's shareholders sold all of the
Company's issued and outstanding common stock to AmeriPath, Inc.

F-103
<PAGE> 174

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and
Stockholders of Clay J. Cockerell, M.D., P.A.
and Freeman-Cockerell Laboratories, Inc.:

We have audited the accompanying combined balance sheets of Clay J. Cockerell,
M.D., P.A. and Freeman-Cockerell Laboratories, Inc. (collectively, the
"Companies") as of December 31, 1994 and 1995 and September 30, 1996 and the
related combined statements of income and retained earnings and of cash flows
for the years ended December 31, 1994 and 1995 and the nine months ended
September 30, 1996. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Companies as of December 31,
1994 and 1995 and September 30, 1996 and the results of their operations and
their cash flows for the years ended December 31, 1994 and 1995 and the nine
months ended September 30, 1996 in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP
Certified Public Accountants
Dallas, Texas

November 12, 1996

F-104
<PAGE> 175

CLAY J. COCKERELL, M.D., P.A. AND
FREEMAN-COCKERELL LABORATORIES, INC.

COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 23,503 $190,402 $ 288,988
Accounts receivable (net of allowances for contractual
adjustments and doubtful accounts of $180,000,
$195,000 and $235,000 at December 31, 1994 and 1995
and September 30, 1996, respectively)............... 340,935 374,879 448,000
Receivable from stockholder............................ 101,161 94,947
Other current assets................................... 1,017 10,772 6,997
-------- -------- ----------
Total current assets........................... 466,616 671,000 743,985
PROPERTY AND EQUIPMENT, NET (Note 3)..................... 297,039 214,163 277,535
OTHER ASSETS............................................. 1,693 44,084 44,085
-------- -------- ----------
TOTAL.......................................... $765,348 $929,247 $ 1,065,605
======== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Notes payable (Note 4)................................. $580,844 $485,913 $ 396,908
Accounts payable and other............................. 42,607 16,479 99,481
Accrued payroll and benefits........................... 31,149 37,517 41,292
-------- -------- ----------
Total current liabilities...................... 654,600 539,909 537,681
COMMITMENTS AND CONTINGENCIES (Note 5)

STOCKHOLDER'S EQUITY:
Clay J. Cockerell, M.D., P.A.:
Common stock, $1 par value, 10,000 shares
authorized, 1,000 issued and outstanding.......... 1,000 1,000 1,000
Freeman-Cockerell Laboratories, Inc.:
Common stock, $.10 par value, 1,000,000 shares
authorized, 10,000 issued and outstanding......... 1,000 1,000 1,000
Retained earnings...................................... 108,748 387,338 525,924
-------- -------- ----------
Total stockholder's equity..................... 110,748 389,338 527,924
-------- -------- ----------
TOTAL.......................................... $765,348 $929,247 $ 1,065,605
======== ======== ==========
</TABLE>

See accompanying notes to combined financial statements.

F-105
<PAGE> 176

CLAY J. COCKERELL, M.D., P.A. AND
FREEMAN-COCKERELL LABORATORIES, INC.

COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -----------------------------
1994 1995 1995 1996
---------- ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUE................................... $2,613,165 $3,160,059 $ 2,388,589 $ 2,770,000
COST OF SERVICES (Note 7)..................... 1,007,226 1,220,086 878,686 1,061,425
---------- ---------- ---------- ----------
GROSS MARGIN.................................. 1,605,939 1,939,973 1,509,903 1,708,575
MARKETING AND ADMINISTRATION:
Marketing................................... 56,980 64,097 47,941 73,200
Administration.............................. 1,197,236 1,316,070 1,043,258 1,187,529
Bad debts................................... 85,000 14,925 11,163 40,000
---------- ---------- ---------- ----------
Total marketing and administration
expenses.......................... 1,339,216 1,395,092 1,102,362 1,300,729
---------- ---------- ---------- ----------
OPERATING PROFIT.............................. 266,723 544,881 407,541 407,846
INTEREST EXPENSE.............................. 69,285 55,841 41,765 22,699
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES....................................... 197,438 489,040 365,776 385,147
PROVISION FOR CURRENT INCOME TAXES (Note 8)... 23,983 20,799 15,557 4,308
---------- ---------- ---------- ----------
NET INCOME.................................... 173,455 468,241 350,219 380,839
RETAINED EARNINGS (DEFICIT), BEGINNING OF
PERIOD...................................... (48,744) 108,748 108,748 387,338
DISTRIBUTIONS TO STOCKHOLDER.................. (15,963) (189,651) (141,848) (242,253)
---------- ---------- ---------- ----------
RETAINED EARNINGS, END OF PERIOD.............. $ 108,748 $ 387,338 $ 317,119 $ 525,924
========== ========== ========== ==========
</TABLE>

See accompanying notes to combined financial statements.

F-106
<PAGE> 177

CLAY J. COCKERELL, M.D., P.A. AND
FREEMAN-COCKERELL LABORATORIES, INC.

COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
----------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1995 1996
--------- --------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................... $ 173,455 $ 468,241 $ 350,219 $ 380,839
Adjustments to reconcile net income to
net cash flows provided by operating
activities:
Depreciation.......................... 160,626 138,173 103,346 69,737
Changes in assets and liabilities:
Accounts receivable................. (65,362) (33,944) (70,231) (73,121)
Other current assets................ (5,332) (52,147) (12,000) (3,775)
Accounts payable and other.......... 27,252 (26,128) 146,162 33,619
Accrued payroll and benefits........ 6,408 50,819 53,158
--------- --------- --------- ---------
Net cash flows provided by
operating activities........... 290,639 500,603 568,315 460,457
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.... (111,530) (55,338) (42,856) (125,560)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Increase) decrease in receivable from
Shareholder........................... (65,114) 6,216 (7,302) 94,947
Payments on notes payable................ (60,299) (94,931) (84,323) (89,005)
Issuance of common stock................. 1,000
Cash distributions to Stockholder........ (15,963) (189,651) (141,848) (242,253)
--------- --------- --------- ---------
Net cash flows used in financing
activities..................... (140,376) (278,366) (233,473) (236,311)
--------- --------- --------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS.............................. 38,733 166,899 291,986 98,586
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................... (15,230) 23,503 23,503 190,402
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD... $ 23,503 $ 190,402 $ 315,489 $ 288,988
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION:
Cash paid during the period for:
Interest.............................. $ 69,285 $ 55,841 $ 42,030 $ 22,699
========= ========= ========= =========
Income taxes.......................... $ 23,982 $ 20,799 $ 15,557 $ 4,308
========= ========= ========= =========
</TABLE>

See accompanying notes to combined financial statements.

F-107
<PAGE> 178

CLAY J. COCKERELL, M.D., P.A. AND
FREEMAN-COCKERELL LABORATORIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996

1. ORGANIZATION AND BUSINESS

Clay J. Cockerell, M.D., P.A. ("CJC") and Freeman-Cockerell Laboratories,
Inc. ("FCL") (collectively "the Companies") were organized in August 1993
and January 1994, respectively. The Companies provide outpatient anatomic
pathology services, principally dermatopathology services. The issued and
outstanding shares of the Companies are held by Clay J. Cockerell, M.D.
(the "Stockholder").

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Combination and Basis of Presentation -- The combined financial statements
include the accounts of CJC and FCL. All significant intercompany
transactions have been eliminated in combination.

Cash and Cash Equivalents -- The Companies consider all highly liquid
instruments purchased with a maturity of three months or less to be cash
equivalents.

Property and Equipment -- Property and equipment is recorded at cost.
Depreciation is provided using accelerated methods for all assets over
their estimated lives as follows:

<TABLE>
<S> <C>
Leasehold improvements...................................................... 9 years
Furniture and fixtures...................................................... 7 years
Equipment................................................................... 5 years
</TABLE>

Revenue Recognition -- The Companies recognize revenue at the time services
are performed. Net revenue is reported at the estimated realizable amounts
from patients, third-party payors and others for services rendered. Revenue
under certain third-party payor agreements is subject to audit and
retroactive adjustments. Provision for estimated third-party payor
settlements and adjustments are estimated in the period the related
services are rendered and adjusted in future periods as final settlements
are determined.

Income Taxes -- The Stockholder has elected that CJC be taxed as a
Subchapter S corporation for federal income tax purposes. As a result,
income tax is not imposed at the corporate level and CJC's income or loss
is reportable by the Stockholder for federal income tax purposes.

FCL is taxed as a C corporation under the Internal Revenue Code. Deferred
income taxes represent the estimated future tax effects resulting from
temporary differences between the financial and tax reporting bases of
assets and liabilities of FCL. FCL has no significant temporary
differences.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.

Financial Instruments -- The Companies believe that the carrying amounts of
cash, accounts receivable, accounts and notes payable are a reasonable
estimate of their fair value.

Interim Financial Data -- The unaudited statements of operations and
retained earnings and of cash flows for the nine months ended September 30,
1995 include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Companies'
results of operations and cash flows. Operating results for the nine months
ended September 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996.

F-108
<PAGE> 179

CLAY J. COCKERELL, M.D., P.A. AND
FREEMAN-COCKERELL LABORATORIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Leasehold improvements........................... $ 51,014 $ 59,809 $ 59,809
Furniture and fixtures........................... 55,778 89,280 100,075
Equipment........................................ 329,329 342,328 464,642
-------- -------- --------
436,121 491,417 624,526
Less accumulated depreciation.................... (139,082) (277,254) (346,991)
-------- -------- --------
Property and equipment, net...................... $297,039 $214,163 $ 277,535
======== ======== ========
</TABLE>

4. NOTES PAYABLE

Notes payable are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
9.25% Bank note payable, paid in October 1996.... $414,825 $363,792 $ 312,812
8.75% Bank note payable, paid in October 1996.... 166,019 122,121 84,096
-------- -------- --------
$580,844 $485,913 $ 396,908
======== ======== ========
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Companies lease the office and laboratory facility
and certain equipment under leases requiring future minimum rental payments
as follows:

<TABLE>
<S> <C>
1996................................................................... $ 26,162
1997................................................................... 86,973
1998................................................................... 73,549
1999................................................................... 64,488
2000................................................................... 58,908
2001................................................................... 59,552
Thereafter............................................................. 105,042
--------
Total........................................................ $ 474,674
========
</TABLE>

Lease expense was approximately $64,618, $123,234, and $69,139 for the
years ended December 31, 1994 and 1995, and the nine months ended September
30, 1996, respectively.

Liability Insurance -- CJC is insured with respect to general liability and
medical malpractice risks on a claims made basis. Management is not aware
of any claims against CJC or FCL. The Companies have not accrued losses for
unreported incidents or for losses in excess of insurance coverage, as the
amount, if any, cannot be determined at this time. It is the opinion of
management that the ultimate resolution of any unasserted claims will not
have a material adverse effect on the Companies' financial position or
results of operations.

Employment Agreement -- The stockholder has a five year employment
agreement with CJC, providing for a minimum annual salary of $250,000.

F-109
<PAGE> 180

CLAY J. COCKERELL, M.D., P.A. AND
FREEMAN-COCKERELL LABORATORIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Companies provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Companies' net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustment
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Companies' services under these
programs could have a material adverse effect on the Companies' financial
position or results of operations.

6. EMPLOYEE BENEFIT PLAN

The Companies have established a 401(k) retirement plan (the "Plan") which
covers substantially all eligible employees who have reached age 21 and
have completed one year of service (as defined in the Plan). Under the
terms of the Plan, employees may contribute up to the maximum percentage
allowable of their compensation, as defined. Employer contributions are
discretionary. During the years ended December 31, 1994 and 1995, and the
nine months ended September 30, 1996 the Companies made contributions to
the Plan of $0, $0 and $1,000, respectively.

7. RELATED PARTY TRANSACTIONS

The Companies utilize the courier services of an affiliate of the
stockholder. Total payments to the affiliate approximated $100,000 to
$200,000 for each of the years ended December 31, 1994 and 1995 and for the
nine months ended September 30, 1996, respectively.

8. INCOME TAXES

The effective tax rates on income before provision for income taxes are
reconciled to statutory federal income tax rates as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
------------- SEPTEMBER 30,
1994 1995 1996
---- ---- -------------
<S> <C> <C> <C>
Statutory federal income tax rate......................... 34% 34% 34%
Subchapter S corporation earnings attributable to
Stockholder............................................. (21) (28) (30)
Surtax rate............................................... (1) (2) (3)
--- --- ---
Effective rate............................................ 12% 4% 1%
=== === ===
</TABLE>

9. CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Companies to
concentration of credit risk, consist principally of accounts receivable.
The Company grants credit without collateral to its patients, most of whom
are Texas residents and are insured under third party payor agreements. The
mix of receivables

F-110
<PAGE> 181

CLAY J. COCKERELL, M.D., P.A. AND
FREEMAN-COCKERELL LABORATORIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

from patients and third-party payors at December 31, 1994 and 1995 and
September 30, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Medicare................................................. 30% 22% 20%
Managed care............................................. 4 6 4
Other third-party payor.................................. 41 51 60
Private pay patients..................................... 25 21 16
--- --- ---
100% 100% 100%
=== === ===
</TABLE>

10. SUBSEQUENT EVENTS

On September 30, 1996, the Stockholder entered into an agreement to sell
the outstanding shares of FCL to AmeriPath, Inc. ("AmeriPath") and to enter
into a management agreement pursuant to which an affiliate of AmeriPath
will manage certain aspects of CJC.

F-111
<PAGE> 182

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Fernandez and Kalemeris, P.A. d/b/a
Gulf Coast Pathology Associates:

We have audited the accompanying balance sheets of Fernandez and Kalemeris, P.A.
d/b/a/ Gulf Coast Pathology Associates (the "Company"), as of December 31, 1995
and September 30, 1996, and the related statements of operations and retained
earnings and cash flows for the year ended December 31, 1995 and for the nine
months ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
September 30, 1996, and the results of its operations and its cash flows for the
year ended December 31, 1995 and the nine months ended September 30, 1996, in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida
November 13, 1996

F-112
<PAGE> 183

FERNANDEZ AND KALEMERIS, P.A. D/B/A
GULF COAST PATHOLOGY ASSOCIATES

BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 178 $ 915,969
Accounts receivable (net of allowance for contractual adjustments
and doubtful accounts of $1,602,671 and $1,598,489 at December
31, 1995 and September 30, 1996, respectively).................. 1,147,703 1,134,276
Prepaid expenses and other assets.................................. 53,267 83,030
---------- ----------
Total current assets....................................... 1,201,148 2,133,275
---------- ----------
PROPERTY AND EQUIPMENT, NET (Note 3)................................. 203,530 138,370
OTHER ASSETS......................................................... 56,223 56,223
GOODWILL (Note 9).................................................... 365,090 345,089
---------- ----------
TOTAL...................................................... $1,825,991 $ 2,672,957
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 239,924 $ 187,951
Accrued liabilities................................................ 73,268 53,781
Accrued bonuses.................................................... 440,530
Accrued profit sharing (Note 5).................................... 61,945 123,890
Income taxes payable (Note 8)...................................... 329,613
Current portion of long term debt and capital lease obligation
(Notes 7 and 9)................................................. 115,847 124,573
Current portion of loans from shareholders (Note 6)................ 49,990 175,439
Deferred tax liability (Note 8).................................... 230,569 154,717
---------- ----------
Total current liabilities.................................. 771,543 1,590,494
---------- ----------
LONG-TERM DEBT AND CAPITAL LEASE (Notes 7 and 9)..................... 207,696 113,088
LOANS FROM SHAREHOLDERS (Note 6)..................................... 219,538
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock, $1.00 par value, 7,500 shares authorized, 2,000
shares issued and outstanding................................... 2,000 2,000
Retained earnings.................................................. 625,214 967,375
---------- ----------
Total shareholders' equity................................. 627,214 969,375
---------- ----------
TOTAL...................................................... $1,825,991 $ 2,672,957
========== ==========
</TABLE>

See notes to financial statements.

F-113
<PAGE> 184

FERNANDEZ AND KALEMERIS, P.A. D/B/A
GULF COAST PATHOLOGY ASSOCIATES

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
NET REVENUE (Note 4)..................................... $8,786,149 $ 6,424,090 $ 6,253,588
Cost of services rendered:
Physicians' compensation -- owners (Note 6)............ 4,589,858 3,292,078 2,180,011
Physicians' compensation -- other...................... 919,938 683,824 729,354
Other.................................................. 1,673,592 1,163,031 1,702,168
---------- ---------- ----------
Total cost of services rendered................ 7,183,388 5,138,933 4,611,533
Selling, general, and administrative expenses............ 568,742 366,248 482,310
Provision for bad debt................................... 834,684 618,349 562,823
---------- ---------- ----------
Total expenses................................. 8,586,814 6,123,530 5,656,666
========== ========== ==========
INCOME BEFORE PROVISION FOR INCOME TAXES................. 199,335 300,560 596,922
PROVISION FOR INCOME TAXES............................... 76,047 123,464 253,761
---------- ---------- ----------
NET INCOME............................................... 123,288 177,096 343,161
DIVIDENDS................................................ 2,000 1,000 1,000
RETAINED EARNINGS, BEGINNING............................. 503,926 503,926 625,214
---------- ---------- ----------
RETAINED EARNINGS, ENDING................................ $ 625,214 $ 680,022 $ 967,375
========== ========== ==========
</TABLE>

See notes to financial statements.

F-114
<PAGE> 185

FERNANDEZ AND KALEMERIS, P.A. D/B/A
GULF COAST PATHOLOGY ASSOCIATES

STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) AND SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 123,288 $ 177,096 $ 343,161
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 90,777 67,817 84,511
Loss on disposal of equipment..................... 4,065
Changes in assets and liabilities:
(Increase) decrease in accounts receivable...... (332,182) (118,938) 13,427
(Increase) in prepaid expenses and other
assets....................................... (12,658) (5,928) (29,763)
(Decrease) in accounts payable, accrued
liabilities, and accrued profit-sharing...... (75,434) (289,093) (9,515)
Increase in accrued bonuses..................... 655,762 440,530
Increase (decrease) in deferred income taxes.... 76,047 2,869 (75,852)
Increase in income taxes payable................ 363,400 329,613
--------- --------- ----------
Net cash provided by (used in) operating
activities................................. (130,162) 852,985 1,100,177
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................ (88,243) (76,350) (3,415)
Acquisition of pathology practice.................... (80,000)
--------- --------- ----------
Net cash used in investing activities........ (168,243) (76,350) (3,415)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to shareholders....................... (2,000) (1,000) (1,000)
Payments on long-term debt and capital lease......... (12,499) (8,971) (85,882)
Payments on loans from shareholders.................. (62,273) (51,230) (94,089)
--------- --------- ----------
Net cash used in financing activities........ (76,772) (61,201) (180,971)
--------- --------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS... (375,177) 715,434 915,791
CASH AND CASH EQUIVALENTS, BEGINNING................... 375,355 375,355 178
--------- --------- ----------
CASH AND CASH EQUIVALENTS, ENDING...................... $ 178 $ 1,090,789 $ 915,969
========= ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest.......................................... $ 32,663 $ 28,936 $ 21,872
========= ========= ==========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:

As disclosed in Note 9, the Company purchased a pathology practice in 1995 for
$400,000, $80,000 of which was paid in cash and the remainder of which was
financed.

See notes to financial statements.

F-115
<PAGE> 186

FERNANDEZ AND KALEMERIS, P.A. D/B/A
GULF COAST PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996

1. ORGANIZATION AND BUSINESS

Fernandez and Kalemeris, P.A. d/b/a Gulf Coast Pathology Associates (the
"Company") is a firm of licensed physicians organized in July 1985 as a
Florida Professional Association to provide hospital-based and outpatient
pathology services. The Company generates approximately 60% of its net
revenue from a hospital contract with Lee Memorial Health Systems ("Lee").
This contract covers three hospitals in Southwest Florida. The Company
performs and bills for the professional component at the hospitals. The
hospital contract expires in December 1999 and contains clauses that allow
termination without cause by either party with sixty days notice. The
Company has had a relationship with Lee for approximately ten years;
however, the termination of this contract would have a material adverse
effect on the Company's financial position and results of operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

Cash and Cash Equivalents -- The Company considers all cash and any highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents.

Property and Equipment -- Property and equipment is stated at cost less
accumulated depreciation. Depreciation is calculated using accelerated and
straight-line methods over the estimated useful lives of the assets which
range from five to ten years. Expenditures for routine maintenance and
repairs are charged to expense as incurred.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

Fair Value of Financial Instruments -- The carrying amounts of cash and
cash equivalents, accounts receivable, accounts payable, and accrued
expenses approximate fair value due to their short-term maturity. The
carrying amount of long-term debt approximates fair value. It is not
practical to determine the fair value of loans from shareholders.

F-116
<PAGE> 187

FERNANDEZ AND KALEMERIS, P.A. D/B/A
GULF COAST PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentrations of Credit Risk -- Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist principally
of accounts receivable. The Company grants credit without collateral to its
patients, most of whom are local residents and are insured under
third-party payor agreements. The major third-party payors are Medicare,
Medicaid, Blue Cross/Blue Shield and various commercial insurance
companies.

Interim Financial Data -- The unaudited statements of operations and
retained earnings and of cash flows for the nine months ended September 30,
1995 include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the Company's
results of operations and cash flows. Operating results for the nine months
ended September 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996.

3. PROPERTY AND EQUIPMENT, NET

Property and equipment at December 31, 1995 and September 30, 1996 was as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Transportation equipment..................................... $ 141,729 $ 141,729
Laboratory equipment......................................... 487,786 491,201
Leasehold improvements....................................... 71,228 65,450
Furniture, fixtures and other equipment...................... 22,983 22,983
------------ -------------
723,726 721,363
Accumulated depreciation..................................... (520,196) (582,993)
------------ -------------
Property and equipment, net.................................. $ 203,530 $ 138,370
========== ==========
</TABLE>

Depreciation expense totaled $88,555 and $64,510 for the year ended
December 31, 1995 and the nine months ended September 30, 1996,
respectively.

4. NET REVENUE

Net revenue consists of gross charges, net of contractual and other
adjustments. Contractual adjustments are based on the difference between
charges at established rates and amounts estimated by management to be
reimbursable by Medicare and Medicaid programs, and public and private
insurance and managed care contracts under applicable laws, regulations,
and program instructions. Collectable amounts are generally less than the
established rates. Final determination of certain amounts earned for
certain patients is subject to review by appropriate program
representatives. Other adjustments represent services provided to patients
for which fees are not expected to be collected at the time the service is
provided.

5. EMPLOYEE PROFIT SHARING PLAN

The Company has a profit sharing plan covering all full-time employees who
meet eligibility requirements. Employer contributions are made to the plan
at the discretion of the Company's Board of Directors. Contributions of
$132,198 and $123,890 were made for the year ended December 31, 1995 and
the nine months ended September 30, 1996, respectively.

6. RELATED PARTY TRANSACTIONS

The Company's shareholders are employed by the Company as physicians and,
accordingly, receive compensation for their services to the Company. The
compensation included in cost of services rendered

F-117
<PAGE> 188

FERNANDEZ AND KALEMERIS, P.A. D/B/A
GULF COAST PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

for these individuals was $4,589,858 and $2,180,011 for the year ended
December 31, 1995 and for the nine months ended September 30, 1996,
respectively.

The Company leases part of its office facilities from a partnership whose
partners are the Company's shareholders. Rent expense from this lease was
$151,584 for the year ended December 31, 1995 and $113,688 for the nine
months ended September 30, 1996, exclusive of any sales taxes.

The Company has loans from shareholders at stated interest rates ranging
from 8% to 12.5%. It is anticipated that these loans will be repaid within
the next twelve months.

7. COMMITMENTS AND CONTINGENCIES

Lease Commitments -- Future minimum lease payments under a capital lease
and noncancellable operating leases at September 30, 1996 were as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASE
--------- -------
<S> <C> <C>
1997............................................................ $19,461 $19,647
1998............................................................ 19,400 7,557
1999............................................................ 20,370
2000............................................................ 1,704
------- -------
$60,935 27,204
=======
Interest on capital lease....................................... (2,122)
-------
Present value of capital lease payments......................... 25,082
Current portion................................................. (17,718)
-------
Long-term portion............................................... $ 7,364
=======
</TABLE>

The Company leases two office sites and an automobile under operating
leases. In addition, the Company occupies four other sites but does not
have signed lease agreements for those sites. Two of those sites are rent
free. Rent expense was $161,733 and $117,162 for the year ended December
31, 1995 and the nine months ended September 30, 1996, respectively.

Liability Insurance -- The Company is insured with respect to general
liability and medical malpractice risks on a claims made basis. Management
is not aware of any claims against the Company. In addition, the Company
has not accrued a loss for unreported incidents or for losses in excess of
insurance coverage, as the amounts, if any, cannot be reasonably estimated
and the probability of an adverse outcome cannot be determined at this
time. It is the opinion of management that the ultimate resolution of any
claims that may be asserted will not have a material adverse effect on the
Company's financial position or results of operations.

Healthcare Regulatory Environment and Reliance on Government
Programs -- The healthcare industry in general, and the services that the
Company provides are subject to extensive federal and state laws and
regulations. Additionally, a significant portion of the Company's net
revenue is from payments by government-sponsored healthcare programs,
principally Medicare and Medicaid, and are subject to audit and adjustments
by applicable regulatory agencies. Failure to comply with any of these laws
or regulations, the results of regulatory audits and adjustments, or
changes in the amounts payable for the Company's services under these
programs could have a material adverse effect on the Company's financial
position or results of operations.

F-118
<PAGE> 189

FERNANDEZ AND KALEMERIS, P.A. D/B/A
GULF COAST PATHOLOGY ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES

The provision for income taxes in the accompanying statements of operations
for the year ended December 31, 1995 and the nine months ended September
30, 1996 consists of the following:

<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Federal and state income taxes:
Current......................................................... $329,613
Deferred........................................................ $76,047 (75,852)
------- --------
$76,047 $253,761
======= ========
</TABLE>

The Company's effective tax rate differs from the statutory federal income
tax rate for the following reasons:

<TABLE>
<CAPTION>
1995 1996
----- -----
<S> <C> <C>
Statutory federal income tax rate.................................... 34.0% 34.0%
State income taxes, net of federal tax benefits...................... 3.7 5.1
Other................................................................ .5 3.4
------ ------
Effective tax rate................................................... 38.2% 42.5%
====== ======
</TABLE>

The sources and amounts of deferred income tax assets and liabilities at
December 31, 1995 and September 30, 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
CURRENT ASSETS CURRENT
(LIABILITIES) (LIABILITIES)
-------------- -------------
<S> <C> <C>
Use of cash basis of accounting for income tax
purposes............................................... $ (320,230) $ (154,717)
Net operating loss carryforward and tax credits.......... 89,661
---------- --------
Total.......................................... $ (230,569) $ (154,717)
========== ========
</TABLE>

9. ACQUISITION

In November 1995, the Company purchased a pathology practice in Port
Charlotte, Florida ("Port Charlotte") for $400,000. The Company assumed
certain operating leases and responsibility for the laboratory licensure
and staffing. The entire purchase price was attributable to goodwill, which
is being amortized over 15 years. Amortization expense for the year ended
December 31, 1995 and for the nine months ended September 30, 1996 was
$2,222 and $20,001, respectively. The acquisition was financed with a
$320,000 note, which is non-interest bearing, and $80,000 in cash. The note
is being repaid in 32 monthly installments of $10,000. The note has been
discounted at 8%. The current portion of the note at December 31, 1995 and
September 30, 1996 was $100,653 and $106,855, respectively. Port
Charlotte's operations did not have a significant impact on the Company's
operations. Accordingly, the pro forma net revenue and results of
operations for the year ended December 31, 1995 and the nine months ended
September 30, 1996 are not materially different from the Company's results
of operations.

10. SUBSEQUENT EVENT

Effective November 1, 1996, the Company's shareholders sold all of the
Company's issued and outstanding common stock to AmeriPath, Inc.

F-119
<PAGE> 190

AmeriPath (LOGO)

6,200,000 SHARES

COMMON STOCK

PROSPECTUS

DEAN WITTER REYNOLDS INC.

HAMBRECHT & QUIST

PIPER JAFFRAY INC.

THE ROBINSON-HUMPHREY
COMPANY, INC.

, 1997
<PAGE> 191

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Company estimates that expenses payable by it in connection with the
offering described in this registration statement (other than underwriting
discounts and commissions) will be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........................ $27,809
NASD filing fee............................................................ $10,482
Nasdaq National Market listing fee......................................... *
Printing expenses.......................................................... *
Accounting fees and expenses............................................... *
Legal fees and expenses.................................................... *
Fees and expenses (including legal fees) for qualifications under state
securities laws.......................................................... *
Registrar and Transfer Agent's fees and expenses........................... *
Miscellaneous.............................................................. *
-------
Total................................................................. $ *
=======
</TABLE>

- ---------------

* To be provided by amendment.

All amounts except the Securities and Exchange Commission registration fee,
the NASD filing fee and the Nasdaq National Market listing fee are estimated.
The Company intends to pay all expenses of registration with respect to shares
being sold by the Selling Stockholders hereunder, with the exception of
underwriting discounts and commissions.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company has authority under Section 145 of the Delaware General
Corporations Law to indemnify its directors and officers to the extent provided
in such statute. The Company's Amended and Restated Certificate of
Incorporation, filed as Exhibit 3.2 to this Registration Statement, provides
that the Company shall indemnify its executive officers and directors to the
fullest extent permitted by law either now or hereafter.

At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought, nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.

Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Securities Act.

The Company intends to obtain prior to the closing of this offering
directors and officers liability insurance for the benefit of its directors and
certain of its officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Pursuant to the Recapitalization in February 1994: (i) Summit and Schroder
purchased 3,084,730 and 123,389 shares, respectively, of the Convertible
Preferred Stock for $5,288,250 million and $211,750 million, respectively; and
(ii) ALA issued 475,200 shares of common stock to each of Drs. Demaray, Poulos
and Kowalczyk, the owners of PDK, for an aggregate purchase price of $1.0
million.

In April 1996, the remaining obligations under the ALA Contingent Notes
were canceled in exchange for an aggregate of 194,400 shares of Common Stock
(64,800 shares to each of Drs. Demaray, Poulos and Kowalczyk).

II-1
<PAGE> 192

In connection with the Share Exchange and formation of AmPath in February
1996, each of Summit, Schroder and Dr. Demaray, Poulos and Kowalczyk exchanged
their respective holdings of Convertible Preferred Stock and Common Stock of ALA
for the same number and type of debt and equity securities of the Company. No
additional consideration was paid in connection with these transactions. Also in
February 1996, Summit and Schroder converted 115,388 and 4,616 shares,
respectively, of the Convertible Preferred Stock to 207,697 and 8,307 shares,
respectively, of Common Stock.

Summit and Schroder will convert their shares of Convertible Preferred
Stock into an aggregate of 5,558,609 shares of Common Stock prior to
consummation of this offering. The Company has reserved 5,558,609 shares of
Common Stock for the conversion of the Convertible Preferred Stock.

Effective June 30, 1996, the Company consummated the acquisition of Derrick
and in connection therewith issued an aggregate of 600,005 shares of Common
Stock to the 19 shareholders of Derrick. On October 13, 1996, the Company
consummated the acquisition of Seidenstein and in connection therewith issued an
aggregate of 75,834 shares of Common Stock to the three shareholders of
Seidenstein. On September 30, 1996, the Company consummated the acquisition of
Richfield Labs and in connection therewith issued an aggregate of 153,333 shares
of Common Stock to the two shareholders of Richfield Labs. On October 15, 1996,
the Company consummated the acquisition of CPI and in connection therewith
issued an aggregate of 96,000 shares of Common Stock to the shareholder of CPI.
On September 30, 1996, the Company consummated the acquisition of Volusia and in
connection therewith issued an aggregate of 6,666 shares of Common Stock to one
of the eight shareholders of Volusia. On November 4, 1996, the Company
consummated the acquisition of Gulf Coast and in connection therewith issued an
aggregate of 200,000 shares of Common Stock to the two shareholders of Gulf
Coast. On November 19, 1996, the Company entered into 21 separate agreements
with respect to the issuance of shares of Common Stock in exchange for the
surrender of contingent rights to receive Common Stock in the future. In
connection with such agreements, the following shares were issued: 44,444 to Les
B. Rosen, M.D.; 22,222 to Kip Amazon, M.D.; 28,750 to each of Robert E. Jones,
Jr., M.D. and James E. Elder, M.D.; 77,820 to David R. Barron, M.D.; 22,180 to
Ruth S. Kleier, M.D.; 50,000 to Beno Michel, M.D.; 12,525 to each of James
Arocho, M.D., Jane Chen, M.D., William Douglas, M.D., Thomas Greer, M.D., Steven
Popok, M.D., James Roberts, M.D. and Lori Shehi, M.D.; 50,000 to Clay J.
Cockerell, M.D.; 59,666 to James E. Dunnington, M.D.; 63,189 to each of Lawrence
Seidenstein, M.D., Steven E. Levine, M.D. and David M. Reardon, M.D.; and
150,000 to each of George C. Kalemeris, M.D. and Richard Fernandez, M.D.

Each of the above issuances of shares of Common Stock was exempt from
registration under the Securities Act pursuant to an exception provided by
Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------------------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- AmeriPath's Amended and Restated Certificate of Incorporation*
3.2 -- AmeriPath's Amended and Restated Bylaws*
5.1 -- Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the
validity of the Common Stock being registered*
10.1 -- Amended and Restated 1996 Stock Option Plan**
10.2 -- Employment Agreement, dated as of October 24, 1995, between AmeriPath and James C.
New**
10.3 -- Employment Agreement, dated as of August 2, 1993, as amended, between ALA and Robert
P. Wynn.**
10.4 -- Employment Agreement, dated as of January 1, 1994, between AmeriPath and Michael J.
Demaray, M.D.**
10.5 -- Employment Agreement, dated June 30, 1996, between AmeriPath and Alan Levin, M.D.**
10.6 -- Employment Agreement, dated as of September 30, 1996, between AmeriPath Florida and
Alan Levin, M.D., as amended**
10.7 -- Employment Agreement, dated as of June 30, 1996, between AmeriPath Florida and
Timothy Kilpatrick, M.D.**
</TABLE>

II-2
<PAGE> 193

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------------------
<C> <S> <C>
10.8 -- Credit Agreement, dated as of May 29, 1996, among AmeriPath, Inc., the subsidiaries
of AmeriPath, Inc. from time to time party thereto, the lenders from time to time
party thereto and The First National Bank of Boston**
10.9 -- Amendment No. 1 to Credit Agreement, dated as of August 30, 1996, between AmeriPath,
Inc., its Subsidiaries and The First National Bank of Boston**
10.10 -- Amendment No. 2 to Credit Agreement, dated as of November 4, 1996, between
AmeriPath, Inc., its Subsidiaries and The First National Bank of Boston**
10.11 -- Lease dated as of April 8, 1988 by and between MLS Properties, Inc. and E.G. Poulos,
M.D., M.J. Demaray, M.D. & A.P. Kowalczyk, M.D., P.A., doing business as American
Laboratory Associates
10.12 -- Stock Purchase Agreement, dated as of May 23, 1996, among AmeriPath, Inc., Derrick &
Associates and the shareholders of Derrick & Associates**
10.13 -- Stock Purchase Agreement, dated as of September 30, 1996, by and among AmeriPath,
Inc., David R. Barron, M.D., Inc., Ruth S. Kleier, M.D. and David R. Barron, M.D.**
10.14 -- Stock Purchase Agreement, dated as of October 31, 1996 among AmeriPath, Inc., Gulf
Coast Pathology Associates, Inc., Richard Fernandez, M.D., and George Kalemeris,
M.D.**
10.15 -- Form of Stock Rights Surrender & Restricted Stock Grant Agreement**
10.16 -- 1996 Director Stock Option Plan**
10.17 -- American Laboratory Associates, Inc. Series A Preferred Stock, Common Stock and
Junior Subordinated Note Purchase Agreement, dated as of January 1, 1994
10.18 -- Letter Agreement, dated September 18, 1996, between Acquisition Management Services,
Inc. and AmeriPath, Inc.
10.19 -- AmeriPath Management Agreement by and between AmeriPath Cincinnati, Inc. and
AmeriPath Ohio, Inc., dated September 30, 1996
10.20 -- Management Agreement by and between Beno Michel, M.D., Inc. and AmeriPath, Inc.,
dated October 15, 1996
10.21 -- Management Agreement by and between Clay J. Cockerell, M.D., P.A. and AmeriPath
Texas, Inc., dated September 30, 1996, as amended January 16, 1997
10.22 -- Agreement for Professional Pathology Services between SmithKline Beecham Clinical
Laboratories, Inc. and Derrick and Associates Pathology, P.A., dated April 1, 1992
10.23 -- Agreement for Medical Directorship between SmithKline Beecham Clinical Laboratories,
Inc. and Derrick and Associates Pathology, P.A., dated April 1, 1992
10.24 -- Agreement for Professional Pathology Services between SmithKline Beecham Clinical
Laboratories, Inc. and AmeriPath Florida, Inc., dated November 1, 1996
21.1 -- Subsidiaries of AmeriPath
23.1 -- Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (to be
included in its opinion to be filed as Exhibit 5.1)*
23.2 -- Consent and Report on Schedules of Deloitte & Touche LLP
23.3 -- Consent of Deloitte & Touche LLP (Fort Lauderdale, Florida)
23.4 -- Consent of Deloitte & Touche LLP (Orlando, Florida)
23.5 -- Consent of Deloitte & Touche LLP (Cincinnati, Ohio)
23.6 -- Consent of Deloitte & Touche LLP (Dallas, Texas)
24.1 -- Reference is made to the Signatures section of this Registration Statement for the
Power of Attorney contained therein**
</TABLE>

- ---------------

* To be filed by amendment.
** Previously filed.

(b) Financial Statement Schedules:

The following supplemental schedules can be found on the indicated
pages of this Registration Statement.

<TABLE>
<CAPTION>
ITEM PAGE
------------------------------------------------------------------------------ ----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts.............................. S-1
</TABLE>

All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.

II-3
<PAGE> 194

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule e and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 195

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Riviera Beach, State of
Florida, on January 21, 1997.

AMERIPATH, INC.

By: /s/ JAMES C. NEW
------------------------------------
James C. New
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ ------------------------ ------------------
<C> <S> <C>

/s/ JAMES C. NEW President, Chief January 21, 1997
- ------------------------------------------------ Executive Officer and
James C. New Director (principal
executive officer)
* Chief Operating Officer January 21, 1997
- ------------------------------------------------ and Director
Alan Levin, M.D.

/s/ ROBERT P. WYNN Executive Vice President January 21, 1997
- ------------------------------------------------ and Chief Financial
Robert P. Wynn Officer (principal
financial officer and
principal accounting
officer)

* Executive Vice January 21, 1997
- ------------------------------------------------ President, Medical
Michael J. Demaray, M.D. Director and Director

* Chairman of the Board January 21, 1997
- ------------------------------------------------ and Director
Thomas S. Roberts

* Director January 21, 1997
- ------------------------------------------------
Timothy Kilpatrick, M.D.

* Director January 21, 1997
- ------------------------------------------------
E. Roe Stamps, IV

*By: /s/ JAMES C. NEW
- ------------------------------------------------
James C. New
Attorney-in-fact
</TABLE>

II-5
<PAGE> 196

AMERIPATH, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND NINE MONTHS ENDED SEPTEMBER 30,
1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
CHARGED TO
BEGINNING STATEMENT OTHER WRITE-OFFS AND ENDING
DESCRIPTION BALANCE OF OPERATIONS INCREASES(1) OTHER ADJUSTMENTS BALANCE
- -------------------------------------- --------- ------------- ------------ ----------------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowances for contractual, other
adjustments and uncollectible
accounts............................ $ 796 $ 2,887 $ 0 $ (2,398) $ 1,285
====== ====== ====== ======== ======
Year ended December 31, 1994:
Allowances for contractual, other
adjustments and uncollectible
accounts............................ $ 1,285 $ 3,569 $ 0 $ (3,355) $ 1,499
====== ====== ====== ======== ======
Year ended December 31, 1995:
Allowances for contractual, other
adjustments and uncollectible
accounts............................ $ 1,499 $ 4,258 $ 0 $ (3,834) $ 1,923
====== ====== ====== ======== ======
Nine months ended September 30, 1996:
Allowances for contractual, other
adjustments and uncollectible
accounts............................ $ 1,923 $ 9,917 $7,368 $ (10,032) $ 9,176
====== ====== ====== ======== ======
</TABLE>

- ---------------

(1) Represents the allowances for contractual, other adjustments and
uncollectible accounts related to the recent acquisitions completed on or
before September 30, 1996.

S-1

<PAGE> 1

EXHIBIT 10.11

LEASE

THIS LEASE, executed this 8th day of April, 1988, in consideration of
the following covenants, agreements, limitations and conditions entered into by
the parties hereto for themselves, their heirs, successors, legal
representatives and assigns, MLS PROPERTIES, INC., hereinafter called Landlord
does lease unto E.G. POULOS, M.D., M.J. DEMARAY, M.D. & A.P. KOWALCZYK, M.D.,
P.A., doing business as AMERICAN LABORATORY ASSOCIATES hereinafter jointly,
severally and collectively called the tenant, the premises described as:

LEGAL DESCRIPTION: Lot 2 and that part of the planting strip lying east of and
adjacent to the Northeast 14th Avenue right of way between the North and South
lines of Lot 2 extended East, Block 2, Coral Ridge Isles Plat Book 45 at Page
47 of the Public Records of Broward County, Florida

to be occupied only as medical laboratory unless written consent of landlord to
occupy for other purposes is first obtained for the stated period of APRIL 1,
1988 to MARCH 31, 1993. The rent for said term shall be the sum of
$658,425.00. PLUS APPLICABLE SALES TAX payable monthly at the rate of
$10,973.50 plus tax.

OPTIONS: The Tenant shall have the option to renew this lease upon the same
terms and conditions for three additional five-year periods.

1. PROVIDING ALWAYS, and the tenant hereby covenants as follows to pay
the rent punctually in advance on the 1ST day of each and every month during
the said term to the Landlord at the designated address.

2. To make any and all repairs to the said premises, plumbing,
fixtures, wiring, etc., when the damage was in any way caused by the fault or
negligence of the said tenant; will at the end of the lease surrender and
deliver up said premises, without demand, in as good order and conditions as
when entered upon, loss by fire, inevitable accident, ordinary wear and decay
only executed. The tenant shall maintain air-conditioning and heat and all
repairs on said premises, and maintain the roof in a water tight condition.

3. That in the event the premises are destroyed or so damaged by fire
or other unavoidable casualty as to be unfit for occupancy or use, then the
rent hereby reserved, or a fair and just proportion thereof, according to the
nature and extent of the damage sustained, shall, until the said premises shall
have been rebuilt or reinstated, be suspended and cease to be payable, or this
lease shall, at the election of the landlord, thereby be determined and ended,
provided, however, that this agreement shall not be construed so as to extend
the term of this lease or to render the landlord liable to rebuild or replace
the said premises.

<PAGE> 2
4. To permit the landlord or his agent, at any reasonable time to
enter said premises or any part thereof for the purpose of exhibiting the same
or making repairs thereto.

5. To pay all charges for electricity, water and gas used on said
premises; not to hold the landlord responsible for any delay in the
installation of electricity, water or gas, or meters therefor, or interruption
in the use and services of such commodities.

6. Not to use the demised premises or any part thereof, or permit the
same to be used for any illegal, immoral or improper purposes; not to make, or
permit to be made, any disturbance, noise or annoyance whatsoever detrimental
to the premises or the comfort and peace of the inhabitants of the vicinity of
the demised premises.

7. TAXES: The Tenant shall be responsible for the payment of all real
estate and personal property taxes on the subject property during the term of
this lease.

8. INSURANCE: The Tenant shall pay for Hazard Insurance on the subject
property in the minimum amount of $411,000.00. The tenants agree to obtain
premises liability insurance in the minimum amount of $100,000.00 per
individual, $300,000.00 per occurance on the subject premises.

9. DEFAULT:

If default is made in the payment of rent as above set forth, or any
part thereof, or if said tenant shall violate any of the covenants and
conditions of this lease, then the tenant shall become a tenant at sufferance,
thereby waiving all right of notice to vacate said premises, and the said
landlord shall be entitled to re-enter and re-take possession immediately of
the demised premises; that if any installment of rent shall remain unpaid for
three (3) days after written notice of such non-payment shall have been served
on the said tenant, or posted in a conspicuous place on said premises, then the
entire rental to the end of this lease shall become at once due and payable
without demand and may be recovered forthwith by distress or otherwise, and in
all proceedings under this lease for the recovery of rent in arrears, whether
said rent accrued before or after the expiration of this lease, and whether by
distress or other action at law, the said tenant hereby waives the benefit of
homestead and other exemption laws, any law to the contrary notwithstanding,
and agrees to pay the landlord reasonable attorney's fees, together with all
costs of such collection and in the event tenant is evicted by suit at law said
tenant agrees to pay to said landlord all costs of such suit, including a
reasonable attorney's fee; that no assent expressed or implied, to any breach
of one or more of the covenants and agreements hereof shall be deemed or taken
to be a waiver of any succeeding or other breach.

10. SUBORDINATION TO THE FIRST MORTGAGE:

This lease and any and all interest of the Tenant are inferior to and
are subordinated to the interest of Barnett Bank of South Florida, N.A., and or
its assigns and or successors, by reason of the first mortgage by and between
MLS Properties, Inc. as Mortgagor and the Barnett Bank of South Florida, N.A.
as Mortgagee dated April 8, 1988 encumbering said property.

2
<PAGE> 3
12. All covenants and agreements of this lease shall be binding upon
and apply to the heirs, executors, legal representatives, and assigns of the
respective parties hereto.

IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the

day and year first above written.

Signed and sealed in the presence of:

AS TO TENANTS:

E.G. POULOS, M.D., M.J.
DEMARAY, M.D. & A.P.
KOWALCZYK, M.D., P.A.

/s/ Gary Davis
- ---------------------------

/s/ Bettie C. Earnest /s/ Evangelos Poulos
- ----------------------------- --------------------------------
by EVANGELOS POULOS
PRESIDENT

AS TO LANDLORD:

/s/ Michael J. Demaray MLS PROPERTIES, INC.
- -----------------------------

/s/ Robert P. Wynn /s/ Sannie Demaray
- ---------------------------- --------------------------------
by SANNIE DEMARAY,
PRESIDENT

STATE OF FLORIDA
COUNTY OF BROWARD

Before me personally appeared EVANGELOS POULOS, as PRESIDENT of E.G. POULOS,
M.D., J.M. DEMARAY, M.D. & A.P. KOWALCZYK, M.D., P.A. to me known to be the
person who signed the foregoing instrument and severally acknowledged the
execution thereof to be his free act and deed as such officer for the use and
the purpose therein mentioned and that he affixed thereto the official seal of
said corporation, and that the said instrument is the act and deed of said
corporation.

WITNESS my hand and seal this 8 day of April, 1988.

My Commission Expires: -------------------------------
Notary Public

STATE OF FLORIDA
COUNTY OF BROWARD

Before me personally appeared SANNIE DEMARAY, as PRESIDENT of MLS PROPERTIES,
INC. to me known to be the person who signed the foregoing instrument and
severally acknowledged the execution thereof to be her free act and deed as
such officer for the use and the purpose therein mentioned and that she affixed
thereto the official seal of said corporation, and that the said instrument is
the act and deed of said corporation.

WITNESS my hand and seal this 8 day of April, 1988.

My Commission Expires: -------------------------------
Notary Public

This instrument prepared by:
Frederick J. Ramirez, Esq.
6444 Pembroke Road
Miramar, FL
989-4100
<PAGE> 4

MODIFICATION OF THE LEASE

The Parties whose names appear below, representing "E.G. Poulos, M.D., M.J.
Demaray, M.D. & A.P. Kowalczyk, M.D., P.A." (the "Tenant") and MLS Properties,
Inc. (the "Landlord"), acknowledge that they had executed a certain "Lease"
dated April 8, 1988.

Whereas, the Parties determined that it was their intent that the Tenant occupy
the subject property at 6061 N.E. 14th Avenue, Fort Lauderdale, Florida for the
term as set forth in the Lease, and to use such property as a medical
laboratory.

Whereas, the Landlord has acquired an additional parcel of property contiguous
to the existing property to accommodate the Tenant's parking requirements.

Whereas the Parties determined that for certain business reasons that the
monthly payment for the initial term of the lease (April 1, 1988 to March 31,
1993) be less than the amount as stipulated in the Lease, and that the Landlord
did in fact agree to accept, and the Tenant did in fact agree to pay, a monthly
rental for the initial term of the lease of $8,550.60.

Therefore,
(1) The Parties hereby agree that the Lease dated April 8, 1988 is modified to
reflect a monthly rent of $8,550.60 during the initial lease term.
(2) The Parties hereby agree to execute the first five-year renewal option of
the Lease dated April 1, 1988.
(3) The Parties hereby agree that commencing April 1, 1993 the monthly rent
shall be $10,973.50 plus applicable sales taxes. All other terms and
conditions of the Lease, as renewed, shall remain in full force and effect.

AS TO THE TENANTS:

/s/ Evangelos Poulos
- --------------------
By: Evangelos Poulos
President
American Laboratory Associates

AS TO THE LANDLORD:

/s/ Sannie Demaray
- --------------------
By: Sannie Demaray
President
MLS Properties, Inc.

<PAGE> 1
EXHIBIT 10.17

AMERICAN LABORATORY ASSOCIATES, INC.

SERIES A PREFERRED STOCK, COMMON STOCK
AND JUNIOR SUBORDINATED
NOTE PURCHASE AGREEMENT

Dated as of January 1, 1994

<PAGE> 2

AMERICAN LABORATORY ASSOCIATES, INC.

SERIES A PREFERRED STOCK, COMMON STOCK
AND JUNIOR SUBORDINATED
NOTE PURCHASE AGREEMENT

Dated as of January 1, 1994

INDEX
<TABLE>
<CAPTION>
Page

ARTICLE I

<S> <C>
Purchase and Sale of Securities

1.1 Authorization of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Reservation of Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Creation of Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Purchase and Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Financing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE II

Terms of Junior Notes

2.1 Issue of Junior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Redemptions and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARTICLE III

Representations and Warranties of the Company

3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Validity of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Securities 1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE IV

Representations, Warranties and Agreements of the Investors

4.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Legends; Stop Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>

- i -
<PAGE> 3

<TABLE>

ARTICLE V
<S> <C>
Affirmative Covenants of the Company

5.1 Accounts and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Maintenance of Key Man Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Compliance with Laws, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Corporate Existence; Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.10 Meetings of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.12 Rule 144A Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.13 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.14 Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE VI

Negative Covenants of the Company

6.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Dealings with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Merger; Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Limitations on Restrictions on
Subsidiary Dividends and Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.7 No Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8 Limitation on Certain Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE VII

Preemptive Right

7.1 Preemptive Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Definition of New Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Notice from the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Sale by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Determination of Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.6 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE VIII

Registration Rights

8.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2 Requested Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 "Piggy Back" Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

- ii -
<PAGE> 4

<TABLE>
<S> <C>
8.4 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 Registration on Form S-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.6 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.8 Information by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.9 Limitations on Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.10 Exception to Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.11 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.12 Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.13 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE IX

Conditions of Purchasers' Obligation

9.1 Effect of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.4 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.6 Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.7 Redemption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.8 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.9 Board of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.10 Completion of Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE X

Defaults and Remedies

10.1 Events of Default; Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Rescission of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE XI

Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE XII

Miscellaneous

12.1 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.2 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.3 Securities Owned by Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.4 Amendments of Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>

- iii -
<PAGE> 5

<TABLE>
<S> <C> <C>
12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.8 Effect of Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.9 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.10 Future Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

EXHIBITS

A Form of Junior Subordinated Note
B Statement of Terms of Preferred Stock
C Stock Option Plan
D Intentionally Omitted
E Opinion of Counsel for the Company
F Shareholders' Agreement
G Redemption Agreement
H Employment Agreement

</TABLE>

- iv -
<PAGE> 6
This Series A Preferred Stock, Common Stock and Junior Subordinated Note
Purchase Agreement is entered into as of the 1st day of January, 1994, by and
among American Laboratory Associates, Inc., a Delaware Corporation (the
"Company"), Summit Ventures III, L.P. and Summit Investors II, L.P.
(collectively "Summit"), Schroder Incorporated, Schroder Ventures Limited
Partnership and Schroder Ventures U.S. Trust (collectively, "Schroder", and
together with Summit, the "Institutional Investors"), and Drs. Evangelos Poulos,
Michael Demaray and Alexander Kowalczyk (collectively, the "Management Investors
and, together with the Institutional Investors, the "Investors").

WHEREAS, the Company has been formed for the purpose of acquiring (the
"Acquisition") substantially all of the assets and liabilities of E.G. Poulos,
M.D., M.J. Demaray, M.D. & A.P. Kowalczyk, M.D., P.A. (the "Seller") pursuant
to an Asset Purchase Agreement of even date (the "Purchase Agreement");

WHEREAS, the Investors wish to acquire Series A Preferred Stock, Common
Stock and Junior Subordinated Notes of the Company, all in accordance with and
subject to the terms of this Agreement, all of the proceeds of which securities
will be used to fund a portion of the purchase price of the Acquisition;

NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and conditions set forth in this Agreement, the parties to
this Agreement, intending to be legally bound, mutually agree as follows:

ARTICLE I

PURCHASE AND SALE OF SECURITIES

1.1 Authorization of Securities. The Company has authorized:

(a) the issuance and delivery to the Institutional Investors of its 10%
junior subordinated notes (herein, together with any such notes which may be
issued hereunder in substitution or exchange therefor in accordance with the
terms thereof, collectively called the "Junior Notes"), in the aggregate
principal amount of $7,500,000, to be dated January 1, 1994, and to mature
December 31, 2001 (the "Maturity Date"), which Junior Notes shall be purchased
at the face amount thereof and shall be in the form of Exhibit A hereto;

(b) the issuance and delivery to the Institutional Investors of 80,203
shares of Series A Convertible Preferred

<PAGE> 7
Stock, $.01 par value per share, of the Company (the "Preferred Stock"), at a
price of $68.576 per share, for a total purchase price of all such shares of
Series A Preferred Stock of $5,500,000; and

(c) the issuance and delivery to the Management Investors of 19,800
shares of Common Stock, $.01 par value per share, of the Company (the "Common
Stock"), at a price of $50.5051 per share, for a total purchase price of all
such shares of Common Stock of $1,000,000. As used herein, the term
"Securities" shall include the Junior Notes, the Preferred Stock and the Common
Stock.

1.2 Reservation of Shares of Common Stock. The shares of Preferred Stock
shall have the rights, terms and privileges set forth in Exhibit B hereto, and
shall be convertible into shares of Common Stock on the terms set forth in said
Exhibit. The Company shall reserve from its authorized but unissued shares of
Common Stock 80,203 shares for issuance upon conversion of the Preferred Stock.
The shares of Common Stock issuable upon conversion of the Preferred Stock are
referred to herein as the "Conversion Shares", and the shares of Preferred
Stock purchased hereunder, together with the Conversion Shares, are sometimes
hereinafter referred to collectively as the "Shares".

1.3 Creation of Stock Option Plan. At the Closing (as herein defined),
the directors and shareholders of the Company shall adopt the Stock Option Plan
in the form of Exhibit C hereto pursuant to which 10,000 shares of authorized
but unissued Common Stock shall be reserved for issuance thereunder (the "Stock
Option Plan"). The Stock Option Plan shall be administered by the Compensation
Committee; provided, however, that no options shall be granted thereunder with
an exercise price less than the price payable hereunder for the Common Stock
(subject to adjustment for stock splits, dividends and other forms of
recapitalization), and none of the Management Investors shall be eligible for
participation in such Stock Option Plan.

1.4 Purchase and Sale of Securities. The Company agrees to issue and
sell to each Investor and, subject to the terms and conditions herein set forth,
each Investor agrees to purchase from the Company at the Closing (as defined
below) the aggregate principal amount of the Junior Notes and the number of
shares of Preferred Stock and Common Stock set forth opposite such Investor's
name on a Schedule which will be delivered to the Company at the Closing (as
defined below) and attached hereto as Schedule 1.4, for the aggregate purchase
price set forth opposite such Investor's name on such

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Schedule. The partnerships comprising Summit will purchase not less than 85%
in number of the shares of Preferred Stock and not less than 85% in principal
amount of the Junior Notes.

1.5 Closing. The purchase and sale of the Securities shall be
consummated at a closing (the "Closing") to be held at the offices of Hutchins,
Wheeler, & Dittmar, A Professional Corporation, 101 Federal Street, Boston,
Massachusetts, at 10:00 A.M. on such date on or before February 28, 1994 as the
Investors and the Company may mutually agree. Payment at the Closing for the
Securities shall be by wire transfer payable in immediately available federal
funds. At the Closing, the Company will deliver to each Investor one or more
certificates representing the Junior Notes, the Preferred Stock and the Common
Stock purchased by such Investor, in such denominations and issued in such
names as may be requested by such Investor. Should the Closing not occur on or
before February 28, 1994, either the Company or the Investors may terminate
this Agreement by written notice to the other party. Concurrently with the
consummation of the issuance of the Securities as herein contemplated, the
transaction contemplated in the Purchase Agreement will be closed.

1.6 Use of Proceeds. The Company shall use all of the proceeds from the
sale of the Securities hereunder to fund in part the Acquisition.

1.7 Allocation of Purchase Price. The Company and each of the Investors
hereby agree that for Federal income tax purposes, including for purposes of
determining original issue discount and the issue price of the Junior Notes
under the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder (the "Treasury Regulations"), the issue
price for the Junior Notes shall be the principal amount thereof as set forth
on Schedule 1.4 hereto, such that in the aggregate, the issue price of the
Junior Notes shall be $7,500,000, and that the issue price of the Preferred
Stock shall be the purchase price for those shares set forth on Schedule 1.4
hereto, such that in the aggregate, the issue price for the shares of Preferred
Stock shall be $5,500,000. The Company and each of the Investors hereby
further agree that the allocation of the issue price pursuant to the preceding
sentence shall be binding on the Company for purposes of any determination by
the Company of the issue price of the Junior Notes pursuant to the Treasury
Regulations.

1.8 Financing Fee. At the Closing, upon purchase of the Securities as
provided in Section 1.4, the Company shall pay in cash to Summit Partners, L.P.
or its designee a financing fee of one hundred ninety thousand ($190,000)
dollars.

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ARTICLE II

TERMS OF JUNIOR NOTES

2.1 Issue of Junior Notes. At the Closing, the Company shall deliver to
the Institutional Investors the Junior Notes in the aggregate principal amount
of $7,500,000 to be dated January 1, 1994, and to mature on the Maturity Date,
which Junior Notes shall be in the form of Exhibit A hereto.

2.2 Interest.

(a) Interest. The Junior Notes shall bear interest from January 1,
1994 until the Maturity Date, computed on the basis of a 360-day year and the
actual number of days elapsed, on the unpaid principal amount thereof at the
rate of ten percent (10%) per annum. Interest only shall be payable on each
March 31, June 30, September 30 and December 31 for the respective three-month
period ending on each such date, commencing on March 31, 1994.

(b) Payments. All payments of principal (including any prepayments
or redemptions) and interest hereunder shall be made by the Company in lawful
money of the United States of America in immediately available funds (or at the
written request of the Investors or any successor holder of this Junior Note,
by certified or bank check) not later than 12:00 noon, Boston time, on the date
each such payment is due.

(c) Intercreditor Agreement. The Junior Notes shall be subordinate
and junior in right of payment to senior indebtedness pursuant to an
intercreditor agreement to be on terms mutually acceptable to the holders of a
majority in principal amount of the Junior Notes (the "Intercreditor
Agreement"). For purposes of this Agreement, the term "senior indebtedness"
shall include each of the following:

(i) any indebtedness now existing or hereafter incurred for
money borrowed from or owed to a bank or other financial institution ("Bank
Debt"); and

(ii) principal and interest owed pursuant to the Senior
Subordinated Notes and Contingent Notes (as each of said terms is defined
herein).

2.3 Redemptions and Prepayments.

(a) Mandatory Annual Prepayments. The Company shall prepay, on each
of December 31, 1999 and December 31, 2000, $2,500,000 of the principal amount
of the Junior Notes

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<PAGE> 10

then outstanding and shall pay in full the remaining principal amount of the
Junior Notes then outstanding on the Maturity Date. Upon any prepayment of the
principal amount of any Junior Notes under this Section 2.3(a), the Company
shall also pay to the holder or holders of such Junior Notes any accrued and
unpaid interest thereon to the date of prepayment (or repayment). Any
prepayment made by the Company pursuant to any other provision of this Article
II shall not reduce or otherwise affect its obligations to make any prepayment
required by this Section 2.3(a).

(b) offer of Prepayment upon Major Corporate Transaction. The
Company covenants that, in the event of (x) the initial underwritten public
offering of equity securities of the Company (the "IPO") pursuant to a
registration statement filed under the Securities Act of 1933, as amended (the
"1933 Act"), (y) the sale of all or substantially all of the stock or assets of
the Company, or (z) the merger or consolidation of the Company as a result of
which those persons who hold 100% of the voting stock of the Company
immediately prior to such transaction own less than 50% of the voting stock of
the surviving resulting entity (each transaction referred to in clauses (x),
(y) or (z) being referred to as a "Major Corporate Transaction"), the Company
shall give the holders of the Junior Notes thirty days' written notice of the
pendency of such Major Corporate Transaction and the Company shall, upon
written demand of the holders of a majority in aggregate principal amount of
the Junior Notes then outstanding made within twenty days of receipt of such
notice, prepay upon consummation of such Major Corporate Transaction the entire
principal amount of the Junior Notes then outstanding, without premium,
together with accrued and unpaid interest thereon to and including the date of
such prepayment.

(c) Optional Prepayment. The Company shall be entitled to prepay the
Junior Notes, either in whole or in part, without premium or penalty, at any
time prior to the Maturity Date, at a price equal to 100% of the principal
amount so prepaid, together with accrued interest on the principal amount
prepaid to the prepayment date. The Company shall give the Investors
irrevocable written notice of each optional prepayment not less than three
business days prior to the prepayment date, specifying such prepayment and the
amount of the Junior Notes proposed to be prepaid on such date, whereupon such
principal amount of the Junior Notes specified in such notice, together with
accrued interest thereon, shall become due and payable on the prepayment date.
Any partial prepayment of the Junior Notes shall be applied to reduce the
remaining payments on the Junior Notes in inverse order of maturity.

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(d) Partial Redemption Pro Rata. Each and every partial prepayment
of the Junior Notes authorized by this Article II shall be made with respect to
all of the Junior Notes then outstanding under this Agreement, rather than to
any portion thereof, and the aggregate amount of each partial prepayment shall
be allocated among all of the holders of the Junior Notes at the time
outstanding in proportion to the unpaid principal amounts of the Junior Notes
held by each of such holders.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investors that:

3.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The Company has
been formed for the purpose of effecting the Acquisition, and has no assets or
liabilities, and has conducted no business, other than such assets and
liabilities which have been created or incurred, and such business as has been
conducted, in connection with the effecting of such Acquisition.

3.2 Capitalization. The authorized capital stock of the Company consists
of (a) 200,000 shares of Common Stock, none of which were issued and
outstanding as of immediately prior to the Closing, and 100,000 shares of
Preferred Stock, which have the rights, terms and privileges set forth in
Exhibit B attached hereto, and none of which were outstanding as of immediately
prior to the Closing. Immediately following the Closing and after giving
effect to the sale of the Securities, there will be outstanding 80,203 shares
of Series A Convertible Preferred Stock and 19,800 shares of Common Stock,
which shares will be held of record as set forth on Schedule 3.2 which will be
attached hereto at the Closing.

3.3 Authorization. All corporate action on the part of the Company and
its officers and directors necessary for the authorization, execution and
delivery of this Agreement and the Redemption Agreement, the Employment
Agreements and the Shareholders' Agreement (collectively, the "Related
Agreements") and the performance of all obligations of the Company under this
Agreement and the Related Agreements required to be performed at or prior to
the Closing and in

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<PAGE> 12

connection with the authorization, issuance and delivery of the Securities
being sold under this Agreement has been duly taken. This Agreement and the
Related Agreements, when executed and delivered by all parties hereto and
thereto, shall constitute the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
execution by the Company of this Agreement and the Related Agreements, and the
performance by the Company of its obligations hereunder and thereunder, will
not contravene or constitute a default under or violation of, the Certificate
of Incorporation of the Company, the By-Laws of the Company, or any other
agreement to which the Company is a party or by which its assets are bound.

3.4 Validity of Shares. The shares of Preferred Stock and Common Stock,
when issued, sold and delivered in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable.

3.5 Securities Act. The sale of the Securities in accordance with the
terms of this Agreement (assuming the accuracy of the representations and
warranties contained in Article IV hereof) is exempt from the registration
requirements of the 1933 Act and applicable state securities or blue sky laws.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
THE INVESTORS

4.1 Authorization. Each Investor represents and warrants that this
Agreement, when executed and delivered by it, will constitute a valid and
legally binding obligation of such Investor, enforceable against such Investor
in accordance with its terms, except to the extent that the enforceability
hereof may be limited by bankruptcy laws, insolvency laws, reorganization laws,
moratorium laws or other laws affecting creditors' rights generally or by
general equitable principles.

4.2 Investment Representations.

(a) This Agreement is made with each such Investor in reliance upon
such Investor's representation to the Company, which by its acceptance
hereof such Investor hereby confirms, that (i) the Securities to be
received by it will be acquired by it for investment for its own account
(except as such Investor has otherwise advised the Company and the
Company's counsel in writing), and not with

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<PAGE> 13

a view to the sale or distribution of any part thereof in violation of
applicable Federal and state securities laws, (ii) it has no current
intention of selling, granting participation in or otherwise distributing
the same in violation of applicable Federal and state securities laws, and
(iii) that it is an "accredited investor", as that term is defined under
Regulation D promulgated under the 1933 Act. By executing this Agreement,
such Investor further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participation to such person, or to any third person, with respect
to any of the Securities in violation of applicable Federal and state
securities laws.

(b) Such Investor understands that the Securities have not been
registered under the 1933 Act on the basis that the sale provided for
in this Agreement and the issuance of securities hereunder is exempt from
registration under the 1933 Act pursuant to Section 4(2) thereof and
regulations issued thereunder, and that the Company's reliance on such
exemption is predicated on the representations of such Investor set forth
herein.

(c) Such Investor represents that it has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment. Such Investor further
represents that it has had access, during the course of the transaction
and prior to its purchase of Securities, to the same kind of information
that is specified in Part I of a registration statement under the 1933 Act
and that it has had, during the course of the transaction and prior to its
purchase of the Securities, the opportunity to ask questions of, and
receive answers from, the Company concerning the terms and conditions of
the offering and to obtain additional information (to the extent the
Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to it or to which it had access.

(d) Such Investor understands that the Securities may not be sold,
transferred or otherwise disposed of without registration under the
1933 Act or compliance with an exemption therefrom, and that in the
absence of an effective registration statement covering the Securities or
an available exemption from registration under the 1933 Act, the Shares
must be held indefinitely. In particular, such Investor is aware that the
Shares may not be sold pursuant to Rule 144 promulgated under the 1933 Act
unless all of the conditions of that Rule are met. Among

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<PAGE> 14

the current conditions for use of Rule 144 by certain holders is the
availability to the public of current information about the Company. Such
information is not now available, and the Company has no current plans to
make such information available.

(e) Independent of the additional restrictions on the transfer of
shares of Common Stock contained in the Shareholders' Agreement, such
Investor agrees that it will not make a transfer, disposition or pledge of
any of the Securities other than pursuant to an effective registration
statement under the 1933 Act, unless and until (i) such Investor shall
have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding
the disposition, and (ii) if requested by the Company, at the expense of
such Investor or transferee, it shall have furnished to the Company
an opinion of counsel, reasonably satisfactory to the Company and its
counsel, to the effect that such transfer may be made without registration
of the Securities under the 1933 Act.

(f) Such Investor agrees that it will not sell, transfer or otherwise
dispose of any Securities unless (i) such Securities have been
registered under the 1933 Act and, to the extent required, under any
applicable state securities laws, or (ii) such Securities are sold in
accordance with the applicable requirements and limitations of Rule 144 or
Rule 144A, or (iii) the Company has been furnished with an opinion or
opinions from counsel to such Investor (which counsel and which opinion(s)
shall be reasonably satisfactory to the Company) to the effect that
registration under the 1933 Act is not required for the transfer as
proposed (which opinion may be conditioned upon the transferee assuming
the obligations of a holder of Securities under this Section) or (iv) the
Company has been furnished with a letter from the Division of Corporation
Finance of the Securities and Exchange Commission (the "Commission") to
the effect that such Division would not recommend any action to the
Commission if such proposed transfer were effected without a registration
statement effective under the 1933 Act. The Company agrees that within
five business days after receipt of any opinion referred to in (iii)
above, it will notify the holder supplying such opinion whether such
opinion is satisfactory to the Company's counsel. Any transfer of
Securities shall also be subject to the Shareholders' Agreement.

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4.3 Legends; Stop Transfer.

(a) Such Investor acknowledges that all certificates evidencing the
Securities purchased hereunder shall bear the following legend:

"TRANSFER RESTRICTED

These securities have not been registered under the Securities
Act of 1933, as amended, and may not be sold, offered for sale,
pledged or hypothecated in the absence of an effective registration
statement as to the securities under said Act or an opinion of
counsel satisfactory to the Company and its counsel that such
registration is not required."

(b) The certificates evidencing the Shares shall also bear any legend
required by the Shareholders' Agreement or any applicable state securities
law.

ARTICLE V

AFFIRMATIVE COVENANTS OF THE COMPANY

Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe (and will cause each Subsidiary to
observe) the following covenants. These covenants shall continue until
consummation of the first Qualified Public Offering. Prior to such
consummation, these covenants shall exist for the benefit of, and be
enforceable by, the Management Investors so long as any Indebtedness remains
outstanding under the Senior Notes or the Contingent Notes or the Management
Investors and their Permitted Transferees own collectively at least one-third
of the shares of Common Stock acquired pursuant to this Agreement, and these
covenants shall exist for the benefit of, and be enforceable by, the
Institutional Investors so long as any Indebtedness remains outstanding under
the Junior Notes or there are any shares of Preferred Stock held by the
Institutional Investors which have not either been converted into Common Stock
or redeemed.

5.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied (except for
year-end and non-recurring adjustments effected in accordance with generally

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accepted accounting principles) and the Company will, and will cause each of
its Subsidiaries to, keep full and complete financial records. The Company
will furnish to each Person who is entitled to the benefits of this Article V
the information set forth in this Section 5.1.

(a) Within ninety (90) days after the end of each fiscal year, a
copy of the consolidated and consolidating balance sheet of the Company and any
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and any Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all
in reasonable detail and duly audited by an independent public accountant of
national recognition selected by the Board of Directors of the Company and
reasonably acceptable to Investors.

(b) Within forty-five (45) days after the end of each fiscal
quarter, a consolidated and consolidating balance sheet of the Company and any
Subsidiaries as of the end of such fiscal quarter and consolidated and
consolidating statements of income, shareholders' equity and cash flow for such
quarter and for the period from beginning of the then current fiscal year to
the end of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal
year, all in reasonable detail (it being understood that for purposes of
presentation of any comparative financial statements under this Section 5.1,
during the first year of the Company's existence, comparison will be made to
the performance of the Seller during the corresponding period of the year which
statements of the Seller may not be in accordance with generally accepted
accounting principles). The financial statements delivered pursuant to this
paragraph (b) need not be audited, but shall be certified by the chief
financial officer of the Company as presenting fairly the financial condition
of the Company and any Subsidiaries in conformity with generally accepted
accounting principles applied on a consistent basis, subject to changes
resulting from year-end and non-recurring adjustments.

(c) Within thirty (30) days after the end of each calendar month, an
unaudited consolidated balance sheet of the Company and any Subsidiaries as of
the end of such month and unaudited consolidated statements of income and
shareholders' equity for such month and for the period commencing at the end of
the previous fiscal year and ending with the end of such month, setting forth
in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all in reasonable detail.

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(d) At the time of delivery of each monthly, quarterly and annual
statement, a certificate, executed by the chief financial officer of the
Company stating that such officer has caused this Agreement to be reviewed and
has no knowledge of any default by the Company in the performance or observance
of any of the provisions of this Agreement or, if such officer has such
knowledge, specifying such default.

(e) Prior to the end of each fiscal year, a copy of the operating
plan and budget for the next fiscal year required under Section 5.8, in form
consistent with past practice.

(f) Promptly upon receipt thereof, any written report, typically
called a "management letter", and any other communication submitted to the
Company or any Subsidiary by its independent public accountants relating to
the business, prospects or financial condition of the Company and any
Subsidiaries;

(g) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any Subsidiary) which, if successful, could have a
material adverse effect on the Company and any Subsidiaries, taken as a whole;
and (ii) all material defaults by the Company or any Subsidiary (whether or
not declared) under any agreement for money borrowed (unless waived or cured
within applicable grace periods);

(h) Promptly upon sending, making available, or filing the same, all
reports and financial statements as the Company (or any Subsidiary) shall send
or make available generally to the shareholders of the Company as such or to
the Commission; and

(i) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as any Person entitled to the benefits of this Article VI may from
time to time reasonably request.

5.2 Payment of Taxes. The Company will pay and discharge (and cause any
Subsidiary to pay and discharge) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon any properties of the Company (or any Subsidiary), provided that neither
the Company nor any Subsidiary shall be

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<PAGE> 18

required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings if the Company or such
Subsidiary shall have set aside on its books adequate reserves with respect
thereto.

5.3 Maintenance of Key Man Insurance. The Company will, at its expense,
obtain prior to the Closing and thereafter maintain a life insurance policy
with a responsible and reputable insurance company payable to the Company on
the life of each of Drs. Evangelos Poulos, Michael Demaray and Alexander
Kowalczyk so long as such Person is an employee of the Company, each in the
face amount of $2,000,000. The Company will maintain such policies and will
not cause or permit any assignment of the proceeds of such policies, and will
not borrow against such policies. The Company will add one designee of the
Institutional Investors as a notice party to such policies, and will request
that the issuer of such policies provide such designee with ten (10) days'
notice before either such policy is terminated (for failure to pay premium or
otherwise) or assigned, or before any change is made in the designation of the
beneficiary thereof.

5.4 Compliance with Laws, Etc. The Company will comply (and cause each
of its Subsidiaries, if any, to comply) with all applicable laws, rules,
regulations and orders of any governmental authority, the noncompliance with
which could materially adversely affect the business or condition, financial or
otherwise, of the Company.

5.5 Inspection. At any reasonable time during normal business hours and
from time to time, but not more frequently than once per calendar quarter for
all Persons entitled to the benefits of this Article V and their transferees as
a group, upon five (5) days written notice, the Company (and any of its
Subsidiaries) will permit any one or more of the Persons entitled to the
benefits of this Article V, or any of the agents or representatives of the
foregoing Persons, to examine and make copies of and extracts from the records
and books of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its senior officers.

5.6 Corporate Existence; Ownership of Subsidiaries. The Company will,
and will cause its Subsidiaries, if any, to, at all times preserve and keep in
full force and effect their corporate existence, and rights and franchises
material to the business of the Company, and will qualify, and will cause each
of its Subsidiaries, if any, to qualify, to do business as a foreign
corporation in any jurisdiction where the failure to do so would have a
material adverse effect on the business,

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condition (financial or other), assets, properties or operations of the
Company. The Company shall at all times own of record and beneficially, free
and clear of all liens, charges, restrictions, claims and encumbrances of any
nature, all of the issued and outstanding capital stock of each of its
wholly-owned Subsidiaries.

5.7 Compliance with ERISA. The Company will comply (and cause each of
its Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which
are subject to ERISA or to the Code, and comply in all other material respects
with the provisions of ERISA and the Code, and the rules and regulations
thereunder, which are applicable to any such plan. Neither the Company nor any
of its Subsidiaries will permit any event or condition to exist which could
permit any such plan to be terminated under circumstances which could cause the
lien provided for in Section 3068 of ERISA to attach to the assets of the
Company or any of its Subsidiaries.

5.8 Board Approval. Prior to the end of each fiscal year, the Company
will prepare and submit to its Board of Directors for approval prior to such
year-end an operating plan and budget, cash flow projections and profit and
loss projections, all itemized in reasonable detail for the immediately
following fiscal year.

5.9 Financings. The Company will promptly provide to the Board of
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible financing of any nature for
the Company (or any Subsidiaries), whether initiated by the Company or any
other Person.

5.10 Meetings of the Board of Directors. The Directors shall schedule
regular meetings not less frequently than once every sixty days. The Company
shall reimburse the Investors and the Principal Shareholders for all direct
reasonable out-of-pocket expenses incurred by any of their director designees
in attending such meetings. Any action required or permitted to be taken at
any meeting of the Directors, may be taken without a meeting only if all of the
Directors consent thereto in writing.

5.11 Maintenance of Properties; Insurance. The Company will maintain or
cause to be maintained in good repair, working order and condition all
properties used or useful in the business of the Company and any Subsidiaries
and from time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. The Company shall maintain

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with financially sound and reputable insurance companies insurance with respect
to its properties and business and the properties and business of any
Subsidiaries against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar business
and similarly situated, of such type and in such amounts as are customarily
carried under similar circumstances by such other corporations.

5.12 Rule 144A Information. The Company shall, upon the written request
of any Person entitled to the benefits of this Article V, provide to such
Person and to any qualified prospective institutional transferee of the
Securities designated by such Person, such financial and other information as
is available to the Company or can be obtained by the Company without material
expense and as such Person may reasonably determine is required to permit such
transfer to comply with the requirements of Rule 144A promulgated under the
1933 Act.

5.13 Stay, Extension and Usury Laws. For so long as any of the Senior,
Contingent or Junior Notes remain outstanding, the Company covenants (to the
extent it may lawfully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any
stay, extension or usury law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Agreement; and
the Company hereby expressly waives (to the extent it may lawfully do so) all
benefit or advantage of any such law, but will suffer and permit the execution
of every such power as though no such law has been enacted. Notwithstanding
anything herein or in the Senior, Contingent or Junior Notes to the contrary,
in no event shall interest payable with respect to the Senior, Contingent or
Junior Notes exceed the maximum amount permitted by applicable law. If any
payments in the nature of interest, additional interest and other charges made
under this Agreement or under any of the Senior, Contingent or Junior Notes are
held to be in excess of the applicable limits imposed by any applicable federal
or state law, the amount held to be in excess shall be considered payment of
principal under the Senior, Contingent or Junior Notes and the indebtedness
evidenced thereby shall be reduced by such amount, pro-rata, in the inverse
order of maturity so that the total liability for payments in the nature of
interest, additional interest and other charges shall not exceed the applicable
limits imposed by any applicable federal or state interest rate laws.

5.14 Business Practices. The Company shall take all reasonable steps
necessary to ensure that all rates and charges

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imposed by the Company's facilities, and all billing practices relating to such
rates and charges, are legal and proper. The Company will not make or receive,
either directly or indirectly, any Sensitive Payment and the Company shall
comply with all Medicare and Medicaid fraud and abuse laws and regulations, as
well as with all other state and federal false claim, fee splitting, rebate,
patient referral and anti-kickback laws with respect to the referral of
patients or provision of services.

ARTICLE VI

NEGATIVE COVENANTS OF THE COMPANY

Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary, if
any, to comply) with each of the provisions of this Article VI. These
covenants shall continue until consummation of the first Qualified Public
Offering. Prior to such consummation, the covenants set forth in Sections 6.1,
6.2, 6.7 (but only to the extent any violation thereof would or is likely to
adversely affect the interests of the Management Investors) and 6.8 shall exist
for the benefit of, and shall be enforceable by, the Management Investors so
long as any Indebtedness under the Senior Notes or the Contingent Notes remains
outstanding and the covenants contained in Sections 6.2, 6.7 (to the extent set
forth above) and 6.8 shall exist for the benefit of, and shall be enforceable
by, the Management Investors so long as the Management Investors and their
Permitted Transferees own collectively at least one-third of the shares of
Common Stock acquired pursuant to this Agreement, and the covenants set forth
in each section of this Article VI shall exist for the benefit of, and be
enforceable by, the Institutional Investors so long as any Indebtedness under
the Junior Notes remains outstanding or there are any shares of Preferred Stock
held by the Institutional Investors that have not either been converted into
Common Stock or redeemed.

6.1 Distributions. The Company will not declare or pay any dividends
(whether in securities, cash or property), issue, sell, purchase, redeem,
retire, or otherwise acquire for value any of its capital stock (or rights,
options or warrants to purchase such shares) now or hereafter outstanding,
return any capital to its shareholders as such, or make any distribution of
assets to its shareholders as such, or permit any Subsidiary to do any of the
foregoing, except that the Subsidiaries may declare and make payment of cash
and stock dividends, return capital and make distributions of assets to the
Company and

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except that nothing herein contained shall prevent the Company from:

(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of
shares of such class of capital stock;

(ii) repurchasing shares of Common Stock or Preferred Stock from an
Institutional Investor in accordance with the Redemption Agreement
attached as Exhibit G; or

(iii) redeeming the Preferred Stock in accordance with its terms as
set forth on Exhibit B.

Notwithstanding the provisions of clauses (ii) and (iii) of this
Section 6.1, in, no event shall the Company repurchase shares of Common Stock
or Preferred Stock under the Company's Certificate of Incorporation or under
the Redemption Agreement or otherwise, pay dividends to the Preferred Stock
holders, prepay the Junior Notes (in whole or in part) or redeem Preferred
Stock in accordance with its terms so long as any indebtedness remains
outstanding under the Senior Notes or the Contingent Notes.

6.2 Dealings with Affiliates. The Company will not enter into any
transaction including, without limitation, any loans or extensions of credit or
royalty agreements or securities issuances, with any officer or director of the
Company or any Subsidiary or holder of any class of capital stock of the
Company, or any member of their respective immediate families or any
corporation or other entity directly or indirectly controlled by one or more of
such officers, directors or shareholders or members of their immediate
families, except for advances in reasonable amounts made to employees of the
Company or any Subsidiary for valid business purposes, provided that such
advances are repaid to the Company within 90 days, unless any such transaction
is on terms which are no less favorable to the Company than those which could
have been obtained from an unaffiliated third party, and such transaction has
been approved by a majority of the members of the Board of Directors, which
majority shall include either one of the Directors designated under the
Shareholders' Agreement by the Management Investors or a majority of the
Independent Directors.

6.3 Merger; Sale of Assets. The Company shall not, and shall not permit
any Subsidiary to, merge or consolidate with or into any other corporation, or
sell, assign, lease or otherwise dispose of or voluntarily part with the
control of

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(whether in one transaction or in a series of related transactions) all, or
substantially all, of its assets (whether now owned or hereinafter acquired),
or any portion of its assets which have accounted for more than 10% of total
revenues of the Company and its Subsidiaries taken as a whole for any of the
three most recent fiscal years of the Company, or sell, assign or otherwise
dispose of (whether in one transaction or in a series of transactions) any of
its accounts receivable (whether now in existence or hereafter created) at a
discount or with recourse, to any Person, (i) except for sales or other
dispositions of assets in the ordinary course of business, and (ii) except that
(a) any wholly owned Subsidiary may merge into or transfer assets to the
Company, and (b) any wholly owned Subsidiary may merge into or consolidate with
or transfer assets to any other wholly owned Subsidiary. Any securities of the
Company which are issued by the Company in a transaction described in this
Section 6.3 shall be issued at the fair market value thereof as determined
pursuant to Section 7.5 hereof.

6.4 Indebtedness. Neither the Company nor any of its Subsidiaries will
create, incur, guarantee, assume or otherwise become directly or indirectly
liable for any Indebtedness except: (i) Indebtedness evidenced by the Senior
Notes, Contingent Notes and Junior Notes; (ii) Bank Debt and (iii) any other
Indebtedness that is expressly subordinate and junior in right of payment to
the Junior Notes pursuant to such subordination provisions as shall be
acceptable to the Investors.

6.5 Liens. Neither the Company nor any of its Subsidiaries will create
or suffer to exist any Lien upon any of its assets, now owned or hereafter
acquired, securing any Indebtedness or other obligation except Permitted Liens.

6.6 Limitations on Restrictions on Subsidiary Dividends and Other
Distributions. The Company shall not permit any of its Subsidiaries, directly
or indirectly, to create or suffer to exist or become effective any
encumbrances or restrictions on the ability of any of its Subsidiaries to (i)
pay dividends or make any other distributions on its capital stock or any other
interest or participation in its profit owned by any of the Company or any of
its Subsidiaries, or pay any Indebtedness owed by any of the Subsidiaries, (ii)
make loans or advances to the Company, or (iii) transfer any of its properties
or assets to the Company.

6.7 No Conflicting Agreements. The Company agrees that neither it nor
any Subsidiary will, without the consent of the Investors, enter into or amend
any agreement, contract,

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commitment or understanding which would limit, restrict or prohibit the
exercise by any Investor of any of his or its rights under this Agreement or
any of the Related Agreements.

6.8 Limitation on Certain Procedures. Unless otherwise required under
applicable law, the Company shall not engage in abortion-related pathology or
fetal tissue research.

ARTICLE VII

PREEMPTIVE RIGHT

7.1 Preemptive Right. The Company hereby grants to each Investor the
right to purchase all or part of his or its pro rata share of New Securities
(as defined in Section 7.2) which the Company, from time to time, proposes to
sell and issue. An Investor's pro rata share, for purposes of this preemptive
right, is the ratio of the number of shares of Common Stock which such
Investor owns or has the right to acquire upon the conversion or exercise of
securities of the Company to the total number of shares of Common Stock then
outstanding or issuable upon the conversion or exercise of outstanding
securities of the Company then held by the Investors. Each Investor shall have
a right of over-allotment pursuant to this Article VII such that to the extent
an Investor does not exercise his or its preemptive right in full hereunder,
such additional shares of New Securities which such Investor did not purchase
may be purchased by the other Investors in proportion to the total number of
shares of Common Stock which each such other Investor owns or has the right to
acquire compared to the total number shares of Common Stock which all such
other Investors own or have the right to acquire.

7.2 Definition of New Securities. "New Securities" shall mean any
capital stock of the Company whether now or hereafter authorized, and rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become convertible into or exchangeable for capital
stock, issued on or after the date hereof; provided that the term "New
Securities" shall not include (i) securities purchased under this Agreement at
the Closing and Common Stock issued as a stock dividend to holders of Common
Stock or upon any stock split, subdivision or combination of shares of Common
Stock, (ii) Conversion Shares, and (iii) up to 10,000 shares of Common Stock
issuable to employees of the Company other than the Management Investors
pursuant to the Stock Option Plan.

7.3 Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Investor written
notice of its intention, describing

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<PAGE> 25

the type of New Securities and the price and the terms upon which the Company
proposes to issue the same. Each Investor shall have 20 business days from the
date of receipt of any such notice to agree to purchase up to the Investor's
pro rata share of such New Securities (and any over-allotment amount pursuant
to the operation of Section 7.1 hereof) for the price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased.

7.4 Sale by the Company. In the event any Investor fails to exercise in
full his or its preemptive (and/or over-allotment) right, the Company shall
have 90 days thereafter to sell the New Securities with respect to which the
Investor's option was not exercised (to the extent the other Investors do not
elect to exercise the over-allotment rights set forth in Section 7.1), at a
price and upon terms no more favorable to the purchasers thereof than specified
in the Company's notice. To the extent the Company does not sell all the New
Securities offered within said 90 day period, the Company shall not thereafter
issue or sell any such New Securities without first again offering such
securities to the Investors in the manner provided herein.

7.5 Determination of Price. All New Securities shall be issued at the
fair market value thereof. Fair market value shall be determined in good faith
by the Board of Directors; provided, however, that such determination shall be
made with the concurrence of at least one member of the Board of Directors who
is designated by the Institutional Investors pursuant to the Shareholders'
Agreement, but who is not an employee or affiliate of the Company or of any of
its Shareholders.

7.6 Termination of Rights. Notwithstanding any other provision of this
Article VII, the rights granted to the Investors under this Article VII shall
expire immediately prior to, and shall not apply in connection with, the sale
of securities in connection with the first Qualified Public Offering.

ARTICLE VIII

REGISTRATION RIGHTS

8.1 Certain Definitions. As used in this Article VIII, the following
terms shall have the following respective meanings:

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<PAGE> 26

"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.

"Initiating Holders" means any Institutional Investor or its assignee(s)
who in the aggregate are holders of at least fifty-one percent (51%) of the sum
of (i) the Conversion Shares now owned or hereafter acquired by the
Institutional Investors, (ii) all other shares of Common Stock owned by the
Investors, and (iii) all other shares of Common Stock issuable with respect to
securities of the Company convertible into or exercisable for shares of Common
Stock now owned or hereafter acquired by any Institutional Investors.

"Initiating Management Holders" means any Management Investor or his
assignee(s) who hold in the aggregate at least fifty-one percent (51%) of the
shares of Common Stock purchased hereunder by the Management Investors.

"Registrable Securities" means (i) all of the Conversion Shares owned by
the Institutional Investors, (ii) all shares of Common Stock owned by the
Management Investors, (iii) all other shares of Common Stock now owned or
hereafter acquired by any Investor; (iv) all shares of Common Stock issuable
with respect to securities of the Company convertible into or exercisable for
shares of Common Stock now owned or hereafter acquired by any Investor; and (v)
any Common Stock issued in respect of the shares described in clauses (i)
through (iv) upon any stock split, stock dividend, recapitalization or other
similar event.

The term "register" means to register under the 1933 Act and applicable
state securities laws for the purpose of effecting a public sale of securities.

"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 8.2, 8.3 or 8.5 hereof, including, without limitation,
all registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel for all the selling Holders
and other security holders, and the expense of any special audits and comfort
letters incident to or required by any such registration.

"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.

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<PAGE> 27

8.2 Demand Registrations

(a) If on any two occasions after the date hereof, the Company shall
receive from one or more Initiating Holders a written request that the Company
effect the registration of such persons' Registrable Securities, or if on any
one occasions after the earlier of (i) the fifth anniversary of the effective
date of this Agreement or (ii) the date which is six months following the date
of consummation of the IPO, the Company shall receive from one or more
Initiating Management Holders a request that the Company effect the
registration of such persons' Registrable Securities, in either case with the
Registrable Securities as to which registration has been requested representing
at least ten percent (10%) of the Registrable Securities then outstanding or
issuable (or any lesser percentage if the reasonably anticipated aggregate
price to the public of the Registrable Securities to be included in such
registration would exceed $10 million), in connection with a firm commitment
underwriting managed by a nationally recognized underwriter, the Company will:

(i) promptly give written notice of the proposed registration to all
other Holders; and

(ii) as soon as practicable, use all commercially reasonable efforts to
effect such registration as may be so requested and as would permit or
facilitate the sale and distribution of such portion of such Registrable
Securities as are specified in such request, together with such portion of
the Registrable Securities of any Holder or Holders joining in such
request as are specified in a written request given within thirty days
after receipt of such written notice from the Company. If the underwriter
managing the offering advises the Holders who have requested inclusion of
their Registrable Securities in such registration that marketing
considerations require a limitation on the number of shares offered, such
limitation shall be imposed first upon Holders other than the
Institutional Investors and their transferees until the total of the
aggregate proceeds received by all Institutional Investors and their
transferees from the sale of equity securities of the Company to the
public equals $13.0 million, second upon Holders other than the Management
Investors and their transferees until the total of the aggregate proceeds
received by all Management investors and their transferees from the sale
of equity securities of the Company to the public equals $1.0 million, and
thereafter pro rata among all Holders who requested inclusion of
Registrable Securities in such registration according to the number of
Registrable

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<PAGE> 28

Securities each such Holder requested to be included in such
registration. Neither the Company nor any other shareholder may include
shares in a registration effected under this Section 8.2 without the
consent of the Holders holding a majority of the Registrable Securities
sought to be included in such registration if the inclusion of shares by
the Company or the other shareholders would limit the number of
Registrable Securities sought to be included by the Holders or reduce the
offering price thereof. No registration initiated by any Holders hereunder
shall count as a registration under this Section 8.2 unless and until it
shall have been declared effective.

(b) Additional Demand Right. Notwithstanding the provisions of
subparagraph (a), in the event the Management Investors request a registration
hereunder, and because of the inclusion in such registration of additional
Registrable Securities by the Holders thereof, the Management Investors are
able to effect the registration of less than two-thirds of the Registrable
Securities as to which they had requested registration, then the Initiating
Management Holders shall have the right to request an additional registration
under subparagraph (a) hereof.

(c) Final Demand Right. Notwithstanding the provisions of
subparagraphs (a) and (b), in the event the Management Investors request an
additional registration of additional Registrable Securities by the Holders
thereof in accordance with subparagraph (b), and the Management Investors are
still only able to effect the registration of less than two-thirds of the
Registrable Securities as to which they had requested registration, then the
Initiating Management Holders shall have the right to request an additional
(and final) registration under subparagraph (a) hereof without participation by
any Holders in order to effect the registration of the Registrable Securities.

(d) Selection of Underwriter. The underwriter of any underwriting
requested under this Section 8.2 shall be selected by the Holders holding a
majority of the Registrable Securities included therein; provided that such
underwriter must be reasonably acceptable to the Company.

8.3 "Piggy Back" Registrations.

(a) If the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders
exercising their registration rights, other than a registration relating solely
to employee options or benefit plans, or a registration on any registration

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<PAGE> 29

form which does not permit secondary sales or does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of Registrable Securities, the Company will:

(i) Promptly give to each Holder of Registrable Securities written
notice thereof (which shall include the number of shares the Company or
other security holder proposes to register and, if known, the name of the
proposed underwriter); and

(ii) Use its best efforts to include in such registration all the
Registrable Securities specified in a written request or requests, made
by any Holder within twenty (20) days after the date of delivery of the
written notice from the Company described in clause (i) above. If the
underwriter advises the Company that marketing considerations require a
limitation on the number of shares offered pursuant to any registration
statement, then the Company may offer all of the securities it proposes to
register for its own account or the maximum amount that the underwriter
considers saleable and such limitation on any remaining securities that
may, in the opinion of the underwriter, be sold will be imposed (x) first
upon Holders other than the Institutional Investors and their transferees
until the total aggregate proceeds received by all Institutional Investors
and their transferees from the sale of equity securities of the Company
equals $13.0 million, (y) second upon Holders other than the Management
Investors and their transferees until the total of the aggregate proceeds
received by all Management Investors and their transferees from the sale
of equity securities of the Company to the public equals $1.0 million, and
(z) third, pro rata among all shareholders who are entitled to include
shares in such registration statement according to the number of
Registrable Securities each such shareholder requested to be included in
such registration statement.

(b) The Company shall select the underwriter for an offering made
pursuant to this Section 8.3; provided that such underwriter must be reasonably
acceptable to the Holders of a majority of the Registrable Securities being
registered in such offering.

8.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 8.2, 8.3 or 8.5 shall be paid by the Company. All Selling Expenses
incurred in connection with any such registration, qualification or compliance
shall be borne by the holders of the securities registered, pro rata on the
basis of the number of their shares so registered.

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<PAGE> 30

8.5 Registration on Form S-3. The Company shall use its best efforts to
qualify or registration on Form S-3 or any comparable or successor form
following initial registration on Form S-1; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Securities Exchange Act of 1934 (the "Exchange Act") in accordance with the
provisions of the Exchange Act following the effective date of the first
registration of any securities of the Company on Form S-1 or any comparable or
successor form. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Article
VIII, the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state
the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders),
provided that the Company shall not be obligated to effect any such
registration pursuant to this Section 8.5 more than once in any six month
period, and in no event shall the Company be required to register shares with
an aggregate market value of less than $500,000.

8.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Article VIII, the Company will keep each Holder
of Registrable Securities included in such registration advised in writing as
to the initiation of each registration and as to the completion thereof. At
its expense, the Company will do the following for the benefit of such Holders:

(a) Keep such registration effective for a period of one hundred
twenty days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs, and amend or supplement such registration statement and the prospectus
contained therein from time to time to the extent necessary to comply with the
1933 Act and applicable state securities laws;

(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or
"blue sky" laws of such jurisdictions as the selling shareholders may
reasonably request; provided, that the Company shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified or to take any action which would subject
it to service of process in suits other than those arising out of such
registration;

(c) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;

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<PAGE> 31

(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 8.2 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the selling Holder and
provided further that, if the underwriter so requests, the underwriting
agreement will contain customary contribution provisions on the part of the
Company;

(e) To the extent then permitted under applicable professional
guidelines and standards, obtain a comfort letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by comfort letters and an opinion from the
Company's counsel in customary form and covering such matters of the type
customarily covered in a public issuance, of securities, in each case addressed
to the Holders, and provide copies thereof to the Holders; and

(f) Permit counsel to the selling shareholders whose expenses are
being paid pursuant to Section 8.4 hereof to inspect and copy such corporate
documents as he may reasonably request.

8.7 Indemnification.

(a) The Company will, and hereby does, indemnify each Holder, each
of its officers, directors and partners, and each person controlling such
Holder within the meaning of the 1933 Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Article VIII,
and each underwriter, if any, and each person who controls such underwriter
within the meaning of the 1933 Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of the 1933 Act or the Exchange Act or the securities act of any
state or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners,

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<PAGE> 32

and each person controlling such Holder, each such underwriter and each person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, whether or not resulting in any
liability, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement (or alleged untrue statement) or omission (or
alleged omission) based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein.

(b) Each Holder will, if Registrable Securities held by him are included in
the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of the 1933 Act and the rules and regulations thereunder,
each other such Holder and each of their officers, directors and partners, and
each person controlling such Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holder's directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, whether or not
resulting in liability, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the liability of each Holder hereunder shall be
limited to an amount equal to the net proceeds received by such Holder upon sale
of his securities.

(c) Each party entitled to indemnification under this Section 8.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual

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<PAGE> 33

knowledge of any claim as to which indemnity may be sought, but the failure of
any Indemnifying Party to give such notice shall not relieve the Indemnifying
Party of its obligations under this Section 8.7 (except and to the extent the
Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party will be entitled to participate in, and to the extent that it
may elect by written notice delivered to the Indemnified Party promptly after
receiving the aforesaid notice from such Indemnified Party, at its expense to
assume, the defense of any such claim or any litigation resulting therefrom,
with counsel reasonably satisfactory to such Indemnified Party, provided that
the Indemnified Party may participate in such defense at its expense,
notwithstanding the assumption of such defense by the Indemnifying Party, and
provided, further, that if the defendants in any such action shall include both
the Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, the Indemnified Party or Parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
Indemnified Party or Parties and the fees and expenses of such counsel shall be
paid by the Indemnifying Party. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall (i) furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom and
(ii) shall reasonably assist the Indemnifying Party in any such defense,
provided that the Indemnified Party shall not be required to expend its funds in
connection with such assistance.

(d) No Holder shall be required to participate in a registration pursuant
to which it would be required to execute an underwriting agreement in connection
with a registration effected under Section 8.2 or 8.3 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Section 8.2 or 8.3 if a Holder is not permitted to
participate in a registration on account of his refusal to execute an
underwriting agreement on the basis of this subsection (d).

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8.8 Information by Holder. Each Holder of Registrable Securities included
in any registration shall promptly furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Article VIII or otherwise required by applicable state or federal
securities laws.

8.9 Limitations on Registration Rights. From and after the date of this
Agreement, the Company shall not enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder (a) the right to require the Company, upon any registration
of any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder, unless under the terms of
such agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of its securities
will not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company.

8.10 Exception to Registration. The Company shall not be required to effect
a registration under this Article VIII if (i) in the written opinion of counsel
for the Company, which counsel and the opinion so rendered shall be reasonably
acceptable to the Holders of Registrable Securities, such Holders may sell
without registration under the 1933 Act all Registrable Securities for which
they requested registration under the provisions of the 1933 Act and in the
manner and in the quantity in which the Registrable Securities were proposed to
be sold, or (ii) the Company shall have obtained from the Commission a
"no-action" letter to that effect; provided that this Section 8.10 shall not
apply to sales made under Rule 144(k) or any successor rule promulgated by the
Commission until after the effective date of the Company's initial registration
of shares under the 1933 Act. Notwithstanding the foregoing, in no event shall
the provisions of this Section 8.10 be construed to preclude a Holder of
Registrable Securities from exercising rights under Section 9.3 for a period of
three years after the effective date of the Company's initial registration of
shares under the 1933 Act.

8.11 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the 1933 Act) to
the public without registration, the Company agrees to:

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<PAGE> 35

(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the 1933 Act, at all times from and
after ninety days following the effective date of the IPO;

(b) use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and

(c) so long as an Investor owns any restricted securities, furnish to the
Investor forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety days following the effective date of the IPO, and of the 1933 Act
and Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as an Investor may
reasonably request in availing itself of any rule or regulation of the
Commission allowing an Investor to sell any such securities without
registration.

8.12 Listing Application. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the registered shares of the
listed class then owned by any Investor.

8.13 Damages. The Company recognizes and agrees that each holder of
Registrable Shares shall not have an adequate remedy if the Company fails to
comply with the provisions of this Article VIII, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Shares shall be entitled to seek specific
performance of the Company's obligations hereunder or other appropriate
equitable relief and that the Company will not oppose an application seeking
such specific performance or other appropriate equitable relief.

ARTICLE IX

CONDITIONS OF INVESTORS' OBLIGATION

9.1 Effect of Conditions. The obligation of the Investors to purchase and
pay for the Securities at the Closing shall be subject at their election to the
satisfaction of each of the conditions stated in the following Sections of this
Article.

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<PAGE> 36

9.2 Representations and Warranties. The representations and warranties of the
Company contained in this Agreement shall be true and correct on the date of
such Closing with the same effect as though made on and as of that date, and the
Investors shall have received a certificate dated as of such Closing and signed
on behalf of the Company to that effect.

9.3 Performance. The Company shall have performed and complied with all of
the agreements, covenants and conditions contained in this Agreement required to
be performed or complied with by them at or prior to such Closing, and the
Investors shall have received a certificate dated as of such Closing and signed
on behalf of the Company and by the Principal Shareholders to that effect.

9.4 Opinions of Counsel. The Investors shall have received an opinion,
dated the date of such Closing, from Hutchins, Wheeler & Dittmar, A Professional
Corporation, counsel to the Company, in the form attached as Exhibit E.

9.5 No Material Adverse Change. The business and properties of the Company
shall not have been materially adversely affected since the date of this
Agreement, whether by fire, casualty, act of God or otherwise, and there shall
have been no other changes in the business, property or financial condition of
the Company that would have a material adverse effect on the value of their
respective businesses or assets.

9.6 Shareholders' Agreement. A Shareholders' Agreement in the form of
Exhibit F hereto shall have been executed by each Investor and the Company.

9.7 Redemption Agreement. A Redemption Agreement in the form of Exhibit G
attached hereto shall have been executed by the Company and each of the
Institutional Investors.

9.8 Employment Agreements. This Company and each of the Management
Investors shall have executed an Employment Agreement substantially in the form
of Exhibit H hereto.

9.9 Board Election. Concurrently with the Closing, the Board of Directors
of the Company shall have been expanded to not more than seven members
designated as provided in the Shareholders' Agreement.

9.10 Completion of Acquisition. The Purchase Agreement shall have been
executed, the Acquisition as therein contemplated shall have been completed in
accordance with the terms of such Purchase Agreement, and all of the conditions
specified in Section 6.3 thereof shall have been fulfilled or waived.

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<PAGE> 37

ARTICLE X

Defaults and Remedies

10.1 Events of Default; Acceleration

An "Event of Default" shall occur with respect to the Senior Notes,
Contingent Notes or Junior Notes (collectively, the "Notes") if:

(1) The Company defaults in the payment of any principal thereof when the
same shall become due, either by the terms thereof or otherwise as herein
provided (or, with respect to the Senior Notes and the contingent Notes, in the
Purchase Agreement); or

(2) The Company defaults in the payment of interest thereon when the same
becomes due and payable and the default continues for a period of 10 days; or

(3) The Company shall fail to perform or observe any covenant contained in
this Agreement (or, with respect to the Senior Notes and the Contingent Notes,
in the Purchase Agreement) for the benefit of the holder of such Note other than
the obligation to make payments under such Note, and such default continues for
a period of 30 days after receipt of notice of such default from such holder; or

(4) The Company or any Subsidiary shall default in the payment of any
principal of or premium, if any, or interest on any other Indebtedness or
obligation with respect to borrowed money the outstanding principal of which is
in an aggregate amount greater than $250,000 or shall default in the performance
of any material term of any instrument evidencing such Indebtedness or of any
mortgage, indenture or agreement relating thereto, and the effect of such
default is to cause, the holder or holders of such obligation to cause, such
Indebtedness or obligation to become due and payable prior to its stated
maturity; or

(5) The Company or any Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:

(A) commences a voluntary case,

(B) consents to the entry of an order for relief against it in an
involuntary case,

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<PAGE> 38

(D) makes a general assignment for the benefit of its creditors, or

(E) is the debtor in an involuntary case which is not dismissed within
60 days of the commencement thereof, or

(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

(A) provides for relief against the company or any Subsidiary in an
involuntary case,

(B) appoints a Custodian of the Company or any Subsidiary for all or
substantially all of its property, or

(7) A final judgment for the payment of money in an amount in excess of
$250,000 shall be rendered against the Company or any of its Subsidiaries (other
than any judgment as to which a reputable insurance company shall have accepted
full liability in writing) and shall remain undischarged for a period (during
which execution shall not be effectively stayed) of 30 days after the date on
which the right to appeal has expired.

Notwithstanding the provisions of clauses (1) and (2) above, no Event of
Default shall occur with respect to nonpayment under any Senior Notes or
Contingent Notes if a Management Investor is responsible, as an officer or
employee of the Company, for ensuring that the Company funds such obligation,
and such Management Investor fails to cause the Company to make such payment on
a timely basis, and no Event of Default shall occur with respect to nonpayment
under any Junior Note if an Institutional Investor or its affiliate is
responsible for ensuring that the Company funds such payment on a timely basis,
and in either such case such failure is not attributable to a lack of funds in
the Company's account to fund such payment or a directive from the Board of
Directors prohibiting or refusing to make such payment.

The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.

In any such case (a) upon the occurrence of any Event of Default described
in clause (1), (5) or (6) above, and subject to the terms of the Intercreditor
Agreement, the unpaid principal amount of and accrued interest on the Notes
shall

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<PAGE> 39

automatically become due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company, and (b) upon
the occurrence of any other Event of Default, and subject to the terms of the
Intercreditor Agreement, in addition to any other rights, powers and remedies
permitted by law or in equity, the holder or holders of greater than 51% in
principal amount of the Senior Notes, Contingent Notes or Junior Notes then
outstanding may, at its or their option, by notice in writing to the Company,
declare all of the Notes of such issue (i.e., the Senior Notes, Contingent Notes
or Junior Notes, as the case may be) to be, and all of the Notes of such issue
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and all other sums due hereunder, without presentment,
demand, protest or other notice of any kind, all of which are waived by the
Company.

Upon the occurrence of any such Event of Default, and subject to the terms
of the Intercreditor Agreement, the holders of Notes may proceed to protect and
enforce their rights by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in the Notes held by them, for an injunction against a violation of
any of the terms hereof or thereof, or for the pursuit of any other remedy which
it may have by virtue of this Agreement or pursuant to applicable law. The
Company shall pay to the holders of Notes upon demand the costs and expenses of
collection and of any other actions referred to in this Article X, including
without limitation reasonable attorneys' fees, expenses and disbursements.

No course of dealing and no delay on the part of the holders of Notes in
exercising any of their rights shall operate as a waiver thereof or otherwise
prejudice the rights of the holders of Notes, nor shall any single or partial
exercise of any right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy thereunder. No
right, power or remedy conferred hereby or by the Notes on the holders thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise.

10.2 Rescission of Acceleration. At any time after any declaration of
acceleration of all of any issue of Notes shall have been made pursuant to
Section 10.1 by any holder or holders of such issue of Notes and before a
judgment or decree for the payment of money due has been obtained by such holder
or holders, the holder or holders of at least 51% in aggregate principal amount
of such issue of Notes at the time outstanding

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<PAGE> 40

may, by written notice to the Company and to the other holders of such issue of
Notes rescind and annul such declaration and its consequences, provided that (i)
the principal of and interest on such issue of Notes which shall have become due
otherwise than by such declaration of acceleration shall have been duly paid,
and (ii) all Events of Default other than the nonpayment of principal of and
interest on such issue of Notes which have become due solely by such declaration
of acceleration shall have been cured or waived by the holders of at least 51%
in aggregate principal amount of such issue of Notes at the time outstanding. No
rescission or annulment referred to above shall affect any subsequent Default or
any right, power or remedy arising out of such subsequent Default.

ARTICLE XI

CERTAIN DEFINITIONS

As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

"1933 Act" means the Securities Act of 1933, as amended.

"Agreement" means this Agreement as from time to time amended and in effect
between the parties.

"Business Day" means any day on which commercial banks are not authorized
or required to close in Boston, Massachusetts or Fort Lauderdale, Florida.

"Closing" shall have the meaning set forth in Section 1.5.

"Code" shall have the meaning set forth in Section 1.7.

"Commission" shall have the meaning set forth in Section 4.2(f).

"Common Stock" shall include (a) the Company's Common Stock as authorized
on the date of this Agreement and (b) any other securities of the Company into
which or for which any of the securities described in (a) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.

"Company" means and shall have the meaning set forth in the first paragraph
hereof and shall include such company's successors and assigns.

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<PAGE> 41

"Compensation Committee" shall mean the committee of the Board of Directors
constituted under Section 7 of the Shareholders' Agreement.

"Contingent Notes" shall mean those certain 8% Non-Negotiable Subordinated
Contingent Notes in the original aggregate principal amount of $2,500,000 issued
pursuant to the Purchase Agreement.

"Conversion Shares" shall have the meaning set forth in Section 1.2
hereof.

"Default" shall mean an Event of Default or any event with notice or lapse
of time or both would become an Event of Default.

"Event of Default" shall have the meaning set forth in Section 10.1.

"Holders" shall have the meaning set forth in Section 8.1 hereof.

"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with generally accepted accounting
principles would be classified upon the obligor's balance sheet as liabilities
(other than deferred taxes) and shall also include capitalized leases,
guarantees, endorsements (other than for collection in the ordinary course of
business) or other arrangements whereby responsibility is assumed for the
obligations of others, including any agreement to purchase or otherwise acquire
the obligations of others or any agreement, contingent or otherwise, to furnish
funds for the purchase of goods, supplies or services for the purpose of payment
of the obligations of others.

"Independent Director" shall mean (i) so long as the Institutional
Investors own at least 51% of the shares owned by them on the date hereof, a
Director who is selected to the Board of Directors pursuant to Section 6(c) of
the Shareholders' Agreement, and (ii) in the event the Institutional
Shareholders own less than 51% of such shares, a Director who is neither an
employee of the Company nor an employee or affiliate of any Investor.

"Investors" shall have the meaning set forth in the first paragraph
hereof.

"Lien" shall mean any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind

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<PAGE> 42

(including any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the Uniform Commercial
Code of any jurisdiction).

"Maturity Date" shall have the meaning set forth in Section 1.1.

"New Securities" shall have the meaning set forth in Section 7.2.

"Notes" shall mean collectively the Senior Notes, Contingent Notes Junior
Notes.

"Officer's Certificate" shall mean a certificate signed in the name of the
Company by its President, acting in his official capacity.

"Permitted Liens" shall mean: (i) Liens for taxes not yet due or payable
under law or being contested in good faith by appropriate proceedings and for
which adequate reserves have been provided; (ii) carriers', warehouseman's,
mechanics, materialmen's, repairmen's and similar Liens arising in the ordinary
course of business to secure amounts owing for the provision of goods or
services; (iii) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation; (iv) easements,
rights of way and similar encumbrances incurred in the ordinary course of
business which do not, individually or in the aggregate, materially detract from
the value of the property subject thereto or interfere with the ordinary course
of business of the Company or any Subsidiary; (v) Liens on goods to secure the
payment of the purchase price of such goods; and (vi) Liens existing on the date
hereof on equipment used in the ordinary course of business to secure the
payment of the cost of acquisition or leasing thereof.

"Permitted Transferees" shall mean those persons to whom shares of capital
stock of the Company may be transferred pursuant to section 2 of the
Shareholders' Agreement.

"Person" means an individual, corporation, partnership, joint venture,
association, syndicate, trust or unincorporated organization or a government or
agency or political subdivision thereof.

"Qualified Public Offering" means the closing of an underwritten public
offering by the Company pursuant to a registration statement filed and declared
effective under the

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<PAGE> 43

1933 Act covering the offer and sale of Common Stock for the account of the
Company in which the aggregate net proceeds to the Company equal at least
$15,000,000.

"Related Agreements" shall mean the Redemption Agreement, the
Shareholders' Agreement and the Employment Agreements.

"Securities" shall have the meaning set forth in Section 1.1.

"Senior Notes" shall mean those 8% Non-Negotiable Senior Subordinated Notes
in the original principal amount of $3,500,000 issued pursuant to the Purchase
Agreement.

"Sensitive Payments" shall include, whether legal or illegal, (i) payments
to governmental officials or employees, (ii) commercial bribes or kickbacks, and
(iii) amounts paid as rebates or refunds or referral fees in contravention of
the laws or regulations of any jurisdiction.

"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time more than fifty percent
(50%) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.

ARTICLE XII

MISCELLANEOUS

12.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby.

12.2 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained
in this Agreement and the Related Agreements shall be binding on and shall inure
to the benefit of the respective successors and assigns of the parties hereto
(including transferees of any of the Securities). The parties agree to maintain
in confidence the terms of the purchase of the Securities hereunder, except that
the Investors may disclose such terms to their investors in the ordinary course
and except that the Company may disclose such terms to its shareholders in the
ordinary course.

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<PAGE> 44

12.3 Securities Owned by Affiliates. For the purposes of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares or Notes, the shares and Notes owned of record by
any affiliate of an Investor shall be deemed to be owned by such Investor. For
the purposes of this Agreement, the term "affiliate" shall mean any Person
controlling, controlled by, or under common control with, an Investor and any
general or limited partner of an Investor.

12.4 Amendments and Waivers. This Agreement may be amended, any provision
hereof can be waived, and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, if such
amendment, waiver, action or omission is approved by those Management Investors
who hold a majority of the shares of Common Stock held by all Management
Investors, and by those Institutional Investors who hold a majority of the
shares of Preferred Stock, or the shares of Common Stock issuable upon
conversion thereof, held by all Institutional Investors; provided, however, that
any such amendment, waiver, action or omission may be taken without the approval
of the Management Investors, if such amendment, waiver, action or omission does
not adversely affect the rights or interests granted hereunder to the Management
Investors; and provided further, however, that no such amendment, waiver, action
or omission which affects the rights or benefits of Schroder without a
comparable effect on the rights or benefits of all holders of Preferred Stock
may be taken without the consent of holders of a majority of the shares of
Preferred Stock held by Schroder. The Company shall promptly send copies of any
amendment, consent or waiver (and any requests for any such amendment, consent
or waiver) relating to this Agreement or the Securities to each Investor and
each other holder of the Securities and, to the extent practicable, shall
consult with each Investor and each other holder of the Securities, in
connection with each such amendment, consent and waiver. No course of dealing
between the Company and the holder of any of the Securities nor any delay in
exercise any rights hereunder or any of the Securities shall operate as a waiver
of any rights of any holder of such Securities.

12.5 Notices. All notices, requests, consents, reports and demands shall be
in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Investors at the
address set

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<PAGE> 45

forth below or to such other address as may be furnished in writing to the
other parties hereto:

The Company: American Laboratory Associates, Inc.
6061 Northeast 14th Avenue
Fort Lauderdale, Florida 33334
Attn: Chairman

with copies to: Summit Partners, L.P.
Suite 3400
One Boston Place
Boston, MA 02108
Attn: Thomas S. Roberts

Schroder Ventures
101 Federal Street, 19th Floor
Boston, MA 02110
Attn: Barbara Piette

The Institutional
Investors: The address set forth opposite the
Institutional Investor's name on
Schedule 1.3 attached hereto.

with copy to: Hutchins, Wheeler & Dittmar, P.C.
101 Federal Street
Boston, MA 02110
Attn: James Westra, Esquire

The Management The Address set forth opposite
Investors: the Management Investor's name
on Schedule 1.3 attached hereto

with copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
515 E. Las Olas Blvd., 15th Floor
Ft. Lauderdale, Florida 33301
Attn: Daniel H. Aronson, Esquire

12.6 Expenses. The Company agrees, whether or not the transactions hereby
contemplated shall be consummated, to pay, and save the Investors harmless
against liability for the payment of, all out-of-pocket expenses arising in
connection with this Agreement, the Securities being purchased hereunder and the
Related Agreements and the transactions hereby and thereby contemplated,
including, without limitation, (i) all costs and expenses of the Investors
incurred in connection with the investigation, preparation, execution and
delivery of such agreements or instruments, or the transactions contemplated
hereby or thereby (and due diligence related thereto) (ii) all

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<PAGE> 46

document production and duplication charges, (iii) all reasonable fees and
expenses of any counsel engaged by the Investors in connection with such
agreements or instruments, or the transactions contemplated hereby or thereby,
(iv) all such expenses, including reasonable attorney's fees and expenses,
incurred by the Investors with respect to the enforcement of any rights or
provisions of any such agreement or instrument, including without limitation,
costs and expenses in any bankruptcy case, and (v) all expenses incurred in
connection with the printing of such agreements and instruments and all taxes
which may be payable in respect of the execution and delivery of such agreements
or instruments, or the issuance, delivery or purchase by the Investors of any of
the Securities. The Company further agrees to indemnify and save harmless the
Investors and each of their respective partners, officers, directors, employees
and agents from and against any and all actions, causes of action, suits,
losses, liabilities and damages, and expenses (including, without limitation,
reasonable attorney's fees and disbursements in connection therewith (herein
called the "indemnified liabilities") incurred by the Investors or any of their
respective partners, officers, directors, employees or agents as a result of, or
arising out of, or relating to any of the transactions contemplated hereby or by
the Related Agreements, except for any indemnified liabilities arising on
account of the gross negligence or willful misconduct of the Investors or any of
their respective partners, officers, directors, employees, or agents; provided
that, if and to the extent such agreement to indemnify may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which shall be permissible
under applicable law. The obligations of the Company under this Section 12.6
shall survive the transfer of any of the Securities.

12.7 Counterparts. This Agreement and any exhibit hereto may be executed in
multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof.

12.8 Effect of Headings. The article and section headings herein are for
convenience of reference only and shall not affect the construction or
interpretation hereof.

12.9 Adjustments. All provisions of this Agreement shall be automatically
adjusted to reflect any stock dividend, stock split or other such form of
recapitalization.

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<PAGE> 47

12-10 Future Issuances. Until the consummation of a Qualified Public
Offering, all securities of the Company hereafter acquired by the Investors
shall be granted the same rights and privileges afforded the Investors under
this Agreement and the Related Agreements.

12-11 Governing Law. This Agreement shall be deemed a contract made under
the laws of the State of Delaware and together with the rights and obligations
of the parties hereunder, shall be construed under and governed by the laws of
such State.

[Remainder of Page Intentionally Left Blank]

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<PAGE> 48

If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.

Very truly yours,

AMERICAN LABORATORY
ASSOCIATES, INC.

By:
--------------------------------
Name:
Title: Chairman

MANAGEMENT INVESTORS:

/s/ Dr. Evanagelos Poulos
-----------------------------------
Dr. Evangelos Poulos

/s/ Dr. Michael Demaray
-----------------------------------
Dr. Michael Demaray

/s/ Dr. Alexander Kowalczyk
-----------------------------------
Dr. Alexander Kowalczyk

INSTITUTIONAL INVESTORS:

SUMMIT VENTURES III, L.P.

By: Summit Partners, III, L.P.,
Its General Partner

By: Stamps, Woodsum & Co. III,
Its General Partner

By: /s/
--------------------------------
General Partner

SUMMIT INVESTORS II, L.P.

By: /s/
--------------------------------
Authorized Signatory

- 43 -

<PAGE> 49

SCHRODERS INCORPORATED

By: /s/ Jeffrey J. Collinson
---------------------------
Jeffrey J. Collinson
Attorney-in-Fact

SCHRODER VENTURES LIMITED
PARTNERSHIP

By: Schroder Ventures
Management L.P.
Its General Partner

By: Schroder Venture
Managers, Inc.
Its General Partner

By: /s/ Jeffrey J. Collinson
-------------------------
Jeffrey J. Collinson
Attorney-in-Fact

SCHRODER VENTURES U.S. TRUST

By: Schroder International
Trust Company Limited,
Trustee

By: /s/ Jeffrey J. Collinson
-------------------------
Jeffrey J. Collinson
Attorney-in-Fact

- 44 -

<PAGE> 1
EXHIBIT 10.18

[LOGO]

Acquisition
Management
Services, Inc.

September 18, 1996

PERSONAL & CONFIDENTIAL

James C. New
President
AmeriPath, Inc.
7289 Garden Road, Suite 220
Riviera Beach, Florida 33404

Dear Jim:

This is to confirm our understanding (as described below) that Acquisition
Management Services, Inc. ("AMS") has been engaged as an advisor and consultant
to AmeriPath, Inc. (the "Company") to assist the Company by providing certain
advisory services. This Agreement shall be in effect from the date of execution
and may be extended to cover additional services with the written consent of
both parties for such periods as the parties may agree. The terms of this
Engagement Agreement will expire thirty (30) days from the date hereof unless
accepted by the Company in writing by executing and delivering to AMS the
final page of this Agreement. This Agreement will be the entire understanding
of the parties with respect to its subject matter, except for the provisions
contained in the letter from AMS to the Company (dated May 22, 1996) regarding
the amount of compensation and the time frame for completion of assignments.

A. ADVISORY SERVICES

The Company hereby retains AMS to perform human resource consulting,
purchase accounting, due diligence, financial analyses, valuations,
projections, strategic analyses and, in consultation with the
Company's management, negotiation of terms with respect to potential
acquisitions by, or other transactions involving, the Company
(the "Services"). For purposes of this Agreement, "due diligence" with
respect to an acquisition target shall include, but not be limited to,
review of (1) contracts, arrangements or other agreements; (2)
ownership structure; (3) organizational structure, including interviews
of officers of key personnel; (4) facilities; (5) insurance policies
and claims histories; (6) litigation matters; (7) tax returns and
related matters; (8) market conditions; and (9) billing practices. AMS
shall prepare appropriate written reports (for use by the Company's
officers and for presentation to the Company's Board of Directors)
documenting the results of the foregoing. AMS shall also prepare, in
consultation with the Company's management, a Memorandum of
Understanding with respect to each potential acquisition for which AMS
provides Services. AMS shall devote such time and attention to these
matters as shall be reasonably requested by the Company or determined
by AMS, in its reasonable discretion, to be necessary or appropriate
for the diligent provision of
<PAGE> 2

AmeriPath, Inc.
Page 2

the Services. All Services shall be rendered by AMS in King of
Prussia, PA, unless otherwise determined by AMS and the Company. AMS
will be compensated for the Services in accordance with the schedule
set forth in Exhibit I.

AMS shall provide the Company with the Services as described
above, and as are otherwise reasonably requested by the Company,
provided that AMS shall not be required to undertake duties not
reasonably within the scope of the Services for which it has been
engaged. In performance of its duties, AMS shall provide the Company
with the benefits of its best judgment and efforts, and shall perform
the Services in a prudent and professional manner. Except for the
foregoing sentence, AMS makes no warranties or representations of any
kind, expressed, implied or statutory, regarding the Services,
including without limitation any representation or warranty as to the
value or quality of the Services. AMS shall be obligated to render
advice, upon the request of the Company in good faith, but shall not be
obligated to spend any specific amount of time in doing so.

The Company acknowledges that AMS and/or its affiliates are in
the business of providing services similar to the Services to others.
Nothing herein shall be construed to limit or restrict AMS in
conducting such business with respect to others or in rendering such
advice to others.

The Company acknowledges and agrees that AMS shall be entitled
to rely on information and instructions supplied by the Company, and
that AMS shall not be liable to the Company (and shall be indemnified
and held harmless by the Company from and against any loss, damage or
liability resulting from) for any action taken at the request of the
Company.

B. RELEASE; LIMITATION OF LIABILITY

The Company, on behalf of itself and its officers, directors,
employees, agents, affiliates, successors and assigns (collectively,
the "Company Affiliates"), does hereby remise, release and forever
discharge AMS, and AMS's officers, directors, employees, agents,
affiliates, predecessors, successors and assigns (collectively, the
"AMS Affiliates", and together with AMS, the "AMS Entities"), of and
from all actions, suits, claims and demands in law or equity, that the
Company or any Company Affiliate ever had, now has, or hereafter may
have, by reason of any claims, demands, actions, or causes of action
for injury, death, loss or damage of any kind or nature whatsoever,
which, either directly or indirectly, arises out of or results from,
the provision of, or the failure to provide, the Services prior to the
date hereof other than the fraud, gross negligence or willful
misconduct on the part of AMS or such AMS Entity. The Company
acknowledges and agrees that neither AMS nor any other AMS Entity shall
be liable to the Company or any Company Affiliate for any liability,
loss or damage relating to, or resulting from the provision of, or
failure to provide, the Services, including but not limited to
consequential or special damages relating to loss of profit or goodwill
or other special or consequential damages, whether or not AMS is
notified of the possibility of such damages, other than liability, loss
or damage resulting from the fraud, gross negligence or willful
misconduct of AMS or such AMS Entity.

The provisions of this Section shall survive the termination of
this Agreement.
<PAGE> 3
AmeriPath, Inc.
Page 3

C. INDEMNIFICATION

Recognizing that transactions and projects of the type contemplated by
the Company sometimes result in litigation and that AMS's role in the
transactions is advisory, the Company and its subsidiaries and
affiliates agree to indemnify and hold harmless AMS and the other AMS
Entities (the "Indemnified Parties") from and against any and all
losses, claims, damages and liabilities, joint or several, related to
or arising in any manner out of any transaction, proposal, consulting
activity or any other matter (collectively, the "Matters") contemplated
by the engagement of AMS hereunder, and will promptly reimburse the
Indemnified Parties for all expenses (including fees and expenses of
legal counsel) as incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim related
to or arising in any manner out of any Matter contemplated by the
engagement of AMS hereunder, or any action or proceeding arising
therefrom (collectively, "Proceedings"), whether or not such
Indemnified Party is a formal party to any such Proceeding.

Notwithstanding the foregoing, the Company shall not be liable in
respect of any losses, claims, damages, liabilities or expenses that a
court of competent jurisdiction or arbitration shall have determined by
final judgment resulted solely from the fraud, gross negligence or
willful misconduct of an Indemnified Party. The Company further agrees
that it will not, without the prior written consent of AMS, settle,
compromise or consent to the entry of any judgment in any pending or
threatened Proceeding in respect of which indemnification may be sought
hereunder (whether or not AMS or any other Indemnified Party is an
actual or potential party to such Proceeding), unless such settlement,
compromise or consent includes an unconditional release of AMS and each
other Indemnified Party hereunder from all liability arising out of
such Proceeding.

The Company agrees that if any indemnification or reimbursement sought
pursuant to this letter were for any reason not available to any
Indemnified Party or insufficient to hold it harmless as and to the
extent contemplated by this letter, then the Company shall contribute
to the amount paid or payable by such Indemnified Party in respect of
losses, claims, damages and liabilities in such proportion as is
appropriate to reflect the relative benefits to the Company and its
stockholders on the one hand, and AMS on the other, in connection with
the Matters to which such indemnification or reimbursement relates or,
if such allocation is not permitted by applicable law, not only such
relative benefits but also the relative faults of such parties as well
as any other equitable considerations. It is hereby agreed that the
relative benefits to the Company and/or its stockholders and to AMS
with respect to AMS's engagement shall be deemed to be in the same
proportion as (i) the total value paid or received or to be paid or
received by the Company and/or its stockholders pursuant to the Matters
(whether or not consummated) for which AMS is engaged to render
financial, consulting, development or other advisory services bears to
(ii) the fees paid to AMS in connection with such engagement. In no
event shall the Indemnified Parties contribute or otherwise be liable
for an amount in excess of the aggregate amount of fees actually
received by AMS pursuant to such engagement (excluding amounts received
by AMS as reimbursement of expenses and other fixed costs of AMS
required to provide services on an ongoing basis).
<PAGE> 4
AmeriPath, Inc.
Page 4

The Company further agrees that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or
otherwise) to the Company for or in connection with AMS's engagement
hereunder except for losses, claims, damages, liabilities or expenses
that a court of competent jurisdiction or arbitration shall have
determined by final judgment resulted solely from the fraud, gross
negligence or willful misconduct of such Indemnified Party. The
indemnity, reimbursement and contribution obligations of the Company
shall be in addition to any liability which the Company may otherwise
have and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company
or an Indemnified Party.

The indemnity, reimbursement and contribution provisions set
forth herein shall remain operative and in full force and effect
regardless of (i) any withdrawal, termination or consummation of or
failure to initiate or consummate any Matter referred to herein, (ii)
any investigation made by or on behalf of any party hereto or any
person controlling (within the meaning of Section 15 of the Securities
Act of 1933, as amended, or Section 20 of the Securities Exchange Act
of 1934, as amended) any party hereto, (iii) any termination or the
completion or expiration of AMS's engagement and (iv) whether or not
AMS shall, or shall not be called upon to, render any formal or informal
advice in the course of such activities to which AMS provides services
to the Company. The provisions of this section shall survive the
termination of this agreement.

D. TERMINATION

This Agreement may be terminated by either party at any item, for any
reason, by giving ten (10) days prior written notice.

E. CONFIDENTIAL NATURE OF INFORMATION AND ADVICE

AMS agrees to keep confidential all non-public information
provided to it by the Company or ascertained by it in the course of
providing the Services, except as required by law or as contemplated by
the terms of this Agreement. Notwithstanding anything to the contrary,
AMS may disclose non-public information to their agents and advisors
whenever AMS determines that such disclosure is necessary or advisable
to provide the services contemplated hereunder.

For purposes of this section, "non-public information" shall
not include information which prior to or after AMS's receipt thereof
(i) was or becomes publicly known without disclosure by AMS or (ii)
becomes available to AMS as a result of disclosure by a third party
which represents to AMS (upon which representation AMS is reasonable in
its reliance) that it is or was entitled to disclose such information.

F. COUNTERPARTS

This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
<PAGE> 5

AmeriPath, Inc.
Page 5

G. ENTIRE AGREEMENT AND GOVERNING LAW

This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Pennsylvania, without regard to
principles of conflicts of law.

H. AMENDMENT

This Agreement may not be amended or modified except in writing executed
by the Company and AMS.

I. SURVIVAL

Notwithstanding anything to the contrary contained herein, the
provisions concerning release, confidentiality, indemnification,
compensation and the Company's obligations to pay fees and reimburse
expenses contained in the indemnification provisions shall survive the
expiration or termination of this Agreement.

If the foregoing correctly sets forth the terms of our agreement, kindly so
indicate by signing and returning one copy of this letter.

Very truly yours,

ACQUISITION MANAGEMENT SERVICES, INC.

By: /s/ Brian G. Murphy
--------------------
Brian G. Murphy
President

Accepted and Agreed
this 19th day of September, 1996

AMERIPATH, INC.

By: /s/ James C. New
--------------------
James C. New
President

<PAGE> 1

EXHIBIT 10.19

AMERIPATH MANAGEMENT AGREEMENT

BY AND BETWEEN

AMERIPATH CINCINNATI, INC.

AND

AMERIPATH OHIO, INC.

<PAGE> 2

MANAGEMENT AGREEMENT

PARTIES: AMERIPATH CINCINNATI, INC. (the "Practice")
AMERIPATH OHIO, INC. ("Ameripath")

EFFECTIVE DATE: SEPTEMBER 30, 1996 (the "Effective Date")

RECITALS:

- AmeriPath is a Delaware corporation engaged in the business
of providing administrative and management services, to
pathology groups;

- The Practice is a professional association comprised of
medical practitioners who engage in the practice of pathology
("Practice Providers");

- The Practice desires to enter into this Agreement with
AmeriPath for the provision of comprehensive business
management services to enhance the efficiency of its
operations and to allow its Practice Providers to concentrate
fully on providing quality medical services;

- The Practice has designated a Managing Physician to oversee
the day to day operations of the Practice's business and to
make administrative and certain other decisions on its
behalf;

- The Practice and AmeriPath desire to enter into this
agreement (the "Agreement") to provide a statement of their
respective rights and responsibilities during its Term (as
defined in Section VI-A herein below).

FOR GOOD AND VALUABLE CONSIDERATION, AmeriPath and the Practice agree
as follows:

I. PRELIMINARY STATEMENTS

A. RECITALS. The recitals set forth above are true and accurate and
are incorporated as part of this Agreement.

B. DEFINITIONS. Many capitalized terms used in this Agreement are
defined in Attachment I to this Agreement; however, capitalized terms used in
this Agreement are also defined in the text of this Agreement, and Attachments
II and III hereof.

1
<PAGE> 3

C. ATTACHMENTS. All attachments to this Agreements are incorporated
into this Agreement by reference. The attachments to this Agreement are the
following:

Attachment I: Definitions
Attachment II: Attorney in Fact
Attachment III: Miscellaneous Contractual Provisions

II. AMERIPATH SERVICES

AmeriPath shall on behalf of Practice and as a Practice Expense,
provide the Practice and the Practice Providers with the following services:

A. STRATEGIC PLANNING AND GOALS. AmeriPath shall prepare, in
consultation with the Managing Physician, an annual Operating Plan (as defined
in Section IV-B), reflecting in reasonable detail anticipated Practice Revenues,
Practice Expenses, Allocated Expenses and Practice Provider staffing. The
Operating Plan shall include, among other things, information relating to the
growth and enhancement of the Practice, a budget for the Practice and the
Management Fee to be paid to AmeriPath.

B. EXPANSION OF PRACTICE. AmeriPath shall assist the Practice in
developing relationships and affiliations with physicians and other specialists,
hospitals, networks, health maintenance organizations and preferred provider
organizations. Subject to the terms of this Agreement, each of the Practice and
AmeriPath shall cooperate and use their respective best efforts to expand the
Practice.

C. MANAGED CARE RELATIONSHIPS. AmeriPath, together with the Managing
Physician, shall evaluate, negotiate, and administer managed care contracts and
other third party payor contracts on behalf of the Practice and its Practice
Providers.

D. FACILITY RELATIONSHIPS. AmeriPath, together with the Managing
Physician, shall evaluate, negotiate, and administer all hospital and other
medical facility contracts on behalf of the Practice and its Practice
Providers.

F. PRACTICE MANAGEMENT SERVICES. AmeriPath shall, in consultation with
the Managing Physician, assess business activity including product line
analysis, outcomes monitoring and customer satisfaction. AmeriPath shall
develop systems to track revenues, expenses, cost accounting, utilization,
quality assurance, physician productivity and customer satisfaction.

G. BUSINESS OFFICE AND SUPPORT SERVICES AmeriPath may, in consultation
with the Managing Physician, provide computer, bookkeeping, billing and
collection, accounts receivable and

<PAGE> 4

accounts payable services necessary for the management of the Practice pursuant
to this Agreement and in accordance with the Operating Plan. AmeriPath may also
order and purchase on behalf of the Practice medical and office supplies
required in the day-to-day operation of the Practice as determined by the
Managing Physician consistent with the Operating Plan. However, the Practice
shall order, purchase, stock, and monitor the inventory of pharmaceuticals and
other medical supplies, substances, or items whose purchase, maintenance, or
security require licensure as a health-care provider or require a permit,
registration, certification, or identification number that requires licensure
or certification as a health-care provider. AmeriPath shall provide access to
management information systems services to the Practice, including risk
contracting systems services. AmeriPath may also arrange laundry, waste
collection, and other necessary operational services in accordance with
applicable laws.

H. PROFESSIONAL AND CONSULTING SERVICES. AmeriPath shall arrange for or
render business and financial management consultation and advice reasonably
requested by the Managing Physician and directly related to the operations of
the Practice pursuant to this Agreement. Except as contemplated by the Operating
Plan, AmeriPath shall not be responsible for any services requested by or
rendered to any individual, employee or agent of the Practice, or any Practice
Provider, not directly related to Practice operations.

I. FINANCIAL STATEMENTS. AmeriPath shall prepare Practice profit and
loss and income statements, in accordance with the manner and form in which
AmeriPath normally keeps its accounts, books and records, and in accordance with
applicable laws. The statements shall reflect Practice Revenues generated by or
on behalf of the Practice and shall contain a comparison of actual and budgeted
Practice Revenues and expenses. AmeriPath shall provide the Managing Physician
with monthly statements within thirty (30) days after the end of each month and
shall provide a year-end statement within ninety (90) days after the end of the
calendar year.

III. PRACTICE OBLIGATIONS

A. EXCLUSIVITY. The Practice and the Practice Providers agree that
during the Term of this Agreement they will not retain, engage or employ,
directly or indirectly, any other entity or individual to provide the services
for which it is contracting with AmeriPath.

B. PROFESSIONAL STANDARDS. Medical services shall be performed solely
by, or under the direct supervision of, the Practice Providers. The Practice
shall have complete and absolute control over the methods by which the Practice,
and Practice Providers practice medicine and/or render the professional services
which they are licensed to provide under the laws of the states in which they
are practicing and Federal Law. The Practice shall require that Practice
Providers comply with applicable ethical standards, laws and regulations. The
Practice shall, with the assistance of AmeriPath (if so requested by the
Managing Physician), resolve utilization review or quality assurance issues
which may arise. In the event that disciplinary actions or professional
liability actions are initiated against any Practice Provider, the Practice
shall immediately inform AmeriPath of the action and the underlying facts and
circumstances. The Practice shall implement and maintain a program to monitor
the quality and utilization of medical care, and AmeriPath shall render
administrative assistance to the Practice, as requested by the Managing
Physician.

3
<PAGE> 5

C. MANAGED CARE ARRANGEMENTS. The Practice shall cooperate with
AmeriPath in the development and operation of managed care arrangements. The
Practice shall participate as a provider and in the administrative operation of
integrated delivery systems and managed care arrangements. The Practice and its
Practice Providers agree to comply with the quality assurance and utilization
review programs of managed care arrangements.

D. CONTINUING MEDICAL EDUCATION. The Practice shall ensure that each
of its Practice Providers participates in continuing medical education
activities, as necessary to remain current in their respective specialties,
including, but not limited to, the minimum continuing medical education
requirements imposed by applicable laws and policies of applicable specialty
boards.

E. PHYSICIAN POWERS OF ATTORNEY AND BILLING. The Practice shall appoint
AmeriPath to act as agent in the billing and collection of all Practice
Revenues, and shall require all Practice Providers to appoint AmeriPath as
attorney-in-fact for the Practice and each Practice Provider, as more
specifically set forth in Attachment II. The Practice shall cooperate and shall
cause its Practice Providers to cooperate with AmeriPath in all matters relating
to the billing and collection of all Practice Revenues. In this regard, each
Practice Provider shall review and approve the reports and other information
required to support complete and accurate bills. Additionally, the Practice and
its Practice Providers will provide such necessary support to appeal or contest
any denials of claims or other regulatory issues.

F. ADDITIONAL PRACTICE PROVIDERS. When the Practice desires to add or
change a Practice Provider, AmeriPath shall provide a business analysis of the
prospective change in the composition of the Practice. Additional Practice
Providers (the "Additional Practice Providers") shall be added to the Practice
as follows: the Practice shall review and approve the credentials and the
medical practices of the prospective Additional Practice Provider. AmeriPath
shall review the business operations, financial condition and results of
operations of the prospective Additional Practice Provider and shall provide
such information to the Managing Physician. The decision to admit an Additional
Practice Provider shall be subject to the approval of the Steering Committee.

G. ADDITIONAL PRACTICES. AmeriPath may, in its discretion, seek to add
additional practices (each such Practice being an "Additional Practice") to this
Agreement. If AmeriPath desires to add an Additional Practice, AmeriPath shall
provide the with a business analysis of the Additional Practice, including
business operations, financial condition and results of operations. The decision
to admit an Additional Practice shall be subject to the approval of the Board.
After an agreement to add an Additional Practice has been reached, the Practice
and AmeriPath shall enter into an amendment (the "New Practice Amendment") to
this Agreement. The New Practice Amendment shall include the understanding of
the parties with respect to AmeriPath's compensation and other issues agreed
upon by the Board and the Additional Practice. The New Practice Amendment shall
obligate the Additional Practice to be bound by the New Practice Amendment.

H. PRACTICE EXPENSES. The Practice shall be solely responsible for the
payment of all Practice Expenses.

4
<PAGE> 6

I. PRACTICE ORGANIZATIONAL DOCUMENTS. The Practice agrees that it shall
not, without the written consent of AmeriPath: (a) modify or amend the Practice
Organizational Documents (as defined in Attachment I); (b) admit New Practice
Providers, except as provided for in this Agreement; (c) remove the Managing
Physician; or (d) terminate or cancel any hospital contracts (or similar
contracts for the provision of services) under this Agreement. Further, the
Practice agrees that it shall consult with AmeriPath prior to the termination or
release of any Practice Provider from his or her obligations.

J. STAFFING OF FACILITIES BY THE PRACTICE. To the extent that the
Practice or the Practice Providers are responsible for staffing facilities
provided by AmeriPath, the Practice shall provide adequate staffing to ensure
that medical services are provided in a manner consistent with applicable
community and medical specialty standards. From time to time AmeriPath may
acquire new facilities that it wishes the Practice to staff. The Practice agrees
that in the event AmeriPath acquires or develops a new facility that it wishes
the Practice to staff, the Practice will use its best efforts to staff the
facility. The parties agree that the Operating Plan will be revised as necessary
to accommodate staffing of the new facility.

K. EQUIPMENT. The Practice shall advise AmeriPath on the maintenance,
repair and proper operation of medical equipment. This obligation shall relate
to the medical functionality of the equipment. Upon receipt of such advice,
AmeriPath shall cause the medical equipment to be maintained in good operating
condition.

L. MEDICAL RECORDS. The Practice shall be responsible for the
preparation of, and direct the contents of, patient medical records. All
patient medical records shall remain the property of the Practice. The Practice
shall be responsible for proper documentation of medical services provided by
the Practice and the Practice Providers.

FINANCIAL MATTERS

H. AMERIPATH COMPENSATION.

1. GENERAL. The compensation provided herein is
expected to provide AmeriPath with fair market value
payment commensurate with the services it provides,
its capital investment, use of its tradename and its
expertise in laboratory and professional practice
management. AmeriPath shall receive compensation
equal to all Practice Revenues in excess of Practice
Expenses.

<PAGE> 7

Practice shall be paid to AmeriPath. Allocated
Expenses may include an allocable portion of
reasonable corporate overhead of AmeriPath.
Allocated Expenses shall be billed to the Practice
at their actual cost to AmeriPath. An operating
budget for Practice Expenses and Allocated Expenses
shall be reviewed at least annually and shall be
set forth in the Operating Plan.

I. REIMBURSEMENT OF EXPENSES. AmeriPath may, from time to time, incur
Practice Expenses which are a part of the Operating Plan, a Revised Operating
Plan, or are Practice Expenses incurred in the ordinary course of business.
AmeriPath shall be entitled to be reimbursed by the Practice for these expenses
when incurred.

J. PRACTICE BANK ACCOUNT, PAYMENT OF FEES AND PAYMENT OF EXPENSES. The
Practice shall establish a bank account for the deposit of all Practice Revenues
(the "Practice Bank Account"). AmeriPath shall have a security interest in the
Practice Bank Account pursuant to this Section V. Additionally, it is understood
and agreed that AmeriPath may assign its security interest and all other
interests that it may have in the Practice Bank Account to its lender or
lenders. Should AmeriPath assign its interest, its assignee shall have a first
lien on the Practice Bank Account. AmeriPath shall have access to the Practice
Bank Account solely for the purposes stated herein. In connection herewith and
throughout the Term, Practice hereby grants to AmeriPath an exclusive special
power of attorney for the purposes herein and appoints AmeriPath as Practice's
exclusive true and lawful agent and attorney-in-fact, and AmeriPath hereby
accepts such special power of attorney and appointment, to deposit into the
Practice Bank Account all funds, fees, and revenues generated from the
Practice's provision of medical services and collected by AmeriPath, and to make
withdrawals from Practice Bank Account for payments specified in this Agreement
and as requested from time-to-time by Practice. Notwithstanding the exclusive
special power of attorney granted to AmeriPath hereunder, Practice may, with
notice to AmeriPath, draw checks on the Practice Bank Account; provided,
however, that Practice shall neither draw checks on the Practice Bank Account
nor request AmeriPath to do so if the balance remaining in the Practice Bank
Account after such withdrawal would be insufficient to enable AmeriPath to pay
on behalf of Practice any Practice Expense attributable to the operations of
Practice or to the provision of medical services, and/or any other obligations
of Practice. Disbursements made from the Practice Bank Account consent shall be
consistent with the type and amount of expenditures authorized by the Operating
Plan. Limits on authority to sign checks and purchase orders shall be mutually
agreed upon by AmeriPath and the Managing Physician.

K. COLLATERAL. As collateral security for the payment of all amounts
owed to AmeriPath pursuant to this Agreement, Practice grants to AmeriPath a
security interest in all tangible and intangible assets of the Practice,
including Practice Revenues which may be created or arise during the Term,
together with all proceeds regardless of the manner in which the entitlement to
payment for Practice Revenues exists whether as accounts, accounts receivable,
notes receivable or other evidence of entitlement to the Practice Revenues and
all of its rights, title and interest (including right to control the same), if
any, in the Bank Account and the sums on deposit (collectively, the
"Collateral") to the extent the same are not otherwise assigned to AmeriPath. In
granting this security interest, the Practice agrees to the following: (i) this
Agreement shall create and constitute a valid and perfected first priority
security interest in the Collateral enforceable against all parties; (ii) the
Practice has and shall continue

<PAGE> 8

to have good indefeasible and merchantable title to and ownership of the
Collateral free and clear of all liens, other than liens created by AmeriPath
or any AmeriPath Affiliate; (iii) this grant of a security interest in the
Collateral shall not result in a violation of any other agreement to which
Practice is or becomes a party; and (iv) the Practice shall take all action
necessary to perfect AmeriPath's security interest in the Collateral, including
the execution of financing statements and authorization to file the same in the
appropriate recording office. AmeriPath and the Practice agree to execute such
further documents and instruments as may be deemed necessary or desirable, in
AmeriPath's sole discretion, to effect the provisions of this Section.

L. REMEDIES FOR NON-PAYMENT. AmeriPath shall have all rights and
remedies of a secured party and all rights, remedies, securities and liens of
the Practice with respect to the Collateral including, but not limited to,
extending the time of payment of, compromising, or settling for cash, credit, or
otherwise upon any terms, any part or all of the Collateral, but shall not be
liable for any failure to collect or enforce the payment thereof. AmeriPath is
authorized by the Practice, except as otherwise prohibited by applicable law, to
take possession of, and endorse in the name of the Practice any notes, checks,
money orders, drafts, cash, insurance payments and any other instruments
received in payment of the Collateral, or any part thereof; to collect, sue for
and give satisfactions for moneys due on account of the Collateral; and to
withdraw any claims, suits or proceedings pertaining to, or arising out of,
AmeriPath's and/or the Practice's rights to the Collateral. AmeriPath's costs of
collection and enforcement, including attorneys' fees and out-of-pocket
expenses, shall be borne solely by the Practice. The Practice agrees that
AmeriPath shall be permitted to place its representatives in the Medical
Offices, with full authority to take possession of and retain for AmeriPath the
books and records of the Practice with reference to the Practice's operations
pursuant to this Agreement with respect to the Collateral.

M. RIGHT OF OFFSET. Notwithstanding any other provision in this
Agreement, AmeriPath is entitled to offset against any sums owed by AmeriPath
to the Practice any amounts payable or reimbursable to AmeriPath under this
Agreement.

N. LEGAL LIMITATION ON ASSIGNMENT. This Agreement shall not constitute
an assignment of Practice Revenues to the extent that such assignment is
prohibited under applicable law. To the extent Practice Revenues are not
assignable, the Practice agrees that it shall promptly deliver non-assigned
Practice Revenues to AmeriPath.

7
<PAGE> 9

IV. TERMS AND TERMINATIONS

A. TERM. The initial term of this Agreement shall be for a period of
forty (40) years commencing on September 30, 1996 and ending on September 29,
2036 (the "Initial Term"). This Agreement shall be extended for separate and
successive five (5) year periods (each such five (5) year period shall be
referred to as an "Extended Term" and the Initial Term and any Extended Term
shall be referred to in this Agreement as the "Term") unless either party
provides the other party notice not less than sixty (60) days prior to the end
of the Initial Term or an Extended Term, unless the Practice has defaulted under
the terms of this Agreement. The same terms and conditions of this Agreement
shall apply to an Extended Term unless the Practice and AmeriPath mutually agree
to alter the terms and conditions hereof with a writing signed by each party
hereto. All New Practice Amendments shall terminate at such time as this
Agreement terminates.

B. TERMINATION. A party (the "Terminating Party") may terminate this
Agreement on the basis of the following:

1. The other party breaches any material term or condition of this
Agreement, and the breach continues for sixty (60) days after the receipt of
written notice specifying the breach by the party which did not perform or
breached.

2. AmeriPath may terminate this Agreement if the Practice is
suspended or prohibited from participating in the Medicare or Medicaid programs
or excluded from entering into healthcare provider agreements with any material
portion of the managed care or healthcare insurance industry; or (ii) the
Practice or the Managing Physician, breaches any material term of this
Agreement, including the restrictive covenants provided in Attachment III.

C. EFFECTS OF AND OBLIGATIONS UPON TERMINATION. Upon the termination or
expiration of this Agreement: (i) neither party shall be discharged from any
previously accrued obligation which remains outstanding; (ii) any sums of money
owing by one party to the other shall be paid immediately, prorated through the
effective date of termination or expiration; (iii) the Practice shall return to
AmeriPath all originals and copies of any Confidential Information in the
possession of the Practice or any other person or entity to whom it has
delivered originals and/or copies; (iv) the Practice and AmeriPath shall perform
matters as are necessary to wind up their activities under this Agreement in an
orderly manner, including providing to the Practice patient billing records on
paper or electronic data; and (v) each party shall have the right to pursue
other legal or equitable relief as may be available depending upon the
circumstances of the termination.

V. LEGAL COUNSEL

The Practice agrees to retain legal counsel recommended by AmeriPath
with respect to matters in which the interests of the Practice are not adverse
to AmeriPath or its business in any significant respect and further agrees to
waive any conflicts of interest in transactional matters which may exist for
such recommended legal counsel with respect to AmeriPath.

8
<PAGE> 10

VI. PRACTICE OF MEDICINE. The parties acknowledge that AmeriPath is not
authorized or qualified to engage in any activity which constitutes the practice
of medicine and nothing required herein to be shall be construed as the practice
of medicine by AmeriPath. To the extent any act or service required to be
performed or provided by AmeriPath is construed or deemed by any governmental
authority, agency or court to constitute the practice of medicine, AmeriPath
shall be released from any obligation to provide such act or service and the
provision for such required act or service shall be deemed waived and forever
unenforceable without otherwise affecting the terms of this Agreement.

Practice and AmeriPath have duly executed this Agreement on the day and
year indicated above.

AMERIPATH CINCINNATI, INC.

/s/ David R. Barron, M.D.
------------------------------

AMERIPATH OHIO, INC.

By: /s/ Robert P. Wynn
---------------------------
Name: Robert P. Wynn
-------------------------
Its: Vice President

9
<PAGE> 11

ATTACHMENT I

DEFINITIONS

AGREEMENT means this agreement and any subsequent amendments
thereto.

ALLOCATED EXPENSES means the expenses relating to the operations of the
facilities of the Practice and the administrative
expenses incurred by AmeriPath on behalf of the
Practice in the performance of AmeriPath's duties under
this Agreement, including the following: billing
services (including personnel), marketing, advertising,
promotion, allocated corporate overhead, legal
expenses, service of laboratory and other expenses as
may be approved from time to time by the Board, all as
permitted to be incurred in accordance with this
Agreement.

DOCUMENTS means the articles of incorporation and bylaws of the
Practice.

MANAGING PHYSICIAN means David R. Barron, M.D., for so long as he is so
designated by Practice's Board of Directors to manage
the administrative and medical functions of the
Practice.

OPERATING PLAN means the Practice Operating Plan referred to in Section
IV.B.

PRACTICE BANK ACCOUNT means the bank account referred to in Section V.C. of
which the Practice is the owner.

PRACTICE EXPENSES means the following expenses: Practice Providers'
compensation expenses, professional liability
insurance, continuing medical education, benefits, dues
and subscriptions, automobiles, facility leases,
repairs and maintenance, telephones and pagers,
utilities, billing services, courier services, legal
expenses, travel and entertainment, outside medical
consultants, license fees and taxes, all expenses
identified in this Agreement as Practice Expenses, all
expenses identified in this Agreement as incurred by
Ameripath on behalf of Practice and other expenses
approved from time to time by the Board, all as
permitted to be incurred in accordance with this
Agreement and any New Practice Amendment (as defined in
Section III.G.).

Attachment I-1

<PAGE> 12

PRACTICE PROVIDERS means individuals who are duly licensed to practice
medicine and who are employed by the Practice, or other
individuals who are under contract with the Practice to
provide physician services to patients of the Practice.

Attachment I-2
<PAGE> 13

ATTACHMENT II

APPOINTMENT OF AMERIPATH AS ATTORNEY IN FACT

On behalf of and for the account of Practice, AmeriPath shall assist
Practice in Practice's establishment and maintenance of credit and billing and
collection policies and procedures, and shall coordinate and supervise Practice
personnel to ensure the timely billing and collection of all professional and
other fees for all billable pathology services provided by Practice or
Physicians. AmeriPath shall advise and consult with Practice regarding the fees
for pathology services provided by Practice; it being understood, however, that
Practice shall establish the fees to be charged for pathology services and that
AmeriPath shall have no authority whatsoever with respect to the establishment
of such fees. In connection with the billing and collection services to be
provided hereunder, and throughout the term of this Agreement, Practice hereby
grants to AmeriPath an exclusive special power of attorney and appoints
AmeriPath as Practice's exclusive true and lawful agent and attorney-in-fact,
and AmeriPath hereby accepts such special power of attorney and appointment, for
the following purposes:

1. To supervise and coordinate the billing of Practice's
patients, in the name of Practice and on behalf of Practice,
as applicable, for all billable pathology services provided
by Practice to patients.

2. To supervise and coordinate the billing in Practice's name
and on Practice's behalf, as applicable, all claims for
reimbursement or indemnification from Blue Shield/Blue Cross,
insurance companies, Medicare, Medicaid, and all other third
party payors or fiscal intermediaries for all covered
billable pathology services provided by Practice to patients.

3. To ensure the collection and receipt in AmeriPath's name and
for AmeriPath's account all accounts receivable of Practice
purchased by AmeriPath, and to deposit such collections in an
account selected by AmeriPath and maintained in AmeriPath's
name.

4. To ensure the collection and receipt in Practice's name and
on Practice's behalf, as applicable, of all accounts
receivable generated by such billings and claims for
reimbursement that have not been purchased by AmeriPath, to
administer such accounts including, but not limited to, (i)
extending the time of payment of any such accounts for cash,
credit or otherwise; (ii) discharging or releasing the
obligors of any such accounts; (iii) with the consent of the
Board, suing, assigning or selling at a discount such
accounts to collection agencies; or (iv) with the consent of
the Practice's Board of Directors ("Board"), taking other
measures to require the payment of any such accounts.

5. To deposit all amounts collected in Practice's name and on
behalf of Practice into Practice Bank Account which shall be
and at all times remain in Practice's name.

Attachment II-1

<PAGE> 14

Practice covenants to transfer and deliver to AmeriPath for
deposit into Practice Bank Account or itself to make such
deposit of all funds received by Practice from patients or
third party payors for pathology services. Upon receipt by
AmeriPath of any funds from patients or third party payors or
from Practice pursuant hereto for pathology services,
AmeriPath shall immediately deposit same into the Practice
Bank Account. AmeriPath shall disburse such deposited funds
to creditors and other persons on behalf of Practice,
maintaining records of such receipt and disbursement of funds
as directed by Practice.

6. To take possession of, endorse in the name of Practice, and
deposit into the Practice Bank Account any notes, checks,
money orders, insurance payments, and any other instruments
received in payment for pathology services.

7. To sign checks, drafts, bank notes or other instruments on
behalf of Practice, and to make withdrawals from the Practice
Bank Account for payments specified in this Agreement and as
requested from time to time by Practice.

Upon request of AmeriPath, Practice shall execute and deliver to the financial
institution wherein the Practice Bank Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
and limited power of attorney granted to AmeriPath by Practice pursuant to this
Agreement. The special and limited power of attorney granted herein shall be
coupled with an interest and shall be irrevocable except with AmeriPath's
written consent. The irrevocable power of attorney shall expire on the later of
when this Agreement has been terminated, when all accounts receivable purchased
by AmeriPath have been collected, or when all management fees due to AmeriPath
have been paid. If AmeriPath assigns this Agreement in accordance with its
terms, then Practice shall execute a power of attorney in favor of the assignee.

Attachment II-2

<PAGE> 15

ATTACHMENT III

MISCELLANEOUS CONTRACTUAL PROVISIONS

1. ADDITIONAL ACTS. Each party agrees to perform any further acts and to
execute and deliver any documents which may be
reasonably necessary to carry out the provisions of
this Agreement.

2. CONTRACT CONSTRUCTION, INTERPRETATION
AND ENFORCEMENT PROVISIONS.

(a) Assignment Neither party may assign this Agreement
without the other's written consent. Nevertheless:
AmeriPath may assign this Agreement to a parent,
subsidiary or affiliate. This Agreement shall be
binding on and shall inure to the benefit of the
parties to this Agreement, and their successors and
permitted assigns. Subject to the foregoing sentence,
no person or entity not a party to this Agreement shall
have any right under or by virtue of this Agreement,
except for AmeriPath Ohio, Inc. as an intended third
party beneficiary of this Agreement.

(b) Captions The captions or headings in this Agreement are made for
convenience and general reference only and shall not be
construed to describe, define or limit the scope or
intent of the provisions of this Agreement.

(c) Costs of
Enforcement In the event that either party files suit in any
court against the other party to enforce the
terms of or to obtain performance under this
Agreement, the prevailing party shall be entitled to
recover all reasonable costs, including reasonable
attorneys' fees, from the other party as part of any
judgment in the suit. The term "prevailing party"
means the party in whose favor final judgment after
appeal (if any) is rendered with respect to the claims
asserted in the complaint. "Reasonable attorneys'
fees" are those attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.

(d) Counterparts The parties may execute this Agreement in several
counterparts, each of which shall be deemed to be an
original, and counterparts shall constitute and be one
and the same instrument.

(e) Governing Law. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of
Ohio, applied without giving effect to any conflicts of
law principles.

Attachment III-1

<PAGE> 16

(g) Notices The parties to this Agreement shall give notice under
this Agreement by U.S. mail, postage prepaid, by hand
delivery or by overnight express, charges prepaid.
Notices shall be addressed as follows:

IF TO THE PRACTICE:

AmeriPath Cincinnati, Inc.
9670 Kenwood Road
Cincinnati, Ohio 45242
Attention: David R. Barron, M.D.

IF TO AMERIPATH:

AmeriPath Ohio, Inc.
6061 N.E. 14th Avenue
Ft. Lauderdale, Florida 33334
Attention: President

or other addresses as furnished in writing by a party
to the other party. All notices shall be considered
received when received by the addressee, if by mail,
when hand delivered or one business day after
delivery to the overnight courier.

(h) Severability. A determination by a court of competent jurisdiction
that a provision or part of any provision of this
Agreement is invalid or unenforceable shall not affect
the remaining parts or provisions of this Agreement
which shall continue in full force and effect.

3. LEGAL EVENTS TRIGGERING
CONTRACT MODIFICATION OR TERMINATION

Attachment III-2
<PAGE> 17

for in this Agreement, then the parties shall negotiate
in good faith to amend this Agreement to provide for
payment of compensation in a manner consistent with
such changes, taking into account any materially
adverse change in reimbursement or payment for
physician services. If the parties cannot reach
agreement on an amendment prior to the effective date
of the change, the parties agree to jointly select a
mediator and share equally in the cost of the
mediation. If mediation does not resolve such dispute,
then the matter shall be settled exclusively by binding
arbitration, which shall be conducted in Broward
County, Florida, in accordance with the National Health
Lawyer's Association, Alternative Dispute Resolution
Service, Rules of Procedure for Arbitration. The
expenses of such arbitration shall be borne equally by
the parties, provided that each party shall pay for the
cost and its own experts, evidence, and attorney's fees
(unless otherwise directed by the arbitrator).

(b) Enactment or Interpretation of Relevant
Statutes and Regulations.

In the event any state or federal laws or regulations,
now existing or enacted or promulgated after the date
hereof, are interpreted by judicial decision, a
regulatory agency, or legal counsel acceptable to both
AmeriPath and the Practice in such a manner as to
indicate that this Agreement or any provision hereof
may be in violation of such laws or regulations, the
Practice and AmeriPath shall amend this Agreement as
necessary to preserve the underlying economic and
financial arrangements between the Practice and
AmeriPath and without substantial economic detriment to
any party. If such an amendment is not possible, either
party shall have the right to terminate this Agreement.

4. INDEPENDENT CONTRACTOR STATUS.

The Practice and AmeriPath are to perform and exercise
their rights and obligations under this Agreement as
independent contractors. AmeriPath's sole function
under this Agreement is to provide services, as
requested, in a competent and satisfactory manner,
exercising reasonable care in the performance of all
such duties. AmeriPath shall not become liable for any
of the obligations, liabilities, debts or losses of the
Practice unless otherwise specifically provided by this
Agreement. AmeriPath shall have no liability whatsoever
for damages suffered on account of the willful
misconduct or negligence of any employee, agent or
independent contractor (other than AmeriPath) of the
Practice. Each party shall be solely responsible for
compliance

Attachment III-3

<PAGE> 18

with all state and federal laws pertaining to
employment taxes, income withholding, unemployment
compensation contributions and other employment related
statutes regarding their respective employees, agents
and servants. In the event that any court or regulatory
authority (or AmeriPath, in good faith) determines that
the relationship established by this Agreements creates
an employment relationship, the parties shall negotiate
in good faith to reach an arrangement involving
AmeriPath and the then current Practice Providers which
substantially preserves for the parties the benefits of
this Agreement. If such an arrangement cannot be
reached, AmeriPath may terminate this Agreement upon
thirty (30) days prior written notice to the Practice.

5. PROHIBITION AGAINST DISCRIMINATION.

The Practice and AmeriPath agree that, in fulfilling
their respective obligations and duties under this
Agreement, they shall not discriminate against any
individual on the basis of race, religion, age, sex,
disability or national origin.

6. USE OF NAMES.

Subject to the approval of the Managing Physician,
which approval shall not be unreasonably withheld,
AmeriPath may include the name of the Practice, the
Practice Providers and the Practice Providers in any
brochures, promotional materials or the like relating
to AmeriPath.

Attachment III-4

<PAGE> 1

EXHIBIT 10.20

MANAGEMENT AGREEMENT

PARTIES: BENO MICHEL, M.D., INC. (the "Practice")
AMERIPATH, INC. ("Ameripath")

EFFECTIVE DATE: OCTOBER 15, 1996 (the "Effective Date")

RECITALS:

- AmeriPath is a Delaware corporation engaged in the business
of providing administrative and management services, to
pathology and dermatopathology groups;

- The Practice is a professional association comprised of
medical practitioners who engage in the practice of
pathology and dermatology ("Practice Providers");

- The Practice desires to enter into this Agreement with
AmeriPath for the provision of comprehensive business
management services to enhance the efficiency of its
operations and to allow its Practice Providers to
concentrate fully on providing quality medical services;

- The Practice has designated a Managing Physician to oversee
the day to day operations of the Practice's business and to
make administrative and certain other decisions on its
behalf;

FOR GOOD AND VALUABLE CONSIDERATION, AmeriPath and the Practice
agree as follows:

I. PRELIMINARY STATEMENTS

A. RECITALS. The recitals set forth above are true and
accurate and are incorporated as part of this Agreement.

B. DEFINITIONS. Many capitalized terms used in this Agreement
are defined in Attachment I to this Agreement; however, capitalized terms used
in this Agreement are also defined in the text of this Agreement, and
Attachments II and III hereof.

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<PAGE> 2

C. ATTACHMENTS. All attachments to this Agreements are
incorporated into this Agreement by reference. The attachments to this
Agreement are the following:

<TABLE>
<S> <C>
Attachment I: Definitions
Attachment II: Attorney in Fact
Attachment III: Miscellaneous Contractual Provisions
</TABLE>

I. AMERIPATH SERVICES

AmeriPath shall on behalf of Practice and as a Practice Expense,
provide the Practice and the Practice Providers with the following services for
the dermatopathology practice conducted by the Practice (the "Lab Practice"):

A. STRATEGIC PLANNING AND GOALS. AmeriPath shall prepare, in
consultation with the Managing Physician, an annual Operating Plan (as defined
in Section IV-B), reflecting in reasonable detail anticipated Practice
Revenues, Practice Expenses, Allocated Expenses and Practice Provider staffing.
The Operating Plan shall include, among other things, information relating to
the growth and enhancement of the Lab Practice, a budget for the Lab Practice
and the Management Fee to be paid to AmeriPath.

B. EXPANSION OF PRACTICE. AmeriPath shall assist the Practice
in developing relationships and affiliations with physicians and other
specialists, hospitals, networks, health maintenance organizations and
preferred provider organizations. Subject to the terms of this Agreement, each
of the Practice and AmeriPath shall cooperate and use their respective best
efforts to expand the Lab Practice.

C. MANAGED CARE RELATIONSHIPS. AmeriPath, together with the
Managing Physician, shall evaluate, negotiate, and administer managed care
contracts and other third party payor contracts on behalf of the Lab Practice
and its Practice Providers.

D. FACILITY RELATIONSHIPS. AmeriPath, together with the
Managing Physician, shall evaluate, negotiate, and administer all hospital and
other medical facility contracts on behalf of the Lab Practice and its Practice
Providers.

E. ESTABLISHMENT OF FEES. AmeriPath shall recommend, but
shall not set, fees, charges, premiums or other amounts due in connection with
services and goods provided by the Lab Practice. The Steering Committee (see
Section IV) may adopt recommendations in its reasonable discretion on behalf of
the Practice and its Practice Providers. The Practice shall retain sole
authority to decide how physician compensation will be divided among individual
physicians.

F. PRACTICE MANAGEMENT SERVICES. AmeriPath shall, in
consultation with the Managing Physician, assess business activity including
product line analysis, outcomes monitoring and customer satisfaction in respect
of the Lab Practice. AmeriPath shall develop systems to track

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<PAGE> 3

revenues, expenses, cost accounting, utilization, quality assurance, physician
productivity and customer satisfaction in respect of the Lab Practice.

G. BUSINESS OFFICE AND SUPPORT SERVICES. With the prior
approval of the Management Committee, AmeriPath may, in consultation with the
Managing Physician, provide computer, bookkeeping, billing and collection,
accounts receivable and accounts payable services necessary for the management
of the Lab Practice pursuant to this Agreement and in accordance with the
Operating Plan. Billing and collections shall initially be performed by the
Practice, but may be performed at AmeriPath's option, by AmeriPath at a later
date. AmeriPath may also order and purchase on behalf of the Lab Practice
medical and office supplies required in the day-to-day operation of the Lab
Practice as determined by the Managing Physician consistent with the Operating
Plan. However, the Practice shall order, purchase, stock, and monitor the
inventory of pharmaceuticals and other medical supplies, substances, or items
whose purchase, maintenance, or security require licensure as a health-care
provider or require a permit, registration, certification, or identification
number that requires licensure or certification as a health-care provider.
AmeriPath shall provide access to management information systems services to
the Lab Practice, including risk contracting systems services. AmeriPath may
also arrange laundry, waste collection, and other necessary operational
services for the Lab Practice in accordance with applicable laws.

H. PROFESSIONAL AND CONSULTING SERVICES. AmeriPath shall
arrange for or render business and financial management consultation and advice
reasonably requested by the Managing Physician and directly related to the
operations of the Lab Practice pursuant to this Agreement. Except as
contemplated by the Operating Plan, AmeriPath shall not be responsible for any
services requested by or rendered to any individual, employee or agent of the
Practice, or any Practice Provider, not directly related to Lab Practice
operations.

I. FINANCIAL STATEMENTS. AmeriPath shall prepare Lab Practice
profit and loss and income statements, in accordance with the manner and form
in which AmeriPath normally keeps its accounts, books and records, and in
accordance with applicable laws. The statements shall reflect Practice
Revenues generated by or on behalf of the Practice and shall contain a
comparison of actual and budgeted Practice Revenues and expenses. AmeriPath
shall provide the Managing Physician with monthly statements within thirty (30)
days after the end of each month and shall provide a year-end statement within
ninety (90) days after the end of the calendar year.

III. PRACTICE OBLIGATIONS

A. EXCLUSIVITY. The Practice agrees that during the Term of
this Agreement it will not retain, engage or employ, directly or indirectly,
any other entity or individual to provide the services for the Lab Practice for
which it is contracting with AmeriPath.

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<PAGE> 4

render the professional services which they are licensed to provide under the
laws of the states in which they are practicing and Federal Law. The Practice
shall require that Practice Providers comply with applicable ethical standards,
laws and regulations. The Practice shall, with the assistance of AmeriPath (if
so requested by the Managing Physician), resolve utilization review or quality
assurance issues which may arise. In the event that disciplinary actions or
professional liability actions are initiated against any Practice Provider, the
Practice shall immediately inform AmeriPath of the action and the underlying
facts and circumstances. The Practice shall implement and maintain a program to
monitor the quality and utilization of medical care, and AmeriPath shall render
administrative assistance to the Lab Practice, as requested by the Managing
Physician.

C. MANAGED CARE ARRANGEMENTS. The Practice shall cooperate
with AmeriPath in the development and operation of managed care arrangements
for the Lab Practice. The Practice shall participate as a provider and in the
administrative operation of integrated delivery systems and managed care
arrangements for the Lab Practice. The Practice and its Practice Providers
agree to comply with the quality assurance and utilization review programs of
managed care arrangements for the Lab Practice.

D. CONTINUING MEDICAL EDUCATION. The Practice shall ensure
that each of its Practice Providers participates in continuing medical
education activities, as necessary to remain current in their respective
specialties, including, but not limited to, the minimum continuing medical
education requirements imposed by applicable laws and policies of applicable
specialty boards.

E. PHYSICIAN POWERS OF ATTORNEY AND BILLING. At such times as
AmeriPath performs Billing and Collection functions, the Practice shall appoint
AmeriPath to act as agent in the billing and collection of all Practice
Revenues, and shall require all Practice Providers to appoint AmeriPath as
attorney-in-fact for the Practice and each Practice Provider, as more
specifically set forth in Attachment II. The Practice shall cooperate and
shall cause its Practice Providers to cooperate with AmeriPath in all matters
relating to the billing and collection of all Practice Revenues. In this
regard, each Practice Provider shall review and approve the reports and other
information required to support complete and accurate bills. Additionally, the
Practice and its Practice Providers will provide such necessary support to
appeal or contest any denials of claims or other regulatory issues.

F. ADDITIONAL PRACTICE PROVIDERS. When the Practice desires
to add or change a Practice Provider for the Lab Practice, AmeriPath shall
provide a business analysis of the prospective change in the composition of the
Lab Practice. Additional Practice Providers for the Lab Practice (the
"Additional Practice Providers") shall be added to the Lab Practice as follows:
the Practice shall review and approve the credentials and the medical practices
of the prospective Additional Practice Provider. AmeriPath shall review the
business operations, financial condition and results of operations of the
prospective Additional Practice Provider and shall provide such information to
the Managing Physician. The decision to admit an Additional Practice Provider
shall be subject to the approval of the Steering Committee.

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<PAGE> 5

G. ADDITIONAL PRACTICES. AmeriPath may, in its discretion,
seek to add additional practices for Dermatopathology services (each such
Practice being an "Additional Practice") to this Agreement. If AmeriPath
desires to add an Additional Practice, AmeriPath shall provide to the Steering
Committee a business analysis of the Additional Practice, including business
operations, financial condition and results of operations. The decision to
admit an Additional Practice shall be subject to the approval of the Steering
Committee. After an agreement to add an Additional Practice has been reached,
the Practice and AmeriPath shall enter into an amendment (the "New Practice
Amendment") to this Agreement. The New Practice Amendment shall include the
understanding of the parties with respect to AmeriPath's compensation and other
issues agreed upon by the Steering Committee and the Additional Practice. The
New Practice Amendment shall obligate the Additional Practice to be bound by
the New Practice Amendment.

H. PRACTICE EXPENSES. The Practice shall be solely
responsible for the payment of all Practice Expenses.

I. PRACTICE ORGANIZATIONAL DOCUMENTS. The Practice agrees
that it shall not, without the written consent of AmeriPath: (a) modify or
amend the Practice Organizational Documents (as defined in Attachment I); (b)
admit New Practice Providers, except as provided for in this Agreement; (c)
remove the Managing Physician; or (d) terminate or cancel any hospital
contracts (or similar contracts for the provision of services) under this
Agreement. Further, the Practice agrees that it shall consult with AmeriPath
prior to the termination or release of any Practice Provider from his or her
obligations.

J. STAFFING OF FACILITIES BY THE PRACTICE. To the extent that
the Practice or the Practice Providers are responsible for staffing facilities
provided by AmeriPath, the Practice shall use reasonable efforts to provide
adequate staffing to ensure that medical services are provided in a manner
consistent with applicable community and medical specialty standards. From
time to time AmeriPath may acquire new facilities that it wishes the Practice
to staff. The Practice agrees that in the event AmeriPath acquires or develops
a new facility that it wishes the Practice to staff, the Practice will use
reasonable efforts to staff the facility with Additional Practice Providers and
other new personnel. The parties agree that the Operating Plan will be revised
as necessary to accommodate staffing of the new facility.

K. EQUIPMENT. The Practice shall advise AmeriPath on the
maintenance, repair and proper operation of medical equipment. This obligation
shall relate to the medical functionality of the equipment. Upon receipt of
such advice, AmeriPath shall cause the medical equipment for the Lab Practice
to be maintained in good operating condition.

L. MEDICAL RECORDS. The Practice shall be responsible for the
preparation of, and direct the contents of, patient medical records. All
patient medical records shall remain the property of the Practice. The
Practice shall be responsible for proper documentation of medical services
provided by the Practice and the Practice Providers.

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<PAGE> 6

IV. STEERING COMMITTEE

A. CREATION AND GENERAL DUTIES OF STEERING COMMITTEE.
AmeriPath and the Practice shall establish a Steering Committee composed of
three members, one of which shall be the Managing Physician and one of which
shall be designated by AmeriPath and one shall be designated by the Practice's
Board of Directors. The Steering Committee shall meet periodically and at the
reasonable request of either party. The Steering Committee shall consider,
review, determine and approve the following matters as they relate to the
operation of the Lab Practice: (i) the Operating Plan; (ii) employment and
recruitment of Additional Practice Providers; (iii) long term strategic
planning; (iv) establishment and maintenance of relationships with health care
providers and payors; (v) the fee schedule for services and items provided by
the Lab Practice; and (vi) approval of all marketing and advertising of
services performed by the Lab Practice or Practice Providers.

B. OPERATING PLAN. One of the Steering Committee's primary
responsibilities shall be the approval of a Lab Practice Operating Plan (the
"Operating Plan"). AmeriPath shall, not less often than one time each fiscal
year, develop a proposed Operating Plan. The proposed Operating Plan shall be
submitted to the Steering Committee for approval. When Approved by the
Steering Committee, both AmeriPath and the Managing Physician shall, as their
responsibilities are allocated in this Agreement, use reasonable efforts to
implement the Operating Plan. The Operating Plan shall set forth the estimated
income and expenditures of the Lab Practice for the period covered, such income
and expenditures to be set forth in reasonable detail. The Practice shall
retain sole authority for proposing the compensation levels and manner of
distribution of physician income among individual physicians. Such proposals
shall be included in the budget of the Lab Practice which shall be incorporated
into the Operating Plan as approved by the Steering Committee. The Operating
Plan shall include Practice Expenses, Allocated Expenses and AmeriPath
compensation. The Steering Committee may revise, from time to time, the
Operating Plan as it determines to be necessary or desirable (as revised, the
"Revised Operating Plan"). AmeriPath and the Managing Physician shall be
authorized without the need for further approval by AmeriPath, the Steering
Committee or the Practice Providers, to make the expenditures and incur the
obligations provided for in a Revised Operating Plan. Additionally, AmeriPath
or the Managing Physician may make expenditures and incur obligations that
differ from an Operating Plan, but incurred in the ordinary course of business.
For example, an increase in professional liability premiums shall create a
variance in the Operating Plan which may be incurred without a revision to the
Operating Plan.

V. FINANCIAL MATTERS

A. AMERIPATH COMPENSATION.
1. GENERAL. The compensation provided herein is
expected to provide AmeriPath with fair market
value payment commensurate with the services it
provides, its capital investment, use of its
tradename and its expertise in laboratory and
professional practice management. AmeriPath
shall, subject to compliance with any applicable
laws, receive compensation equal to all Practice
Revenues in excess of Practice Expenses and
Allocated Expenses paid to AmeriPath.

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<PAGE> 7

2. PRACTICE EXPENSES AND ALLOCATED EXPENSES. All
Practice Expenses (as defined in Attachment I
hereto), including the compensation of Practice
Providers, shall be the sole responsibility of
Practice and shall be paid by the Practice out of
its first available Practice Revenues. Allocated
Expenses (as defined in ATTACHMENT I hereto)
incurred by AmeriPath in the course of the
performance of its duties under this Agreement on
behalf of or as agent for the Practice shall be
paid to AmeriPath. Allocated Expenses may include
an allocable portion of reasonable corporate
overhead of AmeriPath. Allocated Expenses shall
be billed to the Practice at their actual cost to
AmeriPath. An operating budget for Practice
Expenses and Allocated Expenses shall be reviewed
at least annually and shall be set forth in the
Operating Plan.

B. REIMBURSEMENT OF EXPENSES. AmeriPath may, from time to
time, incur Practice Expenses which are a part of the Operating Plan, a Revised
Operating Plan, or are Practice Expenses incurred in the ordinary course of
business. AmeriPath shall be entitled to be reimbursed by the Practice for
these expenses when incurred.

C. PRACTICE BANK ACCOUNT, PAYMENT OF FEES AND PAYMENT OF
EXPENSES. The Practice shall establish a bank account for the deposit of all
Practice Revenues arising from the Lab Practice (the "Practice Bank Account").
AmeriPath shall have a security interest in the Practice Bank Account pursuant
to this Section V. Additionally, it is understood and agreed that AmeriPath
may assign its security interest and all other interests that it may have in
the Practice Bank Account to its lender or lenders. Should AmeriPath assign
its interest, its assignee shall have a first lien on the Practice Bank
Account. AmeriPath shall have access to the Practice Bank Account solely for
the purposes stated herein. In connection herewith and throughout the Term,
Practice hereby grants to AmeriPath an exclusive special power of attorney for
the purposes herein and appoints AmeriPath as Practice's exclusive true and
lawful agent and attorney-in-fact, and AmeriPath hereby accepts such special
power of attorney and appointment, to deposit into the Practice Bank Account
all funds, fees, and revenues generated from the Lab Practice's provision of
Dermatopathology services and collected by AmeriPath, and to make withdrawals
from Practice Bank Account for payments specified in this Agreement and as
requested from time-to-time by Practice. Notwithstanding the exclusive special
power of attorney granted to AmeriPath hereunder, Practice may, with notice to
AmeriPath, draw checks on the Practice Bank Account; provided, however, that
Practice shall neither draw checks on the Practice Bank Account nor request
AmeriPath to do so if the balance remaining in the Practice Bank Account after
such withdrawal would be insufficient to enable AmeriPath to pay on behalf of
Practice any Practice Expense attributable to the operations of Practice or to
the provision of medical services, and/or any other obligations of Practice.
Disbursements made from the Practice Bank Account consent shall be consistent
with the type and amount of expenditures authorized by the Operating Plan.
Limits on authority to sign checks and purchase orders shall be mutually agreed
upon by AmeriPath and the Managing Physician.

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<PAGE> 8

D. COLLATERAL. As collateral security for the payment of all
amounts owed to AmeriPath pursuant to this Agreement, Practice grants to
AmeriPath a security interest in all tangible and intangible assets of the
Practice used exclusively for the Lab Practice including Practice Revenues of
the Lab Practice which may be created or arise during the Term, together with
all proceeds regardless of the manner in which the entitlement to payment for
such Lab Practice Revenues exists whether as accounts, accounts receivable,
notes receivable or other evidence of entitlement to such Lab Practice Revenues
and all of its rights, title and interest (including right to control the
same), if any, in the Practice Bank Account and the sums on deposit
(collectively, the "Collateral") to the extent the same are not otherwise
assigned to AmeriPath. In granting this security interest, the Practice agrees
to the following, subject in each case to the obligations of the Practice and
the rights of Lenders under the Joinder dated as of October 15, 1996 to the
Credit Agreement dated as of May 29, 1996, among AmeriPath, Subsidiaries of
AmeriPath, the Lenders party thereto and the First National Bank of Boston, as
Agent: (i) this Agreement shall create and constitute a valid and perfected
first priority security interest in the Collateral enforceable against all
parties; (ii) the Practice has and shall continue to have good indefeasible and
merchantable title to and ownership of the Collateral free and clear of all
liens, other than liens created by AmeriPath or any AmeriPath Affiliate; (iii)
this grant of a security interest in the Collateral shall not result in a
violation of any other agreement to which Practice is or becomes a party; and
(iv) the Practice shall take all action necessary to perfect AmeriPath's
security interest in the Collateral, including the execution of financing
statements and authorization to file the same in the appropriate recording
office. AmeriPath and the Practice agree to execute such further documents and
instruments as may be deemed necessary or desirable, in AmeriPath's sole
discretion, to effect the provisions of this Section.

E. REMEDIES FOR NON-PAYMENT. AmeriPath shall have all rights
and remedies of a secured party and all rights, remedies, securities and liens
of the Practice with respect to the Collateral including, but not limited to,
extending the time of payment of, compromising, or settling for cash, credit,
or otherwise upon any terms, any part or all of the Collateral, but shall not
be liable for any failure to collect or enforce the payment thereof. AmeriPath
is authorized by the Practice, except as otherwise prohibited by applicable
law, to take possession of, and endorse in the name of the Practice any notes,
checks, money orders, drafts, cash, insurance payments and any other
instruments received in payment of the Collateral, or any part thereof; to
collect, sue for and give satisfactions for moneys due on account of the
Collateral; and to withdraw any claims, suits or proceedings pertaining to, or
arising out of, AmeriPath's and/or the Practice's rights to the Collateral.
AmeriPath's costs of collection and enforcement, including attorneys' fees and
out-of-pocket expenses, shall be borne solely by the Practice. The Practice
agrees that AmeriPath shall be permitted to place its representatives in the
Medical Offices, with full authority to take possession of and retain for
AmeriPath the books and records of the Lab Practice with reference to the Lab
Practice's operations pursuant to this Agreement with respect to the
Collateral.

F. RIGHT OF OFFSET. Notwithstanding any other provision in
this Agreement, AmeriPath is entitled to offset against any sums owed by
AmeriPath to the Practice any amounts payable or reimbursable to AmeriPath
under this Agreement.

8
<PAGE> 9

G. LEGAL LIMITATION ON ASSIGNMENT. This Agreement shall not
constitute an assignment of Practice Revenues to the extent that such
assignment is prohibited under applicable law. To the extent Practice Revenues
are not assignable, the Practice agrees that it shall promptly deliver
non-assigned Practice Revenues of the Lab Practice to AmeriPath.

VI. TERMS AND TERMINATIONS

A. TERM. The initial term of this Agreement shall be for a
period of forty (40) years commencing on October 15, 1996 and ending on October
14, 2036 (the "Initial Term"). This Agreement shall be extended for separate
and successive five (5) year periods (each such five (5) year period shall be
referred to as an "Extended Term" and the Initial Term and any Extended Term
shall be referred to in this Agreement as the "Term") unless either party
provides the other party notice not less than sixty (60) days prior to the end
of the Initial Term or an Extended Term, unless the Practice has defaulted
under the terms of this Agreement. The same terms and conditions of this
Agreement shall apply to an Extended Term unless the Practice and AmeriPath
mutually agree to alter the terms and conditions hereof with a writing signed
by each party hereto. All New Practice Amendments shall terminate at such time
as this Agreement terminates.

B. TERMINATION. A party (the "Terminating Party") may
terminate this Agreement on the basis of the following:

1. The other party breaches any material term or
condition of this Agreement, and the breach continues for sixty (60) days after
the receipt of written notice specifying the breach by the party which did not
perform or breached.

2. AmeriPath may terminate this Agreement if the
Practice is suspended or prohibited from participating in the Medicare or
Medicaid programs or excluded from entering into healthcare provider agreements
with any material portion of the managed care or healthcare insurance industry;
or (ii) the Practice breaches any material term of this Agreement.

C. EFFECTS OF AND OBLIGATIONS UPON TERMINATION. Upon the
termination or expiration of this Agreement: (i) neither party shall be
discharged from any previously accrued obligation which remains outstanding;
(ii) any sums of money owing by one party to the other shall be paid
immediately, prorated through the effective date of termination or expiration;
(iii) the Practice shall return to AmeriPath all originals and copies of any
Confidential Information in the possession of the Practice or any other person
or entity to whom it has delivered originals and/or copies; (iv) the Practice
and AmeriPath shall perform matters as are necessary to wind up their
activities under this Agreement in an orderly manner, including providing to
the Practice patient billing records on paper or electronic data; and (v) each
party shall have the right to pursue other legal or equitable relief as may be
available depending upon the circumstances of the termination.

VII. LEGAL COUNSEL

The Practice agrees to retain legal counsel recommended by
AmeriPath with respect to Lab Practice matters in which the interests of the
Practice are not adverse to AmeriPath or its business in

9
<PAGE> 10

any significant respect and further agrees to waive any conflicts of interest
in transactional matters which may exist for such recommended legal counsel
with respect to AmeriPath.

VIII. PRACTICE OF MEDICINE.

The parties acknowledge that AmeriPath is not authorized or
qualified to engage in any activity which constitutes the practice of medicine
and nothing required herein to be shall be construed as the practice of
medicine by AmeriPath. To the extent any act or service required to be
performed or provided by AmeriPath is construed or deemed by any governmental
authority, agency or court to constitute the practice of medicine, AmeriPath
shall be released from any obligation to provide such act or service and the
provision for such required act or service shall be deemed waived and forever
unenforceable without otherwise affecting the terms of this Agreement.

Practice and AmeriPath have duly executed this Agreement on the
day and year indicated above.

BENO MICHEL, M.D., INC.

By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------

AMERIPATH, INC.

By:
--------------------------------
Name:
------------------------------
Its :
------------------------------

10
<PAGE> 11

ATTACHMENT I

DEFINITIONS

AGREEMENT means this agreement and any subsequent amendments
thereto.

ALLOCATED EXPENSES means the expenses relating to the operations of
the facilities of the Lab Practice and the
administrative expenses incurred by AmeriPath on
behalf of the Lab Practice in the performance of
AmeriPath's duties under this Agreement, including
the following: billing services (including
personnel), marketing, advertising, promotion,
allocated corporate overhead, legal expenses,
service of laboratory and other expenses as may be
approved from time to time by the Steering
Committee, all as permitted to be incurred in
accordance with this Agreement.

DOCUMENTS means the articles of incorporation and bylaws of
the Practice.

MANAGING PHYSICIAN means Beno Michel, M.D., for so long as he is so
designated by Practices Board of Directors to
manage the administrative and medical functions of
the Practice.

OPERATING PLAN means the Practice Operating Plan referred to in
Section IV.B.

PRACTICE BANK ACCOUNT means the bank account referred to in Section V.C.
of which the Practice is the owner.

PRACTICE EXPENSES means the following expenses: Practice Providers'
compensation expenses, professional liability
insurance, continuing medical education, benefits,
dues and subscriptions, automobiles, facility
leases, repairs and maintenance, telephones and
pagers, utilities, billing services, courier
services, legal expenses, travel and
entertainment, outside medical consultants,
license fees and taxes, all expenses identified in
this Agreement as Practice Expenses, all expenses
identified in this Agreement as incurred by
Ameripath on behalf of Practice and other expenses
approved from time to time by the Steering
Committee, all as permitted to be incurred in
accordance with this Agreement and any New
Practice Amendment (as defined in Section III.G.).

Attachment I-1
<PAGE> 12

PRACTICE PROVIDERS means individuals who are duly licensed to
practice medicine and who are employed by the
Practice, or other individuals who are under
contract with the Practice to provide physician
services to patients of the Practice.

Attachment I-2
<PAGE> 13

ATTACHMENT II

APPOINTMENT OF AMERIPATH AS ATTORNEY IN FACT

On behalf of and for the account of Practice, AmeriPath shall
assist Practice in Practice's establishment and maintenance of credit and
billing and collection policies and procedures, and shall coordinate and
supervise Practice personnel to ensure the timely billing and collection of all
professional and other fees for all billable pathology services provided by
Practice or Physicians. AmeriPath shall advise and consult with Practice
regarding the fees for pathology services provided by Practice; it being
understood, however, that Practice shall establish the fees to be charged for
pathology services and that AmeriPath shall have no authority whatsoever with
respect to the establishment of such fees. In connection with the billing and
collection services to be provided hereunder, and throughout the term of this
Agreement, Practice hereby grants to AmeriPath an exclusive special power of
attorney and appoints AmeriPath as Practice's exclusive true and lawful agent
and attorney-in-fact, and AmeriPath hereby accepts such special power of
attorney and appointment, for the following purposes:

1. To supervise and coordinate the billing of Practice's
patients, in the name of Practice and on behalf of
Practice, as applicable, for all billable pathology
services provided by Practice to patients.

2. To supervise and coordinate the billing in Practice's name
and on Practice's behalf, as applicable, all claims for
reimbursement or indemnification from Blue Shield/Blue
Cross, insurance companies, Medicare, Medicaid, and all
other third party payors or fiscal intermediaries for all
covered billable pathology services provided by Practice to
patients.

3. To ensure the collection and receipt in AmeriPath's name
and for AmeriPath's account all accounts receivable of
Practice purchased by AmeriPath, and to deposit such
collections in an account selected by AmeriPath and
maintained in AmeriPath's name.

4. To ensure the collection and receipt in Practice's name and
on Practice's behalf, as applicable, of all accounts
receivable generated by such billings and claims for
reimbursement that have not been purchased by AmeriPath, to
administer such accounts including, but not limited to, (i)
extending the time of payment of any such accounts for
cash, credit or otherwise; (ii) discharging or releasing
the obligors of any such accounts; (iii) with the consent
of the Steering Committee, suing, assigning or selling at a
discount such accounts to collection agencies; or (iv) with
the consent of the Steering Committee, taking other
measures to require the payment of any such accounts.

Attachment II-1
<PAGE> 14

5. To deposit all amounts collected in Practice's name and on
behalf of Practice into Practice Bank Account which shall
be and at all times remain in Practice's name. Practice
covenants to transfer and deliver to AmeriPath for deposit
into Practice Bank Account or itself to make such deposit
of all funds received by Practice from patients or third
party payors for pathology services. Upon receipt by
AmeriPath of any funds from patients or third party payors
or from Practice pursuant hereto for pathology services,
AmeriPath shall immediately deposit same into the Practice
Bank Account. AmeriPath shall disburse such deposited
funds to creditors and other persons on behalf of Practice,
maintaining records of such receipt and disbursement of
funds as directed by Practice.

7. To sign checks, drafts, bank notes or other instruments on
behalf of Practice, and to make withdrawals from the
Practice Bank Account for payments specified in this
Agreement and as requested from time to time by Practice.

Upon request of AmeriPath, Practice shall execute and deliver to the financial
institution wherein the Practice Bank Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
and limited power of attorney granted to AmeriPath by Practice pursuant to this
Agreement. The special and limited power of attorney granted herein shall be
coupled with an interest and shall be irrevocable except with AmeriPath's
written consent. The irrevocable power of attorney shall expire on the later
of when this Agreement has been terminated, when all accounts receivable
purchased by AmeriPath have been collected, or when all management fees due to
AmeriPath have been paid. If AmeriPath assigns this Agreement in accordance
with its terms, then Practice shall execute a power of attorney in favor of the
assignee.

Attachment II-2
<PAGE> 15

ATTACHMENT III

MISCELLANEOUS CONTRACTUAL PROVISIONS

1. ADDITIONAL ACTS. Each party agrees to perform any further
acts and to execute and deliver any
documents which may be reasonably
necessary to carry out the provisions of
this Agreement.

2. CONTRACT CONSTRUCTION, INTERPRETATION
AND ENFORCEMENT PROVISIONS.

(a)Assignment Neither party may assign this Agreement
without the other's written consent.
Nevertheless: AmeriPath may assign this
Agreement to a parent, subsidiary or
affiliate. This Agreement shall be
binding on and shall inure to the
benefit of the parties to this
Agreement, and their successors and
permitted assigns. Subject to the
foregoing sentence, no person or entity
not a party to this Agreement shall have
any right under or by virtue of this
Agreement, except for AmeriPath, Inc. as
an intended third party beneficiary of
this Agreement.

(b)Captions The captions or headings in this
Agreement are made for convenience and
general reference only and shall not be
construed to describe, define or limit
the scope or intent of the provisions of
this Agreement.

(c)Costs of
Enforcement In the event that either party files
suit in any court against the other
party to enforce the terms of or to
obtain performance under this Agreement,
the prevailing party shall be entitled
to recover all reasonable costs,
including reasonable attorneys' fees,
from the other party as part of any
judgment in the suit. The term
"prevailing party" means the party in
whose favor final judgment after appeal
(if any) is rendered with respect to the
claims asserted in the complaint.
"Reasonable attorneys' fees" are those
attorneys' fees actually incurred in
obtaining a judgment in favor of the
prevailing party.

(d)Counterparts The parties may execute this Agreement
in several counterparts, each of which
shall be deemed to be an original, and
counterparts shall constitute and be one
and the same instrument.

Attachment III-1
<PAGE> 16

(e) Governing Law. This Agreement shall be interpreted,
construed and enforced in accordance
with the laws of the State of Ohio,
applied without giving effect to any
conflicts of law principles.

(f) Modifications. This Agreement contains the entire
agreement of the parties with respect
to the subject matter hereof and
supersedes any prior or
contemporaneous negotiations,
understandings or agreements between
the parties, written or oral, with
respect to the transactions
contemplated by this Agreement. This
Agreement may not be changed or
terminated orally but may only be
changed by an agreement in writing
signed by AmeriPath and the Practice;
provided, however, that this Agreement
shall not be modified without the
consent of the Managing Physician for
so long as Beno Michel, M.D., shall be
the Managing Physician, or AmeriPath,
Inc., shall have continuing financial
obligations (contingent or otherwise)
owing to Dr. Michel.

(g) Notices The parties to this Agreement shall
give notice under this Agreement by
U.S. mail, postage prepaid, by hand
delivery or by overnight express,
charges prepaid. Notices shall be
addressed as follows:

If to the Practice:
Beno Michel, M.D., Inc.
23200 Chagrin Building 5, Suite 350
Beachwood, Ohio 44122
Attention: Beno Michel, M.D.

If to AmeriPath:
AmeriPath, Inc.
800 Cypress Creek Road, Suite 200
Ft. Lauderdale, Florida 33334
Attention: James C. New, President

or other addresses as furnished in writing by a party to the other party. All
notices shall be considered received when received by the addressee, if by
mail, when hand delivered or one business day after delivery to the overnight
courier.

(h) Severability. A determination by a court of
competent jurisdiction that a
provision or part of any provision of
this Agreement is invalid or
unenforceable shall not affect the
remaining parts or provisions of this
Agreement which shall continue in full
force and effect.

Attachment III-2
<PAGE> 17

3. LEGAL EVENTS TRIGGERING
CONTRACT MODIFICATION OR TERMINATION

(a)Changes in Reimbursement. In the event that Medicare,
Medicaid, Blue Shield or any other third party
payor, or any other Federal, state or local
laws, rules, regulations or interpretations, at
any time during the Term prohibit, restrict or
in any way materially and adversely change the
method or amount of reimbursement or
compensation for either party provided for in
this Agreement, then the parties shall negotiate
in good faith to amend this Agreement to provide
for payment of compensation in a manner
consistent with such changes, taking into
account any materially adverse change in
reimbursement or payment for physician services.
If the parties cannot reach agreement on an
amendment prior to the effective date of the
change, the parties agree to jointly select a
mediator and share equally in the cost of the
mediation. If mediation does not resolve such
dispute, then the matter shall be settled
exclusively by binding arbitration, which shall
be conducted in Broward County, Florida, in
accordance with the National Health Lawyer's
Association, Alternative Dispute Resolution
Service, Rules of Procedure for Arbitration. The
expenses of such arbitration shall be borne
equally by the parties, provided that each party
shall pay for the cost and its own experts,
evidence, and attorney's fees (unless otherwise
directed by the arbitrator).

(b)Enactment or Interpretation of Relevant Statutes and
Regulations. In the event any state or federal
laws or regulations, now existing or enacted or
promulgated after the date hereof, are
interpreted by judicial decision, a regulatory
agency, or legal counsel acceptable to both
AmeriPath and the Practice in such a manner as
to indicate that this Agreement or any provision
hereof may be in violation of such laws or
regulations, the Practice and AmeriPath shall
amend this Agreement as necessary to preserve
the underlying economic and financial
arrangements between the Practice and AmeriPath
and without substantial economic detriment to
any party. If such an amendment is not
possible, either party shall have the right to
terminate this Agreement.

Attachment III-3
<PAGE> 18

4. INDEPENDENT CONTRACTOR STATUS.
The Practice and AmeriPath are to perform and
exercise their rights and obligations under this
Agreement as independent contractors.
AmeriPath's sole function under this Agreement
is to provide services, as requested, in a
competent and satisfactory manner, exercising
reasonable care in the performance of all such
duties. AmeriPath shall not become liable for
any of the obligations, liabilities, debts or
losses of the Practice unless otherwise
specifically provided by this Agreement.
AmeriPath shall have no liability whatsoever for
damages suffered on account of the willful
misconduct or negligence of any employee, agent
or independent contractor (other than AmeriPath)
of the Practice. Each party shall be solely
responsible for compliance with all state and
federal laws pertaining to employment taxes,
income withholding, unemployment compensation
contributions and other employment related
statutes regarding their respective employees,
agents and servants. In the event that any court
or regulatory authority (or AmeriPath, in good
faith) determines that the relationship
established by this Agreements creates an
employment relationship, the parties shall
negotiate in good faith to reach an arrangement
involving AmeriPath and the then current
Practice Providers which substantially preserves
for the parties the benefits of this Agreement.
If such an arrangement cannot be reached,
AmeriPath may terminate this Agreement upon
thirty (30) days prior written notice to the
Practice.

5. PROHIBITION AGAINST DISCRIMINATION.
The Practice and AmeriPath agree that, in
fulfilling their respective obligations and
duties under this Agreement, they shall not
discriminate against any individual on the basis
of race, religion, age, sex, disability or
national origin.

6. USE OF NAMES. Subject to the approval of the Managing
Physician, which approval shall not be
unreasonably withheld, AmeriPath may include the
name of the Practice, the Practice Providers and
the Practice Providers in any brochures,
promotional materials or the like relating to
AmeriPath.

Attachment III-4

<PAGE> 19

7. SUBORDINATION. AmeriPath and the Company, for themselves and
on behalf of their respective successors and
assigns, hereby agree, for the benefit of Beno
Michel, the Practice Providers, Beno Michel &
Associates, M.D., Inc. and their respective
successors and assigns (collectively, the "Other
Creditors") that AmeriPath's right to payment of
compensation and reimbursement of expenses
pursuant to this Agreement (the "Junior
Obligations") shall be junior and subordinate in
right of payment to the prior final payment in
full, in cash, of all amounts owed (whether
fixed or contingent, due or to become due) under
the Other Agreements (as defined in paragraph 8,
hereunder) and employment contracts with other
Practice Providers (collectively, the "Senior
Obligations"). AmeriPath agrees that it will
not take or demand, and the Company agrees that
it will not make, any payment of or on account
of any Senior Obligations, without the prior
written consent of the Other Creditors, prior to
final payment in full, in cash, of all Junior
Obligations.

8. CONFLICTING PROVISIONS.
Nothing in this Agreement shall expand the
obligations of or impair any rights of the
Managing Physician under his employment
agreement with the Company, and if any term or
provision in this Agreement conflicts with or is
consistent with any term or provision in the
employment agreement, the term or provision in
the employment agreement shall control. Nothing
in this Agreement shall affect in any way any
obligations of the Practice or AmeriPath under
the Stock Purchase Agreement pursuant to which
the Practice was acquired, the contingent notes
issued pursuant to the Stock Purchase Agreement,
the Employment Agreement between the Practice
and the Managing Physician, the Option Agreement
referred to in the Employment Agreement, or any
other agreement to which the Practice or
AmeriPath, on the one hand, and Beno Michel or
Beno Michel & Associates, M.D., Inc., on the
other hand, are parties (collectively, the
"Other Agreements"), and if any term or
provision in this Agreement conflicts with or is
consistent with any term or provision in any
such Other Agreement, the term or provision in
such Other Agreement shall control the rights
and obligations of Beno Michel or Beno Michel &
Associates, M.D., Inc., as applicable.

Attachment III-5

<PAGE> 1

EXHIBIT 10.21

MANAGEMENT AGREEMENT

PARTIES: AMERIPATH TEXAS, INC. ("AmeriPath")
CLAY J. COCKERELL, M.D., P.A. (the "Practice")

EFFECTIVE DATE: SEPTEMBER 30, 1996 (the "Effective Date")

RECITALS:

- AmeriPath is a corporation engaged in the business of operating a
pathology laboratory and is a wholly-owned subsidiary of AmeriPath, Inc., a
corporation engaged in the business of providing administrative and management
services, facilities and equipment to pathology groups;

- The Practice is a professional association comprised of medical
practitioners who engage in the practice of pathology and other medical
specialties ("Practice Providers");

- The Practice desires to enter into this Agreement with AmeriPath for
the provision of comprehensive business management services and facilities to
enhance the efficiency of its operations and to allow its Practice Providers to
concentrate fully on providing quality medical services;

- The Practice has designated a Managing Physician to oversee the day
to day operations of the Practice's business and to make administrative and
certain other decisions on its behalf;

- The Practice and AmeriPath desire to enter into this agreement (the
"Agreement") to provide a statement of their respective rights and
responsibilities during its Term (as defined in Section VI-A herein below).

FOR GOOD AND VALUABLE CONSIDERATION, AmeriPath and the Practice agree
as follows:

I. PRELIMINARY STATEMENTS

A. RECITALS. The recitals set forth above are true and accurate
and are incorporated as part of this Agreement.

B. DEFINITIONS. Many capitalized terms used in this Agreement
are defined in Attachment I to this Agreement; however, capitalized terms used
in this Agreement are also defined in the text of this Agreement, and
Attachments II through VI hereof.
<PAGE> 2

C. ATTACHMENTS. All attachments to this Agreements are
incorporated into this Agreement by reference. The attachments to this
Agreement are the following:

<TABLE>
<S> <C>
Attachment I: Definitions
Attachment II: Appointment of AmeriPath as Attorney in Fact
Attachment III: Restrictive Covenants
Attachment IV: Medical Offices
Attachment V: Miscellaneous Contractual Provisions
Attachment VI: Non-Profit Health Corporation
</TABLE>

II. AMERIPATH SERVICES

AmeriPath shall on behalf of Practice and as a Practice Expense,
provide the Practice and the Practice Providers with the following services:

A. STRATEGIC PLANNING AND GOALS. AmeriPath shall prepare, in
consultation with the Managing Physician, an annual Operating Plan (as defined
in Section IV-B), reflecting in reasonable detail anticipated Practice
Revenues, Practice Expenses, Allocated Expenses and Practice Provider staffing.
The Operating Plan shall include, among other things, information relating to
the growth and enhancement of the Practice, a budget for the Practice and the
Base Fee and Performance Fee to be paid to AmeriPath..

B. EXPANSION OF PRACTICE. AmeriPath shall assist the Practice in
developing relationships and affiliations with physicians and other
specialists, hospitals, networks, health maintenance organizations and
preferred provider organizations. Subject to the terms of this Agreement, each
of the Practice and AmeriPath shall cooperate and use their respective best
efforts to expand the Practice.

C. MANAGED CARE RELATIONSHIPS. AmeriPath, together with the
Managing Physician, shall evaluate, negotiate, and administer managed care
contracts and other third party payor contracts on behalf of the Practice and
its Practice Providers.

E. ESTABLISHMENT OF FEES. AmeriPath shall recommend, but shall
not set, fees, charges, premiums or other amounts due in connection with
services and goods provided by the Practice. The Steering Committee (see
Section IV) may adopt recommendations in its reasonable discretion on behalf of
the Practice and its Practice Providers. The Practice shall retain sole
authority to decide how physician compensation will be divided among individual
physicians.

F. PRACTICE MANAGEMENT SERVICES. AmeriPath shall, in
consultation with the Managing Physician, assess business activity including
product line analysis, outcomes monitoring

2
<PAGE> 3

and customer satisfaction. AmeriPath shall develop systems to track revenues,
expenses, cost accounting, utilization, quality assurance, physician
productivity and customer satisfaction.

G. PERSONNEL. AmeriPath shall, on behalf of Practice as a
Practice Expense, employ and provide all personnel necessary to provide
Practice services (other than Practice Providers), in accordance with the
Practice's operational needs and the Operating Plan then in effect. AmeriPath
shall employ and provide the AmeriPath benefits package to all personnel (other
than Practice Providers) rendering services in connection with the Practice.
AmeriPath shall provide the following personnel services to the Practice:

1. NON-MEDICAL PERSONNEL. AmeriPath shall employ non-medical
personnel (i.e., managerial, clerical, secretarial,
bookkeeping and collection personnel) as determined by
AmeriPath, and as necessary for the Practice's effective
operation, as contemplated by the Operating Plan.
AmeriPath shall provide personnel for the maintenance of
patient records, billing, collection and maintenance of
the financial records. AmeriPath shall determine the
assignments, salaries and fringe benefits of all the
non-medical personnel. AmeriPath will consult with the
Managing Physician but retains decision-making authority
regarding all such matters. Non-medical personnel may
perform services from time to time for other individuals
or entities. AmeriPath may utilize employees or
independent contractors, in its discretion.

2. LICENSED TECHNICAL PERSONNEL. AmeriPath shall employ and
provide to the Practice licensed technical personnel
other than Practice Providers ("Licensed Technical
Personnel"). Licensed Technical Personnel shall be
retained as determined by the Managing Physician, in
consultation with the Steering Committee, in the exercise
of his professional judgment to be reasonably necessary
for the effective operation of the Practice, as
contemplated by the Operating Plan. AmeriPath shall
facilitate the recruitment and retention of all Licensed
Technical Personnel. Although AmeriPath may employ
Licensed Technical Personnel, the Managing Physician, or
its designee, shall have the right to interview, make
determinations to hire, and terminate Licensed Technical
Personnel. All Licensed Technical Personnel providing
services in connection with the Practice shall be under
the direct control and supervision of the Practice and
its Practice Providers.

3. PRACTICE PROVIDERS. AmeriPath shall perform
administrative services relating to the recruitment of
new Practice Providers and Practice Providers. Selection
of new Practice Providers and Practice Providers shall be
the sole responsibility of the Practice. The hiring of
new Practice Providers shall require the prior written
approval of AmeriPath only with respect to economic and
practice management issues. All Practice Providers shall
be

3
<PAGE> 4

employees of the Practice (if such personnel are hired
as employees) and not of AmeriPath. AmeriPath shall
provide technical support to the Practice's risk
management program. Additionally, AmeriPath shall advise,
make arrangements for the purchase of, and manage the
Practice's professional liability coverage program.

H. FACILITIES, UTILITIES, LICENSES, PERMITS AND OTHER RELATED
EXPENSES. AmeriPath shall own, lease or sublease on behalf of the Practice,
Medical Offices necessary for the operation of the Practice pursuant to the
Operating Plan.. The Medical Offices provided as of the Effective Date shall
be those listed on Attachment IV. AmeriPath shall provide, manage and maintain
the Medical Offices in good condition and repair, including the provision of
routine janitorial and maintenance services. AmeriPath shall provide on behalf
of the Practice utilities and shall pay other related expenses, consistent with
the Operating Plan. AmeriPath shall assist the Practice and its Practice
Providers in obtaining required laboratory permits and licenses. The Practice
shall have exclusive use of both existing and new Medical Offices during the
Term.

I. FURNITURE, FIXTURES AND EQUIPMENT. AmeriPath shall provide
necessary and appropriate furniture, fixtures and equipment ("FF&E") on behalf
of the Practice in accordance with the Operating Plan. Nothing in this
Agreement shall be construed to affect or limit in any way the professional
discretion of the Practice to select and use equipment, furnishings, inventory,
and supplies which the Managing Physician deems necessary and appropriate for
the practice of medicine. AmeriPath shall, on behalf of the Practice, provide
for all repairs and maintenance of the FF&E and shall, at the reasonable
request of the Managing Physician, acquire new or replacement FF&E. Title to
existing, new and replacement FF&E shall be in the name of AmeriPath or a
leasing company. The Practice shall have exclusive use of both existing and
new FF&E provided by AmeriPath during the Term.

THE PRACTICE ACKNOWLEDGES THAT AMERIPATH MAKES NO WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO THE FITNESS, SUITABILITY OR ADEQUACY
OF ANY FURNITURE, FIXTURES, EQUIPMENT, INVENTORY, OR SUPPLIES LEASED OR
PROVIDED PURSUANT TO THIS AGREEMENT FOR THE CONDUCT OF A MEDICAL PRACTICE OR
FOR ANY OTHER PARTICULAR PURPOSE.

J. BUSINESS OFFICE AND SUPPORT SERVICES. AmeriPath shall, in
consultation with the Managing Physician, provide computer, bookkeeping,
billing and collection, accounts receivable and accounts payable services
necessary for the management of the Practice pursuant to this Agreement and in
accordance with the Operating Plan. AmeriPath shall also order and purchase on
behalf of the Practice medical and office supplies required in the day-to-day
operation of the Practice as determined by the Managing Physician consistent
with the Operating Plan. However, the Practice shall order, purchase, stock,
and monitor the inventory of pharmaceuticals and other medical supplies,
substances, or items whose purchase, maintenance, or security require licensure
as a health-care provider or require a permit, registration, certification, or
identification number that requires licensure or certification as a health-care
provider. AmeriPath shall provide access to

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management information systems services to the Practice, including risk
contracting systems services. AmeriPath shall also arrange laundry, waste
collection, and other necessary operational services in accordance with
applicable laws.

K. PROFESSIONAL AND CONSULTING SERVICES. AmeriPath shall arrange
for or render business and financial management consultation and advice
reasonably requested by the Managing Physician and directly related to the
operations of the Practice pursuant to this Agreement. Except as contemplated
by the Operating Plan, AmeriPath shall not be responsible for any services
requested by or rendered to any individual, employee or agent of the Practice,
or any Practice Provider, not directly related to Practice operations.

L. PATIENT AND FINANCIAL RECORDS. AmeriPath shall maintain files
and records relating to the operation of the Practice, including, but not
limited to, customary financial records and patient files. The management of
all files and records shall comply with applicable Federal, state and local
statutes and regulations, regarding their confidentiality and retention. Files
and records shall be located to be readily accessible for patient care,
consistent with customary records management practices. AmeriPath shall have
reasonable access to files and records, and, subject to applicable laws, shall
be permitted to retain copies of them. The Practice shall be responsible for
the preparation of, and direct the contents of, patient medical records. All
patient medical records shall remain the property of the Practice. The
Practice shall be responsible for proper documentation of medical services
provided by the Practice and the Practice Providers.

M. FINANCIAL STATEMENTS. AmeriPath shall prepare Practice profit
and loss and income statements, in accordance with the manner and form in which
AmeriPath normally keeps its accounts, books and records, and in accordance
with applicable laws. The statements shall reflect Practice Revenues generated
by or on behalf of the Practice and shall contain a comparison of actual and
budgeted Practice Revenues and expenses. AmeriPath shall provide the Managing
Physician with monthly statements within thirty (30) days after the end of each
month and shall provide a year-end statement within ninety (90) days after the
end of the calendar year.

III. PRACTICE OBLIGATIONS

A. EXCLUSIVITY. The Practice and the Practice Providers agree
that during the Term of this Agreement they will not retain, engage or employ,
directly or indirectly, any other entity or individual to provide the services
for which it is contracting with AmeriPath.

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actions or professional liability actions are initiated against any Practice
Provider, the Practice shall immediately inform AmeriPath of the action and the
underlying facts and circumstances. The Practice shall implement and maintain a
program to monitor the quality and utilization of medical care, and AmeriPath
shall render administrative assistance to the Practice, as requested by the
Managing Physician.

C. MANAGED CARE ARRANGEMENTS. The Practice shall cooperate with
AmeriPath in the development and operation of managed care arrangements. The
Practice shall participate as a provider and in the administrative operation of
integrated delivery systems and managed care arrangements. The Practice and
its Practice Providers agree to comply with the quality assurance and
utilization review programs of managed care arrangements.

D. CONTINUING MEDICAL EDUCATION. The Practice shall ensure that
each of its Practice Providers participates in continuing medical education
activities, as necessary to remain current in their respective specialties,
including, but not limited to, the minimum continuing medical education
requirements imposed by applicable laws and policies of applicable specialty
boards.

E. PHYSICIAN POWERS OF ATTORNEY AND BILLING. The Practice shall
appoint AmeriPath to act as agent in the billing and collection of all Practice
Revenues, and shall require all Practice Providers to appoint AmeriPath as
attorney-in-fact for the Practice and each Practice Provider, as more
specifically set forth in Attachment II. The Practice shall cooperate and
shall cause its Practice Providers to cooperate with AmeriPath in all matters
relating to the billing and collection of all Practice Revenues. In this
regard, each Practice Provider shall review and approve the reports and other
information required to support complete and accurate bills. Additionally, the
Practice and its Practice Providers will provide such necessary support to
appeal or contest any denials of claims or other regulatory issues.

F. ADDITIONAL PRACTICE PROVIDERS. When the Practice desires to
add or change a Practice Provider, AmeriPath shall provide a business analysis
of the prospective change in the composition of the Practice. Additional
Practice Providers (the "Additional Practice Providers") shall be added to the
Practice as follows: the Practice shall review and approve the credentials and
the medical practices of the prospective Additional Practice Provider.
AmeriPath shall review the business operations, financial condition and results
of operations of the prospective Additional Practice Provider and shall provide
such information to the Managing Physician. The decision to admit an
Additional Practice Provider shall be subject to the approval of the Steering
Committee.

G. ADDITIONAL PRACTICES. AmeriPath may, in its discretion, seek
to add additional practices (each such Practice being an "Additional Practice")
to this Agreement. If AmeriPath desires to add an Additional Practice,
AmeriPath shall provide to the Steering Committee a business analysis of the
Additional Practice, including business operations, financial condition and
results of operations. The decision to admit an Additional Practice shall be
subject to the approval of the Steering Committee. After an agreement to add
an Additional Practice has been reached, the Practice and AmeriPath shall enter
into an amendment (the "New Practice Amendment") to this Agreement. The New
Practice Amendment shall include the understanding of the parties with

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respect to AmeriPath's compensation and other issues agreed upon by the
Steering Committee and the Additional Practice. The New Practice Amendment
shall obligate the Additional Practice to be bound by the New Practice
Amendment.

H. RESTRICTIVE COVENANTS. The Practice and each Practice
Provider shall comply with the terms, conditions and provisions of the
Restrictive Covenants set forth in Attachment III. AmeriPath and its parent
company, AmeriPath, Inc., shall be third party beneficiaries of the Restrictive
Covenants and shall have the right to enforce them independently and without
the consent, action or approval of the Practice or any Practice Provider.
Additionally, the Practice and the Practice Providers agree to fully cooperate
with AmeriPath should it desire to enforce the Restrictive Covenants.

I. PRACTICE EXPENSES. The Practice shall be solely responsible
for the payment of all Practice Expenses.

J. PRACTICE ORGANIZATIONAL DOCUMENTS. The Practice agrees that
it shall not, without the written consent of AmeriPath: (a) modify or amend
the Practice Organizational Documents (as defined in Attachment I); (b) admit
New Practice Providers, except as provided for in this Agreement; (c) remove
the Managing Physician; (d) sell all or substantially all its assets or capital
stock; or (e) terminate or cancel any hospital contracts (or similar contracts
for the provision of services) under this Agreement. Further, the Practice
agrees that it shall consult with AmeriPath prior to the termination or release
of any Practice Provider from his or her obligations.

K. STAFFING OF FACILITIES BY THE PRACTICE. To the extent that
the Practice or the Practice Providers are responsible for staffing facilities
provided by AmeriPath, the Practice shall provide adequate staffing to ensure
that medical services are provided in a manner consistent with applicable
community and medical specialty standards. From time to time AmeriPath may
acquire new facilities that it wishes the Practice to staff. The Practice
agrees that in the event AmeriPath acquires or develops a new facility that it
wishes the Practice to staff, the Practice will use its best efforts to staff
the facility. The parties agree that the Operating Plan will be revised as
necessary to accommodate staffing of the new facility.

L. EQUIPMENT. The Practice shall advise AmeriPath on the
maintenance, repair and proper operation of medical equipment. This obligation
shall relate to the medical functionality of the equipment. Upon receipt of
such advice, AmeriPath shall cause the medical equipment to be maintained in
good operating condition.

M. SUPERVISION OF LICENSED TECHNICAL PERSONNEL. The Practice
shall be responsible for the supervision of Licensed Technical Personnel. As
such, it shall provide Licensed Technical Personnel with appropriate training
and medical supervision. The Practice shall determine the responsibilities of
Licensed Technical Personnel and the manner in which they provide services.
Licensed Technical Personnel shall report to such Practice Providers as
designated by the Practice.

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IV. STEERING COMMITTEE

A. CREATION AND GENERAL DUTIES OF STEERING COMMITTEE. AmeriPath
and the Practice shall establish a Steering Committee composed of two members,
one of which shall be the Managing Physician and one of which shall be a
physician designated by AmeriPath. The Steering Committee shall meet
periodically and at the reasonable request of either party. The Steering
Committee shall consider, review, determine and approve the following matters
as they relate to the operation of the Practice: (i) the Operating Plan; (ii)
employment and recruitment of additional Practice Providers; (iii) long term
strategic planning; (iv) establishment and maintenance of relationships with
health care providers and payors; (v) the fee schedule for services and items
provided by the Practice; and (vi) approval of all marketing and advertising of
services performed by the Practice or Practice Providers.

B. OPERATING PLAN. One of the Steering Committee's primary
responsibilities shall be the approval of a Practice Operating Plan (the
"Operating Plan"). AmeriPath shall, not less often than one time each fiscal
year, develop a proposed Operating Plan. The proposed Operating Plan shall be
submitted to the Steering Committee for approval. When Approved by the
Steering Committee, both AmeriPath and the Managing Physician shall, as their
responsibilities are allocated in this Agreement, use their best efforts to
implement the Operating Plan. The Operating Plan shall set forth the estimated
income and expenditures of the Practice for the period covered, such income and
expenditures to be set forth in reasonable detail. The Practice shall retain
sole authority for proposing the compensation levels and manner of distribution
of physician income among individual physicians. Such proposals shall be
included in the budget of the Practice which shall be incorporated into the
Operating Plan as approved by the Steering Committee. The Operating Plan shall
include Practice Expenses, Allocated Expenses and AmeriPath compensation. The
Steering Committee may revise, from time to time, the Operating Plan as it
determines to be necessary or desirable (as revised, the "Revised Operating
Plan"). AmeriPath and the Managing Physician shall be authorized without the
need for further approval by AmeriPath, the Steering Committee or the Practice
Providers, to make the expenditures and incur the obligations provided for in a
Revised Operating Plan. Additionally, AmeriPath or the Managing Physician may
make expenditures and incur obligations that differ from an Operating Plan, but
are incurred in the ordinary course of business. For example, an increase in
professional liability premiums shall create a variance in the Operating Plan
which may be incurred without a revision to the Operating Plan. The Practice
has in the past maintained a fellowship program for the University of Texas
Southwestern Medical Center ("UTSWMC"), which has included up to three
dematopathologists per year. The parties acknowledge that it is important to
the reputation of the Practice to continue the Practice's relationship with
UTSWMC, therefore, the Operating Plan shall include the expenses necessary and
appropriate to continue the Practice's relationship with UTSWMC consistent with
past practices and to expand such relationship as shall reasonably be directed
by the Managing Physician.

V. FINANCIAL MATTERS

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A. AMERIPATH COMPENSATION.

1. GENERAL. The compensation provided herein is expected to
provide AmeriPath with fair market value payment commensurate
with the services it provides, its capital investment, use of
its tradename and its expertise in laboratory and professional
practice management. AmeriPath shall receive compensation, as
provided in the Operating Plan and in accordance with this
Section V.

2. PRACTICE EXPENSES AND ALLOCATED EXPENSES. All Practice
Expenses (as defined in Attachment I hereto), including the
compensation of Practice Providers, shall be the sole
responsibility of Practice and shall be paid by the Practice
out of its first available Practice Revenues. Allocated
Expenses (as defined in ATTACHMENT I hereto) incurred by
AmeriPath in the course of the performance of its duties under
this Agreement on behalf of or as agent for the Practice shall
be paid to AmeriPath. Allocated Expenses may include an
allocable portion of reasonable corporate overhead of
AmeriPath. Allocated Expenses shall be billed to the Practice
at their actual cost to AmeriPath. An operating budget for
Practice Expenses and Allocated Expenses shall be reviewed at
least annually and shall be set forth in the Operating Plan.

3. MANAGEMENT FEE. AmeriPath shall be paid a base management fee
(the "Base Fee") for its services performed and to be
performed pursuant to this Agreement. The Base Fee shall be a
flat amount and shall be reviewed annually and shall be set
forth in the Operating Plan. The Base Fee shall be paid to
AmeriPath as provided in the Operating Plan, subject only to
the prior payment of Practice Expenses and Allocated Expenses.
Any portion of the Base Fee that is not paid when due shall
accrue and be paid with the next available Practice Revenues.

4. PERFORMANCE FEE. On an annual basis, the Steering Committee
shall determine a set of performance goals and objectives for
AmeriPath in the performance of its duties under this
Agreement. Such goals and objectives may include, among other
things, the identification and recruitment of Additional
Practice Providers, the retention of Practice Providers, the
procurement or expansion of managed care or other contracts or
the achievement of operating efficiencies. AmeriPath may be
paid a performance fee (the "Performance Fee") based on the
achievement of such specified goals and objectives. The
amount of such Performance Fee shall be as set forth in the
Operating Plan.

B. REIMBURSEMENT OF EXPENSES. AmeriPath may, from time to time, incur
Practice Expenses which are a part of the Operating Plan, a Revised Operating
Plan, or are Practice

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Expenses incurred in the ordinary course of business. AmeriPath shall be
entitled to be reimbursed by the Practice for these expenses when incurred.

C. PRACTICE BANK ACCOUNT, PAYMENT OF FEES AND PAYMENT OF
EXPENSES. The Practice shall establish a bank account for the deposit of all
Practice Revenues (the "Practice Bank Account"). AmeriPath shall have a
security interest in the Practice Bank Account pursuant to this Section V.
Additionally, it is understood and agreed that AmeriPath may assign its
security interest and all other interests that it may have in the Practice Bank
Account to its lender or lenders. Should AmeriPath assign its interest, its
assignee shall have a first lien on the Practice Bank Account. AmeriPath shall
have access to the Practice Bank Account solely for the purposes stated herein.
In connection herewith and throughout the Term, Practice hereby grants to
AmeriPath an exclusive special power of attorney for the purposes herein and
appoints AmeriPath as Practice's exclusive true and lawful agent and
attorney-in-fact, and AmeriPath hereby accepts such special power of attorney
and appointment, to deposit into the Practice Bank Account all funds, fees, and
revenues generated from the Practice's provision of medical services and
collected by AmeriPath, and to make withdrawals from Practice Bank Account for
payments specified in this Agreement and as requested from time-to-time by
Practice. Notwithstanding the exclusive special power of attorney granted to
AmeriPath hereunder, Practice may, with notice to AmeriPath, draw checks on the
Practice Bank Account; provided, however, that Practice shall neither draw
checks on the Practice Bank Account nor request AmeriPath to do so if the
balance remaining in the Practice Bank Account after such withdrawal would be
insufficient to enable AmeriPath to pay on behalf of Practice any Practice
Expense attributable to the operations of Practice or to the provision of
medical services, and/or any other obligations of Practice. Disbursements made
from the Practice Bank Account consent shall be consistent with the type and
amount of expenditures authorized by the Operating Plan. Limits on authority
to sign checks and purchase orders shall be mutually agreed upon by AmeriPath
and the Managing Physician.

D. COLLATERAL. As collateral security for the payment of all
amounts owed to AmeriPath pursuant to this Agreement, Practice grants to
AmeriPath a security interest in all tangible and intangible assets of the
Practice, including Practice Revenues which may be created or arise during the
Term, together with all proceeds regardless of the manner in which the
entitlement to payment for Practice Revenues exists whether as accounts,
accounts receivable, notes receivable or other evidence of entitlement to the
Practice Revenues and all of its rights, title and interest (including right to
control the same), if any, in the Bank Account and the sums on deposit
(collectively, the "Collateral") to the extent the same are not otherwise
assigned to AmeriPath. In granting this security interest, the Practice agrees
to the following: (i) this Agreement shall create and constitute a valid and
perfected first priority security interest in the Collateral enforceable
against all parties; (ii) the Practice has and shall continue to have good
indefeasible and merchantable title to and ownership of the Collateral free and
clear of all liens, other than liens created by AmeriPath or any AmeriPath
Affiliate; (iii) this grant of a security interest in the Collateral shall not
result in a violation of any other agreement to which Practice is or becomes a
party; and (iv) the Practice shall take all action necessary to perfect
AmeriPath's security interest in the Collateral, including the execution of
financing statements and authorization to file the same in the appropriate
recording office. AmeriPath and the Practice agree to execute such further

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documents and instruments as may be deemed necessary or desirable, in
AmeriPath's sole discretion, to effect the provisions of this Section.

E. REMEDIES FOR NON-PAYMENT. AmeriPath shall have all rights and
remedies of a secured party and all rights, remedies, securities and liens of
the Practice with respect to the Collateral including, but not limited to,
extending the time of payment of, compromising, or settling for cash, credit,
or otherwise upon any terms, any part or all of the Collateral, but shall not
be liable for any failure to collect or enforce the payment thereof. AmeriPath
is authorized by the Practice, except as otherwise prohibited by applicable
law, to take possession of, and endorse in the name of the Practice any notes,
checks, money orders, drafts, cash, insurance payments and any other
instruments received in payment of the Collateral, or any part thereof; to
collect, sue for and give satisfactions for moneys due on account of the
Collateral; and to withdraw any claims, suits or proceedings pertaining to, or
arising out of, AmeriPath's and/or the Practice's rights to the Collateral.
AmeriPath's costs of collection and enforcement, including attorneys' fees and
out-of-pocket expenses, shall be borne solely by the Practice. The Practice
agrees that AmeriPath shall be permitted to place its representatives in the
Medical Offices, with full authority to take possession of and retain for
AmeriPath the books and records of the Practice with reference to the
Practice's operations pursuant to this Agreement with respect to the Collateral.

F. RIGHT OF OFFSET. Notwithstanding any other provision in this
Agreement, AmeriPath is entitled to offset against any sums owed by AmeriPath
to the Practice any amounts payable or reimbursable to AmeriPath under this
Agreement.

VI. TERMS AND TERMINATIONS

A. TERM. The initial term of this Agreement shall be for a
period of forty (40) years commencing on October 1, 1996 and ending on
September 30, 2036 (the "Initial Term"). This Agreement shall be extended for
separate and successive five (5) year periods (each such five (5) year period
shall be referred to as an "Extended Term" and the Initial Term and any
Extended Term shall be referred to in this Agreement as the "Term") unless
either party provides the other party notice not less than sixty (60) days
prior to the end of the Initial Term or an Extended Term, unless the Practice
has defaulted under the terms of this Agreement. The same terms and conditions
of this Agreement shall apply to an Extended Term unless the Practice and
AmeriPath mutually agree to alter the terms and conditions hereof with a
writing signed by each party hereto. All New Practice Amendments shall
terminate at such time as this Agreement terminates.

B. TERMINATION. A party (the "Terminating Party") may terminate
this Agreement on the basis of the following:

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1. The other party breaches any material term or condition
of this Agreement, and the breach continues for sixty (60) days after the
receipt of written notice specifying the breach by the party which did not
perform or breached.

2. AmeriPath may terminate this Agreement if the Practice
or the Managing Physician is suspended or prohibited from participating in the
Medicare or Medicaid programs or excluded from entering into healthcare
provider agreements with any material portion of the managed care or healthcare
insurance industry; or (ii) the Practice or the Managing Physician, breaches
any material term of this Agreement, including the restrictive covenants
provided in Attachment III.

C. EFFECTS OF AND OBLIGATIONS UPON TERMINATION. Upon the
termination or expiration of this Agreement: (i) neither party shall be
discharged from any previously accrued obligation which remains outstanding;
(ii) any sums of money owing by one party to the other shall be paid
immediately, prorated through the effective date of termination or expiration;
(iii) the Practice shall return to AmeriPath all originals and copies of any
Confidential Information in the possession of the Practice or any other person
or entity to whom it has delivered originals and/or copies; (iv) the Practice
and AmeriPath shall perform matters as are necessary to wind up their
activities under this Agreement in an orderly manner, including providing to
the Practice patient billing records on paper or electronic data; and (v) each
party shall have the right to pursue other legal or equitable relief as may be
available depending upon the circumstances of the termination.

VII. REPRESENTATIONS AND WARRANTIES

A. REPRESENTATIONS AND WARRANTIES OF THE PRACTICE. The Practice
represents and warrants to AmeriPath the following:

1. The Practice is a professional association duly
organized, validly existing and in good standing under
the laws of the State of Texas.

2. The Practice has all necessary power to own all of its
properties and assets and to carry on its business as
now being conducted.

3. The Managing Physician has the authority on behalf of
the Practice to execute, deliver and perform this
Agreement and all other agreements and documents
executed and delivered by the Practice pursuant to this
Agreement.

4. The Practice has the authority to execute, deliver and
perform this Agreement and all other agreements and
documents executed and delivered by it pursuant to this
Agreement.

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5. The Practice has taken all action required by law, its
Practice Organizational Documents, or otherwise to
authorize the execution, delivery and performance of
this Agreement and the related documents.

6. The execution and delivery of this Agreement does not
violate any provisions of the Practice Organizational
Documents or any agreement, instrument, order,
arbitration award, judgment or decree to which the
Practice is a party or by which it is bound.

7. This Agreement has been duly executed and delivered by
the Practice and constitutes the legal, valid and
binding obligation of the Practice, enforceable in
accordance with its terms.

B. REPRESENTATIONS AND WARRANTIES OF AMERIPATH. AmeriPath
represents and warrants to the Practice as follows:

1. AmeriPath is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Texas.

2. AmeriPath has all necessary power to own all of its
properties and assets and to carry on its business as
now being conducted.

3. AmeriPath has the corporate authority to execute,
deliver and perform this Agreement and all agreements
executed and delivered by it pursuant to this
Agreement.

4. AmeriPath has taken all action required by its Articles
of Incorporation, its Bylaws or otherwise to authorize
the execution, delivery and performance of this
Agreement and related documents.

5. The execution and delivery of this Agreement does not
and, subject to the consummation of the transactions
contemplated by this Agreement, shall not, violate any
provisions of the Articles of Incorporation or Bylaws
of AmeriPath or any agreement, instrument, order,
arbitration award, judgment or decree to which
AmeriPath is a party or by which it is bound, which
would adversely affect the ability of AmeriPath to
perform its obligations under this Agreement.

6. This Agreement has been duly executed and delivered by
AmeriPath and constitutes the legal, valid and binding
obligation of AmeriPath, enforceable against AmeriPath
in accordance with its terms.

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VIII. LEGAL COUNSEL

IX. MEDICAL PRACTICE ISSUES

A. PRACTICE OF MEDICINE. The parties acknowledge that AmeriPath
is not authorized or qualified to engage in any activity which constitutes the
practice of medicine and nothing required herein to be shall be construed as
the practice of medicine by AmeriPath. To the extent any act or service
required to be performed or provided by AmeriPath is construed or deemed by any
governmental authority, agency or court to constitute the practice of medicine,
AmeriPath shall be released from any obligation to provide such act or service
and the provision for such required act or service shall be deemed waived and
forever unenforceable without otherwise affecting the terms of this Agreement.

B. INSURANCE. The Practice shall provide, or arrange for the
provision of, and maintain throughout the Term, for the Practice and each
Practice Provider professional liability/malpractice insurance coverage in the
minimum amount of $1,000,000 per occurrence and $3,000,000 annual aggregate (or
such other amount as required by law, prevailing in the community, or required
by managed care companies) and workers' compensation insurance coverage in the
minimum amounts required by applicable law. The Practice shall maintain
general liability insurance and other insurance of the type generally
maintained by business involved in the same business as the Practice. The
Practice shall, at its sole cost and expense, pay the premium costs of all
insurance coverage during the Term of this Agreement and, upon request by
AmeriPath, provide AmeriPath with evidence of such coverage.

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Practice and AmeriPath have duly executed this Agreement on the day
and year indicated above.

CLAY J. COCKERELL, M.D., P.A.

By:
---------------------------------
Name: Clay J. Cockerell, M.D.

Its:
--------------------------------

AMERIPATH TEXAS, INC.

By:
---------------------------------
Name:
-------------------------------
Its
---------------------------------

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ATTACHMENT I
DEFINITIONS

AGREEMENT means this agreement and any subsequent amendments thereto,
including, NEW PRACTICE AMENDMENTS.

ALLOCATED EXPENSES means the expenses relating to the operations of the
facilities of the Practice and the administrative expenses incurred by
AmeriPath on behalf of the Practice in the performance of AmeriPath's duties
under this Agreement, including the following: billing services (including
personnel), marketing, advertising, promotion, allocated corporate overhead,
legal expenses, service of laboratory and other expenses as may be approved
from time to time by the Steering Committee, all as permitted to be incurred in
accordance with this Agreement and any New Practice Amendment (as defined in
Section III.G.)

BASE FEE has the meaning ascribed to it in Section V.A.3.

CONFIDENTIAL INFORMATION has the meaning ascribed to it in Attachment III.

FF&E has the meaning ascribed to it in Section II-I.

MANAGING PHYSICIAN means Clay J. Cockerell, M.D., for so long as he remains
employed by the Practice or its successor, and thereafter "Managing Physician"
shall mean the Practice Provider designated by the Practice and AmeriPath in
the Operating Plan to manage the administrative and medical functions of the
Practice.

MEDICAL OFFICES means the medical offices and laboratory facilities listed on
Attachment IV and/or at such other place or places of business as may be agreed
upon by the parties in writing.

NEW PRACTICE AMENDMENT means those individual amendments to this Agreement
executed by the Practice, an Additional Practice and AmeriPath.

OPERATING PLAN means the Practice Operating Plan referred to in Section IV.B.

PRACTICE BANK ACCOUNT means the bank account referred to in Section V.C. of
which the Practice is the owner.

PRACTICE EXPENSES means the following expenses: Practice Providers'
compensation expenses, professional liability insurance, continuing medical
education, benefits, dues and subscriptions, automobiles, facility leases,
repairs and maintenance, telephones and pagers, utilities, billing services,
courier services, legal expenses, travel and entertainment, outside medical
consultants, license fees and taxes, all expenses identified in this Agreement
as Practice Expenses, all expenses identified in this Agreement as incurred by
AmeriPath on behalf of Practice and other expenses approved from time to time
by the Steering Committee, all as permitted to be incurred in accordance with
this Agreement and any New Practice Amendment (as defined in Section III.G.).

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PRACTICE PROVIDERS means individuals who are duly licensed to practice medicine
and who are employed by the Practice, or other individuals who are under
contract with the Practice to provide physician services to patients of the
Practice.

PRACTICE ORGANIZATIONAL DOCUMENTS means the articles of incorporation and
bylaws of the Practice.

PRACTICE REVENUES means all revenues generated by or on behalf of the Practice,
after the date hereof, as a result of professional medical services furnished
to patients, ancillary services provided to patients, pharmaceuticals and other
items and supplies sold to patients and other fees or income generated by the
Practice or Practice Providers rendered in an inpatient or outpatient setting
and regardless of whether rendered to health maintenance organization,
preferred provider organization, Medicare, Medicaid or other patients,
including, but not limited to, payments received under capitation arrangements,
less account adjustments for uncollectible accounts, discounts, Medicare,
Medicaid, workers' compensation, professional courtesy discounts and other
write-offs. Notwithstanding the foregoing, Practice Revenues shall not include
revenues generated by Clay J. Cockerell, M.D. (a) from consulting and related
services as a medical doctor for any medical practice or health care provider
other than the Practice or an affiliate of AmeriPath; (b) from clinical
dermatology services for any patient in a clinic environment or otherwise; (c)
as a member, director, associate director, consultant to, or advisor to The
University of Texas Southwestern Medical Center, (d) as an employee of a local,
federal or state government or agency; (e) in performing duties as a member of
the United States military services or the National Guard; (or) on a locum
tenens basis.

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<PAGE> 18

ATTACHMENT II

APPOINTMENT OF AMERIPATH AS ATTORNEY IN FACT

On behalf of and for the account of Practice, AmeriPath shall
assist Practice in Practice's establishment and maintenance of credit and
billing and collection policies and procedures, and shall coordinate and
supervise Practice personnel to ensure the timely billing and collection of all
professional and other fees for all billable pathology services provided by
Practice or Physicians. AmeriPath shall advise and consult with Practice
regarding the fees for pathology services provided by Practice; it being
understood, however, that Practice shall establish the fees to be charged for
pathology services and that AmeriPath shall have no authority whatsoever with
respect to the establishment of such fees. In connection with the billing and
collection services to be provided hereunder, and throughout the term of this
Agreement, Practice hereby grants to AmeriPath an exclusive special power of
attorney and appoints AmeriPath as Practice's exclusive true and lawful agent
and attorney-in-fact, and AmeriPath hereby accepts such special power of
attorney and appointment, for the following purposes:

2. To supervise and coordinate the billing in Practice's name and
on Practice's behalf, as applicable, all claims for
reimbursement or indemnification from Blue Shield/Blue Cross,
insurance companies, Medicare, Medicaid, and all other third
party payors or fiscal intermediaries for all covered billable
pathology services provided by Practice to patients.

4. To ensure the collection and receipt in Practice's name and on
Practice's behalf, as applicable, of all accounts receivable
generated by such billings and claims for reimbursement that
have not been purchased by AmeriPath, to administer such
accounts including, but not limited to, (i) extending the time
of payment of any such accounts for cash, credit or otherwise;
(ii) discharging or releasing the obligors of any such
accounts; (iii) with the consent of the Steering Committee,
suing, assigning or selling at a discount such accounts to
collection agencies; or (iv) with the consent of the Steering
Committee, taking other measures to require the payment of any
such accounts.

5. To deposit all amounts collected in Practice's name and on
behalf of Practice into Practice Bank Account which shall be
and at all times remain in Practice's name.

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<PAGE> 19

Upon request of AmeriPath, Practice shall execute and deliver to the financial
institution wherein the Practice Bank Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
and limited power of attorney granted to AmeriPath by Practice pursuant to this
Agreement. The special and limited power of attorney granted herein shall be
coupled with an interest and shall be irrevocable except with AmeriPath's
written consent. The irrevocable power of attorney shall expire on the later
of when this Agreement has been terminated, when all accounts receivable
purchased by AmeriPath have been collected, or when all management fees due to
AmeriPath have been paid. If AmeriPath assigns this Agreement in accordance
with its terms, then Practice shall execute a power of attorney in favor of the
assignee.

19
<PAGE> 20

ATTACHMENT III

RESTRICTIVE COVENANTS

The Practice shall cause each Practice Provider to enter into an
agreement with respect to restrictive covenants, such as the confidentiality of
information relating to the Practice or AmeriPath, restrictions on solicitation
of employees or customers of the Practice or AmeriPath and restrictions on such
Practice Provider's right to compete with the Practice after termination of the
Practice Provider's employment by the Practice. Such agreement shall be in a
form reasonably satisfactory to AmeriPath and shall provide that AmeriPath
shall be a third party beneficiary of such agreements.

20
<PAGE> 21

ATTACHMENT IV

2330 Butler Street, Suite 115, Dallas, Texas 75235

21
<PAGE> 22

ATTACHMENT V
MISCELLANEOUS CONTRACTUAL PROVISIONS

1. ADDITIONAL ACTS. Each party agrees to perform any further acts
and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.

2. CONTRACT CONSTRUCTION, INTERPRETATION AND ENFORCEMENT PROVISIONS.

(a) Assignment. Neither party may assign this Agreement without
the other's written consent. Nevertheless: 1) AmeriPath may
assign this Agreement to a parent, subsidiary or affiliate, and;
2) the Practice may assign this Agreement to a non-profit
organization organized to conduct the business of the Practice, as
provided in Attachment VII. This Agreement shall be binding on
and shall inure to the benefit of the parties to this Agreement,
and their successors and permitted assigns. Subject to the
foregoing sentence, no person or entity not a party to this
Agreement shall have any right under or by virtue of this
Agreement, except for AmeriPath, Inc. as an intended third party
beneficiary of this Agreement.

(b) Captions. The captions or headings in this Agreement are
made for convenience and general reference only and shall not be
construed to describe, define or limit the scope or intent of the
provisions of this Agreement.

(c) Costs of Enforcement. In the event that either party files
suit in any court against the other party to enforce the terms of
or to obtain performance under this Agreement, the prevailing
party shall be entitled to recover all reasonable costs, including
reasonable attorneys' fees, from the other party as part of any
judgment in the suit. The term "prevailing party" means the party
in whose favor final judgment after appeal (if any) is rendered
with respect to the claims asserted in the complaint. "Reasonable
attorneys' fees" are those attorneys' fees actually incurred in
obtaining a judgment in favor of the prevailing party.

(d) Counterparts. The parties may execute this Agreement in
several counterparts, each of which shall be deemed to be an
original, and counterparts shall constitute and be one and the
same instrument.

(e) Governing Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws of the State of
Texas, applied without giving effect to any conflicts of law
principles.

22
<PAGE> 23

or terminated orally but may only be changed by an agreement in
writing signed by AmeriPath and the Practice; provided, however,
that this Agreement shall not be modified without the consent of
the Managing Physician for so long as Clay J. Cockerell, M.D.,
shall be the Managing Physician and AmeriPath, Inc., shall have
continuing contingent financial obligations owing to Dr. Cockerell
pursuant to that certain Stock Purchase Agreement dated as of the
date hereof.

(g) Notices. The parties to this Agreement shall give notice
under this Agreement by U.S. mail, postage prepaid, by hand
delivery or by overnight express, charges prepaid. Notices shall
be addressed as follows:

If to the Practice:

Clay J. Cockerell, M.D., P.A.
2330 Butler Street, Suite 115
Dallas, Texas 75235
Attention: Clay J.Cockerell, M.D.

If to AmeriPath:

AmeriPath Texas, Inc.
2330 Butler Street, Suite 115
Dallas, Texas 75235
Attention: President

With a copy to:

AmeriPath, Inc.
800 Cypress Creek Road, Suite 200
Fort Lauderdale, Florida 33334
Attention: President

or other addresses as furnished in writing by a party to the other
party. All notices shall be considered received when received by
the addressee, if by mail, when hand delivered or one business day
after delivery to the overnight courier.

(h) Severability. A determination by a court of competent
jurisdiction that a provision or part of any provision of this
Agreement is invalid or unenforceable shall not affect the
remaining parts or provisions of this Agreement which shall
continue in full force and effect.

3. LEGAL EVENTS TRIGGERING CONTRACT MODIFICATION OR TERMINATION

23
<PAGE> 24

(a) Changes in Reimbursement. In the event that Medicare,
Medicaid, Blue Shield or any other third party payor, or any other
Federal, state or local laws, rules, regulations or
interpretations, at any time during the Term prohibit, restrict or
in any way materially and adversely change the method or amount of
reimbursement or compensation for either party provided for in
this Agreement, then the parties shall negotiate in good faith to
amend this Agreement to provide for payment of compensation in a
manner consistent with such changes, taking into account any
materially adverse change in reimbursement or payment for
physician services. If the parties cannot reach agreement on an
amendment prior to the effective date of the change, the parties
agree to jointly select a mediator and share equally in the cost
of the mediation. If mediation does not resolve such dispute,
then the matter shall be settled exclusively by binding
arbitration, which shall be conducted in Broward County, Florida,
in accordance with the National Health Lawyer's Association,
Alternative Dispute Resolution Service, Rules of Procedure for
Arbitration. The expenses of such arbitration shall be borne
equally by the parties, provided that each party shall pay for the
cost and its own experts, evidence, and attorney's fees (unless
otherwise directed by the arbitrator).

(b) Enactment or Interpretation of Relevant Statutes and
Regulations. In the event any state or federal laws or
regulations, now existing or enacted or promulgated after the date
hereof, are interpreted by judicial decision, a regulatory agency,
or legal counsel acceptable to both AmeriPath and the Practice in
such a manner as to indicate that this Agreement or any provision
hereof may be in violation of such laws or regulations, the
Practice and AmeriPath shall amend this Agreement as necessary to
preserve the underlying economic and financial arrangements
between the Practice and AmeriPath and without substantial
economic detriment to any party. If such an amendment is not
possible, either party shall have the right to terminate this
Agreement.

4. INDEPENDENT CONTRACTOR STATUS. The Practice and AmeriPath are to
perform and exercise their rights and obligations under this
Agreement as independent contractors. AmeriPath's sole function
under this Agreement is to provide services, as requested, in a
competent and satisfactory manner, exercising reasonable care in
the performance of all such duties. AmeriPath shall not become
liable for any of the obligations, liabilities, debts or losses of
the Practice unless otherwise specifically provided by this
Agreement. AmeriPath shall have no liability whatsoever for
damages suffered on account of the willful misconduct or
negligence of any employee, agent or independent contractor (other
than AmeriPath) of the Practice. Each party shall be solely
responsible for compliance with all state and federal laws
pertaining to employment taxes, income withholding, unemployment
compensation contributions and other employment related statutes
regarding their respective employees, agents and servants. In the
event that any court or regulatory authority (or AmeriPath, in
good faith) determines that the relationship established by this
Agreements creates an employment relationship, the parties shall
negotiate in good faith to reach an arrangement involving
AmeriPath and the then current Practice Providers which
substantially preserves for the parties the benefits of this
Agreement. If such an arrangement cannot be reached,

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<PAGE> 25

AmeriPath may terminate this Agreement upon thirty (30) days prior
written notice to the Practice.

5. PROHIBITION AGAINST DISCRIMINATION. The Practice and AmeriPath
agree that, in fulfilling their respective obligations and duties
under this Agreement, they shall not discriminate against any
individual on the basis of race, religion, age, sex, disability or
national origin.

6. USE OF NAMES. Subject to the approval of the Managing Physician,
which approval shall not be unreasonably withheld, AmeriPath may
include the name of the Practice, the Practice Providers and the
Practice Providers in any brochures, promotional materials or the
like relating to AmeriPath.

7. INDEMNIFICATION.

(a) AmeriPath agrees to indemnify and hold the Practice and its
directors, officers, agents employees, Practice Providers and
affiliates (collectively, the "Practice Group") harmless from and
against any and all filings, suits, proceedings, claims,
penalties, damages, costs and expenses (including, but not limited
to, court costs and reasonable attorney and paralegal fees)
incurred by the Practice Group, resulting or arising from any
breach in any representation or warranty of AmeriPath contained
herein or any default in the performance of any covenant or
agreement of AmeriPath contained herein.

(b) The Practice agrees to indemnify and hold AmeriPath and its
directors, officers, agents employees, stockholders and
affiliates, and the directors, officers, agents and employees of
its stockholders and affiliates (collectively, the "AmeriPath
Group"), harmless from and against any and all filings, suits,
proceedings, claims, penalties, damages, costs and expenses
(including, but not limited to, court costs and reasonable
attorney and paralegal fees) incurred by the AmeriPath Group,
resulting or arising from any breach in any representation or
warranty of the Practice contained herein or any default in the
performance of any covenant or agreement of the Practice contained
herein.

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<PAGE> 26

ATTACHMENT VI

1. ORGANIZATION OF NON-PROFIT HEALTH CORPORATION

The parties shall cause to be formed a Non-Profit Health
Corporation organized pursuant to Section 5.01(a) of the Texas Medical Practice
Act (the "Corporation"). The Corporation shall be named AmeriPath Pathology
Group, Inc. and shall have articles and bylaws as attached to this Attachment
VI. The parties shall fully cooperate with each other to effectuate the
organization of the Corporation, and its qualification to engage in the
practice of medicine. Clay J. Cockerell, M.D. agrees, on behalf of the
Practice and of himself to become a director of the Corporation. AmeriPath
shall bear all reasonable costs associated with the organization and
qualification of the Corporation.

2. ASSIGNMENT OF INTERESTS

The parties agree that the following agreements shall be assigned
to the Corporation on or promptly after the Corporation becomes qualified: 1)
this Agreement; 2) all Physician Employment Agreements entered into by the
Practice, including Agreements Not To Compete 3) Managed Care Agreements and 4)
all other agreements for the provision of pathology services. The Corporation
shall assume all of the liabilities of the Practice and shall be entitled to
receipt of all of its assets.

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<PAGE> 27

FIRST AMENDMENT TO
MANAGEMENT AGREEMENT

PARTIES: AMERIPATH TEXAS, INC. ("AmeriPath")
CLAY J. COCKERELL, M.D., P.A. (the "Practice")

EFFECTIVE DATE: JANUARY 16, 1997 (the "Effective Date")

RECITALS:

The parties hereto entered into a Management Agreement (the
"Agreement") dated as of September 30, 1996.

Section 2(f) of Attachment V of the Agreement provides that the
Agreement may be changed by a written instrument executed by each of the
parties thereto and with the consent of Clay J. Cockerell, M.D. (the "Managing
Physician").

AmeriPath, Inc., a Delaware corporation and owner of all of the
capital stock of AmeriPath (the "Parent Company") has filed a registration
statement with the Securities and Exchange Commission with respect to the
underwritten public offering of the Common Stock of the Parent Company.

In connection with the Parent Company's underwritten public offering
of its Common Stock, the parties hereto desire to clarify the rights and
obligations of the parties under the Agreement and amend the terms of the
Agreement in the manner set forth in this Amendment.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, AmeriPath and the Practice agree as follows:

1. The recitals set forth above are true and correct in all
respects and are incorporated herein and made a part hereof.

2. All capitalized terms used in this Amendment without
definition shall have the meanings assigned thereto in the Agreement.

3. Section IV.A. of the Agreement is hereby deleted in its
entirety and replaced with the following language:

" A. CREATION AND GENERAL DUTIES OF STEERING COMMITTEE.
AmeriPath and the Practice shall establish a Steering Committee
composed of three members, one of which shall be the Managing
Physician and two of which shall be designated by AmeriPath (one
<PAGE> 28

of such two AmeriPath designees to be a physician). The Steering
Committee shall meet periodically and at the reasonable request of any
member. The Steering Committee shall consider, review, determine and
approve (by simple majority vote of the three members) the following
matters as they relate to the operation of the Practice: (i) the
Operating Plan; (ii) employment and recruitment of additional Practice
Providers; (iii) long term strategic planning; (iv) establishment and
maintenance of relationships with health care providers and payors;
(v) the fee schedule for services and items provided by the Practice;
and (vi) approval of all marketing and advertising of services
performed by the Practice or Practice Providers; provided, however,
that with respect to all decisions relating to the practice of
medicine and the provision of medical services, including, but not
limited to, the matters set forth in (ii) and (v) above, the Managing
Physician must concur with the majority decision of the Steering
Committee or, if the Managing Physician does not concur, the decision
of the Managing Physician will control."

4. The rights and obligations under the former Section IV.A. are
terminated by this Amendment and there shall be no continuing rights or
obligations thereunder except as it is hereby amended above. All other terms
and conditions of the Agreement shall remain in full force and effect.

5. This Amendment may be signed in counterparts, each of which
shall be deemed an original and all of which, when taken together, shall
constitute one agreement.

IN WITNESS WHEREOF, the Practice and AmeriPath have duly executed this
Amendment as of the day and year indicated above.

CLAY J. COCKERELL, M.D., P.A.

By:
----------------------------------
Clay J. Cockerell, M.D., President

AMERIPATH TEXAS, INC.

By:
----------------------------------
Robert P. Wynn, Vice President
ACCEPTED AND AGREED:

- --------------------------------
Clay J. Cockerell, M.D.

<PAGE> 1
EXHIBIT 10.22

AGREEMENT FOR PROFESSIONAL PATHOLOGY SERVICES

BETWEEN

SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC.

AND

DERRICK AND ASSOCIATES PATHOLOGY, P.A.

<PAGE> 2

AGREEMENT FOR PROFESSIONAL PATHOLOGY SERVICES

THIS AGREEMENT is made this 1st day of April, 1992, by and between
SmithKline Beacham Clinical Laboratories, Inc., a Delaware corporation, with a
principal office located at 4225 East Fowler Avenue, Tampa, Florida 33617
("SBCL") and Derrick and Associates Pathology, P.A., a professional corporation
organized under the laws of the state of Florida with a principal office
located at 8100 Chancellor Drive, Suite 130, Orlando, Florida 32809
("Association").

WITNESSETH

WHEREAS, SBCL is a corporation organized under the laws of the state
of Delaware which owns and operates or manages clinical laboratories or
provides laboratory services, management support and reference testing to
laboratories which perform various tests for the purpose of providing
information for the diagnosis, prevention or treatment of disease or the
assessment of medical conditions; and

WHEREAS, Association is a professional corporation organized under the
laws of the state of Florida, which employs physicians who are duly licensed to
practice medicine in the state of Florida and specialists that are Board
Certified in the fields of anatomic pathology; and

WHEREAS, SBCL owns laboratory facilities located in the Florida
counties of Brevard, Orange, Osceola and Seminole (the "Laboratories") for
which professional pathology services and other medical services are needed
from time to time to ensure its proper operation; and

WHEREAS, Association owns a licensed laboratory facility located at
8100 Chancellor Drive, Suite 130, Orlando, Florida 32809 ("Orlando Laboratory")
in which anatomic pathology services are provided;

WHEREAS, SBCL desires to contract with Association for the provision
by Association of anatomic pathology services to SBCL at the Orlando Laboratory
and to compensate Association therefor; and

WHEREAS, Association desires to provide anatomic pathology services to
SBCL; and

WHEREAS, Association and SBCL, desire to provide a statement of their
respective rights, obligations and duties in connection with the performance of
services hereunder.
<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:

A. RESPONSIBILITIES OF ASSOCIATION

1. Services. Association agrees to provide professional
anatomic pathology services to SBCL in the Florida counties of Brevard, Orange,
Osceola, Seminole and Volusia (Volusia County is subject hereto only to the
extent Volusia County or any part thereof is not subject to a prior pathology
services agreement of SBCL) as shall from time to time be necessary to fulfill
the needs of SBCL as determined by SBCL, including providing such services to
SBCL's clients at the Orlando Laboratory. In the event SBCL requires
professional anatomic pathology services in the Florida counties of Indian
River, Okeechobee, St. Lucie and Volusia (to the extent not covered above) and
SBCL is not restricted to whom it may refer such services, Association agrees
to provide professional anatomic pathology services to SBCL in such counties as
shall from time to time be necessary to fulfill the needs of SBCL as determined
by SBCL. Such medical services will include the professional aspects of tissue
pathology and cytology (with all gynecologic cytology services being performed
on-site at the Orlando Laboratory) and professional consultations. Association
shall at all times have members or engage physicians as more fully described
below in numbers sufficient for such purposes, including particularly those
services performed at the Orlando Laboratory. In addition, Association commits
to at least one pathologist on site at the Orlando Laboratory, from 8:00 a.m.
to 5:00 p.m., Monday through Friday, for consultation regarding cytology and
biopsy services, including, but not limited to, interpretation of results and
explanation of procedures with SBCL or any of SBCL's clients.

2. Licensure and Certification. All members and professional
employees of Association shall be licensed to practice medicine in the state of
Florida and shall be Board Certified pathologists, and shall maintain any other
licensing required by applicable laws or regulations to provide services under
this Agreement. At all times during the term of this Agreement and any renewal
thereof, all cytotechnologists employed by Association, if any, shall be
licensed by the state of Florida, if such licensing exists, and shall meet the
standards set forth in 42 CFR 493.1433-1437 and any amendments or revisions
thereto. The medical services to be provided hereunder shall be rendered in
accordance with the professional standards adopted by the College of American
Pathologists.

3. Quality Assurance and Document/Slide Retention. All services
provided by Association hereunder will be conducted in accordance with the
applicable state and federal laws and regulations pertaining to the services
provided under this Agreement. All services provided by Association hereunder
will be conducted in such a way as to fulfill all SBCL quality assurance

<PAGE> 4

requirements, and Association agrees to participate in the SBCL quality
assurance audit programs. With respect to all SBCL requirements, said
requirements shall not result in any substantial increase in cost to the
Association. SBCL will advise the Association in advance as to any change in
any said SBCL requirements and SBCL, will work with the Association in regard
to providing for compliance. Further, Association agrees to abide by SBCL's
document and slide retention policies/protocols, and with the requirements of
all applicable laws and regulations pertaining to document/slide retention.
Upon receipt of a request for documents and/or slides, Association shall
immediately notify SBCL of the request and shall not release such documents and
slides or any information pertaining thereto until permission is granted by
SBCL.

4. Nondisclosure of Proprietary Information.

a. Proprietary Information. Association acknowledges
that, this Agreement creates a relationship of confidence and trust between the
parties with respect to any information disclosed by SBCL to Association during
the course of this Agreement including, but not limited to, secret processes,
formulas, trade secrets, techniques, inventions (whether or not patentable) and
know-how (hereinafter collectively called "proprietary information").
Association agrees to hold such proprietary information communicated to it by
SBCL and documents containing it such an customer lists, specifications, sales
and service manuals, samples and correspondence, in trust and confidence at all
times during the term of this Agreement and after its termination and will
refrain from using or disclosing any such proprietary information except when
acting pursuant to this Agreement.

b. Nondisclosure. All proprietary information received
from SBCL either prior to this Agreement or during its existence shall remain
the property of SBCL, shall be treated as proprietary by Association, shall be
treated with the same degree of care with which Association treats its own
proprietary information, and shall not be divulged or disclosed to others
except with the prior written consent of SBCL. Association agrees that it will
not, without prior written consent of SBCL, communicate proprietary information
to any person or organization other than to those of Association's partners,
associates, employees, agents or representatives to whom it shall be necessary
to disclose it in order to carry out the purposes of this Agreement.
Association agrees to use its best efforts to prevent its partners, associates,
employees, agents or representatives from disclosing any proprietary
information to any other person or organization. Association will promptly
return all such proprietary information provided in written form upon the
written demand therefor by SBCL.

c. Exceptions. The provisions of this paragraph 4 shall
not apply to the extent (i) the information in the public domain or is publicly
known, (ii) the Association obtains said

3
<PAGE> 5

information from a third party who is not under any duty of confidentiality,
(iii) any disclosure is made with the consent of SBCL or is otherwise required
in order for the Association to fulfill its duties and obligations under this
Agreement, or (iv) the Association is compelled to do so by legal process or
the disclosure is otherwise required by applicable law.

B. RESPONSIBILITIES OF SBCL

1. Fees. a. The schedule of fees not forth in Exhibit A
attached hereto shall represent Association's full compensation for all
services provided by Association under this Agreement. Such fee schedule may
be renegotiated annually to take effect January 1 of each year. Any change in
the fee schedule must be approved in writing by both parties. Such fee
schedule must at all times, comply with all applicable laws, rules, regulations
and contractual arrangements with third-party payors.

b. SBCL and Association agree to renegotiate the fee
schedule in good faith. If SBCL and Association can not agree upon a fee
schedule by December 1 of each year then either party may cancel this Agreement
within thirty (30) days of written notice to the other party of such
cancellation.

c. if this Agreement in not renewed or SBCL
terminates this Agreement to obtain another provider for cytology and histology
testing, other than for reasons of non-performance or quality assurance, SBCL
shall provide Association a right of first. refusal to provide those services
but only if SBCL proposes to pay to the other provider a fee schedule greater
than that which SBCL last proposed to Association prior to the expiration or
termination of this Agreement.

d. Association shall invoice SBCL on a monthly basis.
Within twenty (20) days after SBCL's receipt of each invoice, SBCL will pay
Association at Association's office located at 8100 Chancellor Drive, Suite
130, Orlando, Florida 32809, an amount equal to the total professional and
technical fees for services performed during the preceding month in accordance
with the fee schedule set forth in Exhibit A.

2. Services. SBCL shall provide the following services or perform
the following obligations on an ongoing basis during the term of this Agreement
and any renewals thereof:

a. all supplies, including but not limited to, glass
slides, slide holders, collection supplies, requisition slips, reporting forms
and other supplies as needed by SBCL clients, at no cost to Association;

b. sell supplies, equipment and requisitions to
Association for its clients at cost;

4
<PAGE> 6

c. Distribution services which include courier and report
delivery, at no cost to Association (such courier services shall apply to all
clients of the Association regardless of whether said clients are also SBCL
clients and shall be of such frequency and timing as are customarily required
by the Association to perform its duties and obligations under this Agreement);

d. order entry and accessioning of cytology work to
interface with Association's computer system and providing Association with a
copy of requisition, at no cost to Association;

e. microfilm copy of all cytology and histology
requisitions, at no cost to Association;

f. installation of the necessary telephone lines into
Association to be used solely for the purpose of carrying out the terms of this
Agreement (SBCL shall permit Association to utilize its Florida WATS line for
the purpose of carrying out this Agreement and for Association's other
clients), at no cost to Association;

g. data processing capabilities at no cost to
Association except to the extent SBCL incurs any additional, third party costs
as a direct result of said sharing by Association (and which costs would not
previously have been incurred by SBCL but for this Agreement). SBCL shall
notify Association of such costs and provide evidence to Association
substantiating such costs. Association shall pay such costs within twenty (20)
days of notice. Depreciation and other similar non-cash expenses and SBCL
salaries shall not be considered a cost or expense under this provision; and

h. maintain appropriate licenses and certifications
necessary for SBCL to operate the Laboratories.

3. Nonsolicitation. During the term of this Agreement and any
renewals thereof and continuing for a period of one (1) year following
expiration, nonrenewal or termination of this Agreement, SBCL agrees not to
solicit directly or indirectly the services, including employment or consulting
agreements, of any person employed by Association without the consent of
Association.

4. Primary Vendor. In the counties which are subject to this
Agreement (which would include such additional counties under paragraph A.1. as
may from time to time be subject to this Agreement), the Association shall be
the primary vendor of pathology services to SBCL and SBCL clients. As such,
subject to the further provisions of this paragraph 4, SBCL shall refer to the
Association all specimens for anatomic pathology services in said areas for the
Association to provide said services hereunder. The provisions of this
paragraph 4 are subject to the following terms:

a. if a client of SBCL wishes to utilize cytology and
histology services from another pathology provider, then SBCL shall

5
<PAGE> 7

not be obligated to refer or said specimens to the Association hereunder
provided, and

b. In regard to cytology/histology testing, the provisions
of paragraph D.2.e. shall apply as to any substantial increase in volume.

C. PROFESSIONAL LIABILITY INSURANCE AND NOTICE

2. Notice. Each party hereto shall promptly notify the other in
writing of any claim asserted against the other party, or any of either party's
employees, agents, servants or representatives, relating to the services
provided under this Agreement or the responsibilities hereunder, and further
shall promptly deliver to the other party a true copy of any such claim
including, but not limited to, a true copy of any summons or other process,
pleading or notice issued in any lawsuit or other proceeding to assert or
enforce any such claim.

D. TERM AND TERMINATION

1. Initial Term and Renewal. This Agreement shall commence on
the 1st day of April, 1992 and shall remain in effect for an initial term of
one (1) year. Thereafter, this Agreement shall automatically renew for
successive terms of three (3) years subject to all terms and conditions herein
contained (except that the fees provided for in paragraph B.1, above, are
subject to review and adjustment on an annual basis), unless and until either
the Association or SBCL shall give the other party written notice not less than
ninety (90) days prior to expiration of the then current term of its intention
to terminate this Agreement as of the expiration of the initial yearly term or
any subsequent term.

2. Termination. This Agreement will immediately and
automatically terminate on and as of the date any of the following occur:

a. Default. Failure of either party to comply with any
of the material terms of this Agreement after thirty (30) days' written notice
of such failure or violation by the other party giving notice of such default
or noncompliance and written notice of its intention to so terminate, unless
within such thirty (30) day period the defaulting party has cured such default;
or

6
<PAGE> 8

b. Discontinuance of Operations. Discontinuance of its
operations by either party by law or otherwise for a period of fifteen (15) or
more days; or

c. Bankruptcy. The filing of a petition in bankruptcy
by either party or the making by either party of an assignment for the
benefit of creditors; or if any involuntary petition in bankruptcy or petition
for an arrangement pursuant to the Bankruptcy Act is filed against either
party and is not dismissed within thirty (30) days; or if a receiver is
appointed for the business of either party, or any part thereof.

d. Sale of Association. The sale of the Association or
any part of the Association to a third party.

e. SBCL may terminate this Agreement immediately upon
written notice to Association under the following circumstances;

(1) any shareholder, physician employee or
physician contractor of Association is
charged with gross misconduct of either a
professional or personal nature, or engages
in other conduct which is grounds for
immediate discharge without pay under SBCL's
personnel policies; or

(2) any shareholder, physician employee or
physician contractor of Association is
convicted of a crime other than a minor
traffic violation; or

(3) any shareholder, physician employee or
physician contractor of Association has his
or her right to practice medicine in the
State either suspended, lapsed, revoked, or
placed under probation, or is excluded from
the Medicare or Medicaid programs, or fails
to maintain his or her standing as a Board-
Certified clinical and anatomic pathologist
or licensed cytotechnologist; or

(4) any shareholder, physician employee or
physician contractor has a guardian or
conservator of the person or estate appointed
by a court of competent jurisdiction; or

(5) any shareholder, physician employee or
physician contractor of Association becomes
permanently disabled to the extent he or she
is unable to perform the duties required by
this Agreement.

7
<PAGE> 9

This subparagraph e. shall not apply if, within thirty (30) days after the
receipt by the Association of said notice, the Association in regard to said
particular shareholder, physician employee or physician contractor either
terminates said person or undertakes said actions as are necessary so that said
person will no longer be involved in the rendering of services to SBCL under
this Agreement.

f. Association may terminate this Agreement in the event SBCL
does not provide Association with cytology and histology tests in an amount
equal to at least seventy-five (75) percent of the number of tests provided in
1992, during each year of this Agreement and any renewals thereof. In the
event SBCL proposes to furnish to the Association additional cytology and
histology tests resulting in a substantial increase in number over that set
forth herein or from that previously agreed to between SBCL and the
Association, the parties will agree to cooperate and work together so that the
Association shall have time within which to increase its capacity to handle
said increase and once the Association has increased its capacity, said
increase as agreed to shall constitute the revised number of tests under this
subparagraph f.

E. MISCELLANEOUS

1. Nonbreach. Each party represents and warrants that execution
of and performance under this Agreement shall not constitute or cause a breach
of any other agreement between that party and any third party.

2. Entire Agreement: Amendments. This Agreement contains the
entire understanding between the parties hereto and supersedes any and all
prior agreements, understandings and arrangements between the parties relating
to the subject matter hereof. No amendment, change, modification or alteration
of the terms and conditions hereof shall be binding unless evidenced by a
writing signed by all the parties hereto.

3. Waiver. The failure of any party to this Agreement to exercise
or enforce any right conferred upon it hereunder shall not be deemed to be a
waiver of any such right nor operate to bar the exercise or performance thereof
at any time or times thereafter, nor shall a waiver of any right hereunder at
any given time, including rights to any payments, be deemed a waiver thereof
for any other time.

4. Force Majeure. No party to this Agreement shall be liable for
failure to perform any duty or obligation that said party may have under the
Agreement where such failure has been occasioned by any act of God, fire,
strike, inevitable accident, war or any cause outside the reasonable control of
the party who had the duty to perform.

8
<PAGE> 10
5. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, the
parties shall, if possible, agree on a legal, valid and enforceable substitute
provision which is as similar in effect to the deleted provision as possible.
The remaining portion of the Agreement not declared illegal, invalid or
unenforceable shall, in any event, remain valid and effective for the term
remaining unless the provision found illegal, invalid or unenforceable goes to
the essence of this Agreement.

6. Assignment. Without prior written consent of the other party
hereto, neither party may assign any of its rights or delegate any of its
obligations hereunder. Notwithstanding anything to the contrary herein
contained, SBCL may assign its rights hereunder to SmithKline Beecham
Corporation or any of its affiliated companies without the consent of
Association. Subject to the foregoing, this Agreement inures to the benefit
of, and is binding upon, the successors and assigns of the parties hereto.

7. Legislative/Regulatory Modification. In the event Medicare,
Medicaid or any third-party payor, or any other federal, state or local law,
rule, regulation or interpretation thereof at any time during the term of this
Agreement prohibits, restricts or in any way substantially changes the method
or amount of reimbursement or payment for services under this Agreement, then
this Agreement shall, in good faith, be amended by the parties to provide for
payment of compensation in a manner consistent with any such prohibition,
restriction or limitation. If as a result of any such prohibition, restriction
or change Association incurs additional costs, SBCL shall compensate
Association for such additional costs. However, if as a result of any such
prohibition, restriction or change Association's costs are reduced, Association
shall pay SBCL an amount equal to such reduction. With respect to any such
prohibitions, restrictions or changes that require amendment of this Agreement,
if this Agreement is not so amended in writing prior to the effective date of
said change, this Agreement shall terminate, unless otherwise agreed upon.

8. Notice. All notices hereunder shall be in writing, personally
delivered or sent by certified mail, return receipt requested, addressed to
the other party as follows:

If to Association: Derrick & Associates Pathology, P.A.
8100 Chancellor Drive, Suite 130
Orlando, Florida 32809
Attention: Sherry P. Larson, CEO

<PAGE> 11

If to SBCL: SmithKline Beecham Clinical
Laboratories, Inc.
4225 East Fowler Avenue
Tampa, Florida 33617
Attention: John B. Okkerse, Jr.,
Vice President and
General Manager

With a copy to: SmithKline Beecham
Law Department (FP2225)
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101
Attention: Robert F. Harchut, Esq.

and

Akerman, Senterfitt & Eidson
17th Floor, Firstate Tower
255 South Orange Avenue
Post Office Box 231
Orlando, Florida 32802-0231
Attention: Patrick T. Christiansen, Esq.

Either party may change its address to which notices shall be sent by a notice
similarly sent.

9. Execution in Counterpart. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

10. Section Headings. Section headings contained in this Agreement
are for reference purposes only and shall not affect, in any way, the meaning
and interpretation of this Agreement.

11. Parties as Independent Contractors. The parties to this
Agreement understand and agree that no agency, employment, partnership or joint
venture is created by this Agreement, and the businesses operated by SBCL and
Association are separate. The parties further agree that neither party is the
general agent of the other and no representation shall be made by either party
that would create apparent agency, employment, partnership or joint venture.
Neither party will have the authority to act for the other in any manner, nor
to create obligations or debts that would be binding upon the other.

10
<PAGE> 12

giving effect to Florida choice-of-law or conflict-of-law principles.

13. No Third Party Beneficiaries. This Agreement is solely
between SBCL and the Association, and no other parties shall have any rights or
privileges hereunder either as third party beneficiaries or otherwise.

14. Cross Default/Cross-Termination. This Agreement has been
entered into simultaneous with the parties also entering into a certain
Agreement for Medical Directorship (the "Medical Directorship Agreement"). This
Agreement and the Medical Directorship Agreement shall be subject to cross
default and cross termination provisions such that a default under either
agreement shall be and constitute a default under the other agreement and the
termination or expiration of one agreement shall also constitute the
termination or expiration of the other agreement.

[INTENTIONALLY LEFT BLANK]

11
<PAGE> 13
IN WITNESS WHEREOF, the duly authorized representatives of the parties
have executed this Agreement in duplicate effective as of the date first above
written, each party to retain a duplicate original.

SMITHKLINE BEECHAM CLINICAL
LABORATORIES, INC. ("SBCL")

By: /s/John B. Okkerse, Jr.
-----------------------------------
Name: John B. Okkerse, Jr.
---------------------------------
Title: Vice President/General Manager
--------------------------------

DERRICK & ASSOCIATES PATHOLOGY
P.A. ("ASSOCIATION")

By: /s/Gert G. Larbig, M.D.
-----------------------------------
Name: Gert G. Larbig, M.D.
---------------------------------
Title: President
--------------------------------

<PAGE> 1

EXHIBIT 10.23

AGREEMENT FOR MEDICAL DIRECTORSHIP

THIS AGREEMENT is made this 1st day of April, 1992, by and between
SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation, with a
principal office located at 4225 East Fowler Avenue, Tampa, Florida 36617
("SBCL") and Derrick and Associates Pathology, P.A., a professional corporation
organized under the laws of the state of Florida with a principal office
located at 8100 Chancellor Drive, Suite 130, Orlando, Florida 32809
("Association").

WITNESSETH

WHEREAS, SBCL is a corporation organized under the laws of the state of
Delaware which owns and operates or manages clinical laboratories or provides
laboratory services, management support and reference testing to laboratories
which perform various tests for the purpose of providing information for the
diagnosis, prevention or treatment of disease or the assessment of medical
conditions; and

WHEREAS, SBCL owns a laboratory facility located at 7520 Commerce
Center, Orlando, Florida 32819 (the "Laboratory") for which professional
pathology services and medical director services are needed from time to time
to ensure its proper operation; and

WHEREAS, SBCL desires to contract with Association for the provision by
Association of clinical pathology and medical director services to the
Laboratory and to compensate Association therefor; and

WHEREAS, Association desires to provide clinical pathology and medical
director services to SBCL; and

WHEREAS, Association and SBCL desire to provide a statement of their
respective rights, obligations and duties in connection with the performance of
services hereunder.

NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:

<PAGE> 2
A. RESPONSIBILITIES OF ASSOCIATION

1. Medical Director. Association agrees to make available to
the Laboratory the services of a qualified pathologist, who shall be designated
by Association (subject to SBCL's approval and consent), to perform the duties
of Medical Director of the Laboratory ("Medical Director") and qualified
substitutes on a temporary basis when the appointed Medical Director of that
facility is temporarily absent. If Association is unable to designate a
qualified pathologist who meets with SBCL's approval to act as a replacement or
substitute Medical Director for the Laboratory, SBCL may terminate this
Agreement as set forth in paragraph D 2 hereof. Said Medical Director will
initially be on-site at the Laboratory a minimum of four (4) hours per week.
As the testing activities of the Laboratory increase, the number of hours
on-site shall be increased accordingly as agreed by Association and SBCL.

2. Responsibilities of Medical Director.

a. Director of Laboratory. Medical Director shall act as
Director of the Laboratory and shall be responsible for the administration of
all technical and scientific operations of the Laboratory, including
supervision of testing procedures and result reporting. Medical Director shall
be responsible for ensuring that the Laboratory is in compliance with all
applicable local, state and federal laws, rules and regulations.

b. Quality Assurance. Medical Director will be a
participating member of SBCL's Quality Assurance Committee, which includes
participating in national quality assurance assignments at SBCL's request.
Each week Medical Director will devote at a minimum thirty percent (30%) of
Medical Director's on-site time at the Laboratory to qualify assurance matters.

3. Additional Professional Services. At such time as SBCL
requires professional pathology services and medical direction for any
additional laboratory or laboratories which SBCL owns or provides management
support in the Florida counties of Brevard, Orange, Osceola, Seminole, Indian
River, Lake, Okeechobee, St. Lucie and Volusia, Association agrees to provide
clinical pathology services and a medical director (subject to SBCL's approval
and consent) upon the request of SBCL, unless the parties mutually agree that
Association need not perform these additional services. Additional
compensation for such services will be negotiated in good faith as required.
SBCL retains the right to choose the pathology group and medical director for
the additional laboratory or laboratories at its sole discretion.

4. Nondisclosure of Proprietary Information.

a. Proprietary Information. Association acknowledges
that this Agreement creates a relationship of confidence and trust

2
<PAGE> 3
between the parties with respect to any information disclosed by SBCL to
Association during the course of this Agreement including, but not limited to,
secret processes, formulas, trade secrets, techniques, inventions (whether or
not patentable) and know-how (hereinafter collectively called "proprietary
information"). Association agrees to hold such proprietary information
communicated to it by SBCL and documents containing it such as customer lists,
specifications, sales and service manuals, samples and correspondence, in trust
and confidence at all times during the term of this Agreement and after its
termination and will refrain from using or disclosing any such proprietary
information except when acting pursuant to this Agreement.

b. Nondisclosure. All proprietary information received from SBCL
either prior to this Agreement or during its existence shall remain the
property of SBCL, shall be treated as proprietary by Association, shall be
treated with the same degree of care with which Association treats its own
proprietary information, and shall not be divulged or disclosed to others
except with the prior written consent of SBCL. Association agrees that it will
not, without prior written consent of SBCL, communicate proprietary information
to any person or organization other than to those of Association's partners,
associates, employees, agents or representatives to whom it shall be necessary
to disclose it in order to carry out the purposes of this Agreement.
Association agrees to use its best efforts to prevent its partners, associates,
employees, agents or representatives from disclosing any proprietary
information to any other person or organization. Association will promptly
return all such proprietary information provided in written form upon the
written demand therefor by SBCL.

c. Exceptions. The provisions of this paragraph 4 shall not apply to
the extent (i) the information is in the public domain or is publicly known,
(ii) the Association obtains said information from a third party who is not
under any duty of confidentiality, (iii) any disclosure is made with the
consent of SBCL or is otherwise required in order for the Association to
fulfill its duties and obligations under this Agreement, or (iv) the
Association is compelled to do so by legal process or the disclosure is
otherwise required by applicable law.

B. RESPONSIBILITIES OF SBCL

1. Fees. SBCL shall pay Association for the professional services
rendered Twenty-four Thousand Dollars ($24,000.00) per year. Such fee-for
service remuneration shall be paid in equal monthly installments of Two
Thousand Dollars ($2,000.00) per month on the last day of each month following
the month in which services have been provided by Association hereunder. The
installments must at all times, comply with all applicable laws, rules,
regulations and contractual arrangements with third-party payors.

3
<PAGE> 4
2. Nonsolicitation. During the term of this Agreement and any
renewals thereof and continuing for a period of one (1) year following
expiration, nonrenewal or termination of this Agreement, SBCL agrees not to
solicit directly or indirectly the services, including employment or consulting
agreements, of any person employed by Association without the consent of
Association which consent shall not be unreasonably withheld.

C. PROFESSIONAL LIABILITY INSURANCE AND NOTICE

D. TERM AND TERMINATION

1. Initial Term and Renewal. This Agreement shall commence on the 1st
day of April, 1992 and shall remain in effect for an initial term of one (1)
year. Thereafter, this Agreement shall automatically renew for successive
terms of three (3) years subject to all terms and conditions herein contained
(except that the installments provided for in paragraph B.1, above, are subject
to review and adjustment on an annual basis), unless and until either the
Association or SBCL shall give the other party written notice not less than
ninety (90) days prior to expiration of the then current term of its intention
to terminate this Agreement as of the expiration of the initial or any
subsequent yearly term.

2. Termination. This Agreement will immediately and automatically
terminate on and as of the date any of the following to occur:

a. Default. Failure of either party to comply with any of the
material terms of this Agreement after thirty (30) days written notice of such
failure or violation by the other party

<PAGE> 5
giving notice of such default or noncompliance and written notice of its
intention to so terminate, unless within such thirty (30) day period the
defaulting party has cured such default; or

b. Discontinuance of Operations. Discontinuance of its operations by
either party by law or otherwise for a period of fifteen (15) or more days; or

c. Bankruptcy. The filing of a petition in bankruptcy by either party
or the making by either party of any assignment for the benefit of creditors;
or if any involuntary petition in bankruptcy or petition for an arrangement
pursuant to the Bankruptcy Act is filed against either party and is not
dismissed within thirty (30) days; or if a receiver is appointed for the
business of either party, or any part thereof.

d. Sale of Association. The sale of the Association or any part of
the Association or any part of the Association to a third party.

e. SBCL may terminate this Agreement immediately upon written notice
to Association under the following circumstances:

(1) Medical Director is charged with gross misconduct of either a
professional or personal nature, or engages in other conduct
which is grounds for immediate discharge without pay under
SBCL's personnel policies; or

(2) Medical Director is convicted of a crime other than a minor
traffic violation; or

(3) Medical Director has his or her right to practice medicine in
the State either suspended, lapsed, revoked, or placed under
probation, or is excluded from the Medicare or Medicaid
programs, or fails to maintain his or her standing as a
Board-Certified clinical and anatomic pathologist or licensed
cytotechnologist; or

(4) Medical Director has guardian or conservator of the person or
estate appointed by a court of competent jurisdiction; or

(5) Medical Director becomes permanently disabled to the extent he
or she is unable to perform the duties required by this
Agreement and ABCL does not approve the pathologist designated
by Association to act as the replacement or substitute for the
Medical Director.

<PAGE> 6
This subparagraph e. shall not apply if, within thirty (30) days after the
receipt by the Association of said notice, the Association in regard to said
Medical Director either terminates said Medical Director or undertakes said
actions as are necessary so that said Medical Director will no longer be
involved in the rendering of services to SBCL under this Agreement and
Association designates a pathologist who is approved by SBCL to act as the
replacement or substitute for the Medical Director.

E. Miscellaneous

1. Nonbreach. Each party represents and warrants that execution of and
performance under this Agreement shall not constitute or cause a breach of any
other agreement between that party and any third party.

2. Entire Agreement; Amendments. This Agreement contains the entire
understanding between the parties hereto and supersedes any and all prior
agreements, understandings and arrangements between the parties relating to the
subject matter hereof. No amendment, change, modification or alteration of the
terms and conditions hereof shall be binding unless evidenced by a writing
signed by all the parties hereto.

3. Waiver. The failure of any party to this Agreement to exercise or
enforce any right conferred upon it hereunder shall not be deemed to be a
waiver of any such right nor operate to bar the exercise or performance thereof
at any time or times thereafter, nor shall a waiver of any right hereunder at
any given time, including rights to any payments, be deemed a waiver thereof
for any other time.

4. Force Majeure. No party to this Agreement shall be liable for failure
to perform any duty or obligation that said party may have under the Agreement
where such failure has been occasioned by any act of God, fire, strike,
inevitable accident, war or any cause outside the reasonable control of the
party who had the duty to perform.

5. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, the
parties shall, if possible, agree on a legal, valid and enforceable substitute
provision which is as similar in effect to the deleted provision as possible.
The remaining portion of the Agreement not declared illegal, invalid or
unenforceable shall, in any event, remain valid and effective for the term
remaining unless the provision found illegal, invalid or unenforceable goes to
the essence of this Agreement.

6. Assignment. Without prior written consent of the other party hereto,
neither party may assign any of its rights or delegate any of its obligations
hereunder. Notwithstanding anything

6
<PAGE> 7
to the contrary herein contained, SBCL may assign its rights hereunder to
SmithKline Beecham Corporation or any of its affiliated companies without the
consent of Association. Subject to the foregoing, this Agreement inures to the
benefit of, and is binding upon, the successors and assigns of the parties
hereto.

7. Legislative/Regulatory Modification. In the event Medicare, Medicaid
or any third-party payor, or any other federal, state or local law, rule,
regulation or interpretation thereof at any time during the term of this
Agreement prohibits, restricts or in any way substantially changes the method
or amount of reimbursement or payment for services under this Agreement, then
this Agreement shall, in good faith, be amended by the parties to provide for
payment of compensation in a manner consistent with any such prohibition,
restriction or change Association incurs additional costs, SBCL shall
compensate Association for such additional costs. However, if as a result of
any such prohibition, restriction or change Association's costs are reduced,
Association shall pay SBCL an amount equal to such reduction. With respect to
any such prohibitions, restriction or changes that require amendment of this
Agreement, if this Agreement is not so amended in writing prior to the
effective date of said change, this Agreement shall terminate, unless otherwise
agreed upon.

8. Notice. All notices hereunder shall be in writing, personally
delivered or sent by certified mail, return receipt requested, addressed to the
other party as follows:

If to Association: Derrick & Associates Pathology, P.A.
8100 Chancellor Drive, Suite 130
Orlando, Florida 32809
Attention: Sherry P. Larson, CEO

If to SBCL: SmithKline Beecham Clinical
Laboratories, Inc.
4225 East Fowler Avenue
Tampa, Florida 33617
Attention: John B. Okkerse, Jr.,
Vice President and
General Manager

With a copy to: SmithKline Beecham
Law Department (FP2225)
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101
Attention: Robert F. Harchut, Esq.

and

7
<PAGE> 8

Akerman, Senterfitt Edison
17th Floor, Firstate Tower
255 South Orange Avenue
Post Office Box 231
Orlando, Florida 32802-0231
Attention: Patrick T. Christiansen, Esq.

Either party may change its address to which notices shall be sent by a notice
similarly sent.

10. Section Headings. Section headings contained in this Agreement
are for reference purposes only and shall not affect, in any way, the meaning
and interpretation of this Agreement.

11. Parties as Independent Contractors. The parties to this
Agreement understand and agree that no agency, employment, partnership or joint
venture is created by this Agreement, and the businesses operated by SBCL and
Association are separate. The parties further agree that neither party in the
general agent of the other and no representation shall be made by either party
that would create apparent agency, employment, partnership or joint venture.
Neither party will have the authority to act for the other in any manner, nor
to create obligations or debts that would be binding upon the other.

12. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall in all respects be governed by the substantive
law of the state of Florida, including all matters of construction, validity
and performance, but without giving effect to Florida choice-of-law or
conflict-of-law principles.

13. No Third Party Beneficiaries. This Agreement in solely
between SBCL and the Association, and no other parties shall have any rights or
privileges hereunder either as third party beneficiaries or otherwise.

14. Cross Default/Cross-Termination. This Agreement has been
entered into simultaneous with the parties also entering into a certain
Agreement for Professional Pathology Services (the "Pathology Services
Agreement"). This Agreement and the Pathology Services Agreement shall be
subject to cross default and cross termination provisions such that a default
under either agreement shall be and constitute a default under the other
agreement and the

8
<PAGE> 9
termation or expiration of one agreement shall also constitute the termination
or expiration of the other agreement.

(INTENTIONALLY LEFT BLANK)

9
<PAGE> 10
IN WITNESS WHEREOF, the duly authorized representatives of the parties
have executed this Agreement in duplicate effective as of the date first above
written, each party to retain a duplicate original.

SMITHKLINE BEECHAM CLINICAL
LABORATORIES, INC. ("SBCL")

By: /s/John B. Okkerse, Jr.
-----------------------------------
Name: John B. Okkerse, Jr.
---------------------------------
Title: Vice President/General Manager
--------------------------------

DERRICK & ASSOCIATES PATHOLOGY
P.A. ("ASSOCIATION")

By: /s/Gert G. Larbig, M.D.
-----------------------------------
Name: Gert G. Larbig, M.D.
---------------------------------
Title: President
--------------------------------

<PAGE> 1
EXHIBIT 10.24

AGREEMENT FOR PROFESSIONAL PATHOLOGY SERVICES

THIS AGREEMENT is made this 1st day of November 1996, by and between
SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation, with a
principal office located at 4225 East Flower Avenue, Tampa, Florida 36617
("SBCL") and AmeriPath Florida, Inc. Derrick and Associates Pathology, a
corporation organized under the laws of the state of Florida with a principal
facility located at 8100 Chancellor Drive, Suite 130, Orlando, Florida 32809
("AmeriPath").

WITNESSETH

WHEREAS, SBCL is a corporation organized under the laws of the state of
Delaware which owns and operates or manages clinical laboratories or provides
laboratory services, management support and reference testing to laboratories
which perform various tests for the purpose of providing information for the
diagnosis, prevention or treatment of disease or the assessment of medical
conditions; and

WHEREAS, AmeriPath is a professional corporation organized under the
laws for the state of Florida, which employs physicians who are duly licensed to
practice medicine in the State of Florida and specialists that are Board
Certified in the fields of anatomic and clinical pathology; and

WHEREAS, SBCL owns laboratory facilities located in Florida (the
"Laboratories") for which professional pathology services and other medical
services are needed from time to time to ensure its proper operation; and

WHEREAS, AmeriPath owns a licensed laboratory facility located at 8100
Chancellor Drive, Suite 130, Orlando, Florida 32809 ("Orlando Laboratory") in
which anatomic pathology services are provided;

WHEREAS, SBCL desires to contract with AmeriPath for the provision by
AmeriPath of anatomic pathology services to SBCL and to compensate AmeriPath;
and

WHEREAS, AmeriPath desires to provide anatomic pathology services to
SBCL; and

WHEREAS, AmeriPath and SBCL desire to provide a statement of their
respective rights, obligations and duties in connection with the performance of
services hereunder.

NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:

A. RESPONSIBILITIES OF AMERIPATH

1. Services: AmeriPath agrees to provide professional
anatomic pathology services (including histological and cytological services to
SBCL as SBCL shall from time-to-time request. Such medical services will
include, without limitation, the professional aspects of tissue pathology and
cytology and professional consultations and shall be performed only on site at
(site(s) licensed for anatomic pathology under federal regulations and by the
state of Florida. AmeriPath agrees that it will provide written [or
electronic] reports to SBCL with respect to its findings as to all tissue
specimens by AmeriPath. Such reports shall set forth the name and address of
the facility where the examination was performed and the Unique Physician
Identification Numbers ("UPINs") of the physicians rendering the professional
anatomic pathology services.
<PAGE> 2
AMERIPATH DBA DERRICK AND ASSOCIATES PATHOLOGY
SMITHKLINE BEECHAM CLINICAL LABORATORIES
OCTOBER, 96
PAGE 2

AmeriPath shall at all times have members or engage physicians in numbers
sufficient for such purposes and in numbers sufficient to meet any and all
applicable federal, state or local regulations.

2. Specimen Handling: AmeriPath agrees to provide specimen
receiving and computer accessioning services for all cytology and history
specimens. The accessioning will be performed on the SBCL "Top Lab" system
following established SBCL procedures.

3. Licensure and Certification. All members and professional
employees of AmeriPath shall be licensed to practice medicine in the state of
Florida and shall be Board Certified pathologists, and shall maintain any other
licensing required by applicable laws or regulations to provide services under
this Agreement. At all times during the term of this Agreement and any renewal
thereof, all cytotechnologists employed by AmeriPath, if any, shall be Licensed
by the state of Florida, if such licensing exists, and any other applicable
Federal, state or local regulations, and also be registered or eligible for
registration by the American Society of Clinical Pathologists and shall meet
the standards set forth in 42 CFR 493.1433-1437 and any amendments or revisions
thereto. The medical services to be provided hereunder shall be rendered in
accordance with the professional standards adopted by the College of American
Pathologists. AmeriPath will maintain appropriate licenses and certifications
necessary to operate the pathology services and laboratories.

4. Quality Assurance and Document/Slide Retention. All services
provided by AmeriPath hereunder will be conducted in accordance with the
applicable laws and regulations pertaining to the services provided under this
Agreement. All services provided by AmeriPath hereunder will be conducted in
such a way as to fulfill all SBCL quality assurance requirements (including,
without limitation, the requirement that results or cytological findings be
reported using the then current Bethesda System), and AmeriPath agrees to
participate in all SBCL quality assurance efforts. Further, AmeriPath agrees
to abide by SBCL's document and slide retention policies/protocols, and with
the requirements of all applicable laws and regulations pertaining to document
/slide retention. Upon receipt of a request for documents and/or slides,
AmeriPath shall immediately notify SBCL of the request and shall coordinate the
release of such documents, slides and/or any information pertaining thereto
with the SBCL well in advance of such release.

5. Nondisclosure of Proprietary Information.

a. Proprietary Information. Ameripath acknowledges
that this Agreement creates a relationship of confidence and trust between the
parties with respect to any information disclosed by SBCL to AmeriPath during
the course of this Agreement including, but not limited to, secret processes,
formulas, trade secrets, techniques, inventions (whether or not patentable) and
know-how (hereinafter collectively called "proprietary information").
AmeriPath agrees to hold such proprietary information communicated to it by
SBCL and documents containing it such as customer lists, specifications, sales
and service manuals, samples and correspondence, in trust and confidence at all
times during the term of this Agreement and after its termination and will
refrain from using or disclosing any such proprietary information except when
acting pursuant to this Agreement.

<PAGE> 3
AMERIPATH DBA DERRICK AND ASSOCIATES PATHOLOGY
SMITHKLINE BEECHAM CLINICAL LABORATORIES
OCTOBER 96
PAGE 3

agrees to use its best efforts to prevent its partners, associates, employees,
agents or representatives from disclosing any proprietary information to any
other person or organization. AmeriPath will promptly return all such
proprietary information provided in written form upon the written demand by
SBCL.

e. Exceptions. The provisions of this paragraph 4 shall not apply to
the extent (i) the information is in the public domain or is publicly known,
(ii) AmeriPath obtains said information from a third party who is not under any
duty of confidentiality, (iii) any disclosure is made with the consent of SBCL
or is otherwise required in order for AmeriPath to fulfill its duties and
obligations under this Agreement, or (iv) AmeriPath is compelled to do so by
legal process or the disclosure is otherwise required by applicable law.
However, in such cases AmeriPath will give SBCL prior written notification of
its disclosure.

B. RESPONSIBILITIES OF SBCL

1. Fees and Billing. The schedule of fees set forth in Exhibit A
attached hereto shall represent AmeriPath's full compensation for all services
provided by AmeriPath under this Agreement. Such fee schedule may be
renegotiated annually, on the anniversary date of the contract, to take effect
within 60 days of Agreement each year and to remain in effect for the
succeeding twelve (12) month period. Any change in the fee schedule must be
approved in writing by both parties. Such fee schedule must at all times,
comply with all applicable laws, rules, regulations and contractual
arrangements with third-party payors. SBCL and AmeriPath agree to renegotiate
the fee schedule in good faith.

AmeriPath shall invoice SBCL on a monthly basis. Within twenty (20) days after
SBCL's receipt of each invoice, SBCL will pay AmeriPath an amount equal to the
total professional and technical fees for services performed during the
preceding month in accordance with the fee schedule set forth in Exhibit A.
AmeriPath shall use electronic interface for transmitting invoices to SBCL
including the CPT codes of services provided.

2. Billing Penalty: AmeriPath has agreed to provide a PAP smear final
report to SBCL within 21 calendar days of receiving the slide in the AmeriPath
facility. If the turnaround time exceeds 21 calendar days, SBCL will notify
AmeriPath in writing of this Problem. AmeriPath has one week to correct the
problem without penalty. After one week, a penalty of 5% of the PAP smear fee
will be imposed until the turnaround time is corrected to less than 21
calendar days.

3. Renewal: If this Agreement is not renewed or SBCL terminates
this Agreement to obtain another provider for cytology and histology testing,
other than for reasons of non-performance or quality assurance, SBCL shall
provide AmeriPath a right of first refusal to provide those services at the same
rate.

4. Services: SBCL shall provide the following services or perform
the following obligations on an ongoing basis during the term of this Agreement
and any renewals thereof;

a. all supplies, including but not limited to, glass slides,
slide holders, collection supplies, regulations slips, reporting forms and
other supplies as needed by SBCL clients, at no cost to AmeriPath;

b. distribution services which include courier and report
delivery, at no cost to AmeriPath (such courier services shall apply to all
clients of AmeriPath and shall be of such obligations under this Agreement);

<PAGE> 4
AMERIPATH DBA DERRICK AND ASSOCIATES PATHOLOGY
SMITKLINE BEECHAM CLINICAL LABORATORIES
OCTOBER, 96
PAGE 4

c. installation of the necessary telephone lines into
AmeriPath to be used solely for the purpose of carrying out the terms of this
Agreement (SBCL shall permit AmeriPath to utilize its Florida Watts line for
the purpose of carrying out this Agreement), at no cost to AmeriPath;

d. data processing capabilities necessary for handling the
patient demographic, billing and clinical information.

e. access to computer programmers and analysts as required
to set up and maintain the information interfaces described in this agreement.

5. Nonsolicitation. During the term of this Agreement and any
renewals thereof and continuing for a period of one (1) year following
expiration, nonrenewable or termination of this Agreement, SBCL agrees not to
solicit directly or indirectly the services, including employment or
consulting agreements, or any person employed by or under contract with
AmeriPath without the consent of AmeriPath. AmeriPath agrees not to solicit
directly or indirectly the SBCL clients to which it gains access as a result
of this Agreement unless agreed to in writing by SBCL.

6. Exclusive Vendor. In the areas which are subject to this
Agreement (which would include such additional areas as may from time to time
be subject to this Agreement (which would include such additional areas as may
from time to time be subject to this Agreement), AmeriPath shall be the
exclusive vendor of pathology services to SBCL and SBCL clients. As such, SBCL
shall refer to AmeriPath all specimens for anatomic pathology services in said
areas for AmeriPath to provide said services hereunder. Listing of exclusive
areas are noted on Exhibit B. AmeriPath shall be given the right of first
refusal to bid on certain managed care contracts for the "carve out" of
anatomic pathology services.

C. PROFESSIONAL LIABILITY INSURANCE AND NOTICE

1. Professional Liability Insurance Coverage. Each party shall
obtain and maintain at its own expense respectively, professional liability
insurance, or in the case of SBCL only self-insurance, in the minimum amount of
One Million Dollars ($1,000,000) per claim/occurrence and Five Million Dollars
($5,000,000) per in the aggregate to cover said party for any and all liability
it may have with respect to the provision of services pursuant to this
Agreement or with respect to its responsibilities hereunder or any services
performed by AmeriPath for or on behalf of SBCL. AmeriPath agrees to furnish
SBCL upon request with a current and valid certificate of endurance relating to
the extent of professional liability coverage called for under this Agreement.
In the event of termination or nonrenewal of this Agreement, if AmeriPath did
not maintain insurance on a claims-made basis for the full term of this
Agreement (as is required under this Agreement), AmeriPath shall provide a
reporting endorsement of "tail" coverage relating to AmeriPath's duties under
this Agreement.

2. Notice. Each party hereto shall promptly notify the other in
writing of any claim asserted against the other party, or any of either party's
employees, agents, servants or representatives, relating to the services
provided under this Agreement of the responsibilities hereunder, and further
shall promptly deliver to the other party a true copy of any such claim
including, but not limited to, a true copy of any summons or other process,
pleading or notice issued in any lawsuit or other proceeding to assert or
enforce any such claim.

D. TERM AND TERMINATION

1. Initial Term and Renewal. This Agreement shall commence
on the 1st day of November, 1996 and shall remain in effect for an initial term
of two (2) years. Thereafter, this Agreement shall automatically renew for
successive terms of three (3) years subject to all terms and

<PAGE> 5
AMERIPATH DBA DERRICK AND ASSOCIATES PATHOLOGY
SMITHKLINE BEECHAM CLINICAL LABORATORIES
OCTOBER, 96
PAGE 5

conditions herein contained (except that the fees provided for in paragraph
B.1, above are subject to review and adjustment on an annual basis), unless and
until either AmeriPath or SBCL shall give the other party written notice not
less than ninety (90) days prior to expiration of the then current term of its
intention to terminate this Agreement as of the expiration of the initial term
or any subsequent term.

2. Termination. This Agreement will immediately and
automatically terminate on and as of the date of any of the following occur:

a. Default. Failure of either party to comply with
any of the material terms of this Agreement after thirty (30) days written
notice of such failure or violation by the other party giving notice of such
default or noncompliance and written notice of its intention to so terminate,
unless within such thirty (30) day period the defaulting party has cured such
default; or

b. Discontinuance of Operations. Discontinuance of its
operations by either party by law or otherwise for a period of fifteen (15) or
more days; or

c. Bankruptcy. The filing of a petition in bankruptcy
by either party or the making by either party of an assignment for the benefit
of creditors; or if any involuntary petition in bankruptcy or petition for an
arrangement pursuant to the Bankruptcy Act is filed against either party and is
not dismissed within thirty (30) days; or if a receiver is appointed for the
business of either party, or any party thereof.

d. SBCL may terminate this Agreement immediately without
written notice to AmeriPath as the date of any of the following occur:

1. any physician employee or physician contractor
of AmeriPath is charged with gross misconduct of either a professional or
personal nature, or engages in other conduct which is grounds for immediate
discharge without pay under SBCL's personnel policies; or

2. any physician employee or physician contractor
of AmeriPath is convicted of a crime other than a minor traffic violation; or

3. any physician employee or physician contractor
of AmeriPath providing services under this Agreement has his or her right to
practice medicine in the State either suspended, revoked, or placed under
probation, or is excluded from the Medicare or Medicaid programs, or fails to
maintain his or her standing as a Board-Certified clinical and anatomic
pathologist or licensed cytotechnologies; or

4. any physician employee or physician contractor
providing services under this Agrement has a guardian or conservator of the
person or estate appointed by a court of competent jurisdiction; or

5. any physician employee or physician contractor
of AmeriPath becomes permanently disabled to the extent her or she is unable to
perform the duties required by this Agreement.

This subparagraph d. shall not apply if, within ten (10) days after SBCL's
termination, AmeriPath cures the above circumstances in regard to said
particular physician employee or physician contractor either terminates said
person or confirms to SBCL in writing that said person will no longer be
involved in the rendering of services to SBCL under this Agreement and the
continued association or employment by AmeriPath shall not have a material
adverse effect on AmeriPath's ability to perform or on SBCL's reputation.

<PAGE> 6
AMERIPATH DBA DERRICK AND ASSOCIATES PATHOLOGY
SMITHKLINE BEECHAM CLINICAL LABORATORIES
OCTOBER, 96
PAGE 6

e. In the event SBCL proposes to furnish to AmeriPath additional
cytology and histology tests resulting in a substantial increase in number over
that set forth herein or from that previously agreed to between SBCL and
AmeriPath, the parties will agree to cooperate and work together so that
AmeriPath shall have time within which to increase its capacity to handle said
increase.

E. MISCELLANEOUS

1. Nonbreach. Each party represents and warrants that execution of and
performance under this Agreement shall not constitute or cause a breach of any
other agreement between that party and any third party.

2. Entire Agreement: Amendments. This Agreement contains the entire
understanding between the parties hereto and supersedes any and all prior
agreements, understandings and arrangements between the parties relating to the
subject matter hereof. No amendment, change, modification or alteration of the
terms and conditions hereof shall be binding unless evidenced by a writing
signed by all the parties hereto.

3. Waiver. The failure of any party to this Agreement to exercise or
enforce any right conferred upon it hereunder shall not be deemed to be a
waiver of any such right nor operate to bar the exercise or performance thereof
at any time or times thereafter, nor shall a waiver of any right hereunder
at any given time, including rights to any payments, be deemed a waiver thereof
for any other time.

4. Force Majeure. No party to this Agreement shall be liable for failure to
perform any duty or obligation that said party may have under the Agreement
where such failure has been occasioned by any act of God, fire, strike,
inevitable accident, war or any cause outside the reasonable control of the
party who had the duty to perform.

5. Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable by a court of competent jurisdiction, the parties
shall, if possible, agree on a legal, valid and enforceable substitute provision
which is as similar in effect to the deleted provision as possible. The
remaining portion of the Agreement not declared illegal, invalid or
unenforceable shall, in any event, remain valid and effective for the term
remaining unless the provision found illegal, invalid or unenfoceable goes to
the essence of this Agreement.

6. Assignment. Without prior written consent of other party hereto, neither
party may assign any of its rights or delegate any of its obligations hereunder.
Notwithstanding anything to the contrary herein contained, SBCL may assign its
rights hereunder to SBCL or any of its affiliated companies without the consent
of AmeriPath. Subject to the foregoing, this Agreement inures to the benefit of,
and is binding upon, the successors and assigns of the parties hereto.

7. Legislative/Regulatory Modification. In the event Medicare, Medicaid or
any third-party payor, or any other federal, state or local law, rule,
regulation or interpretation thereof at any time during the term of this
Agreement prohibits, restricts or in any way substantially changes the method or
amount of reimbursement or payment for services under this Agreement, then this
Agreement shall, in good faith, be amended by the parties to provide for payment
of compensation in a manner consistent with any such prohibition, restriction or
limitation. If as a result of any such prohibition, restriction or change
AmeriPath incurs additional costs, SBCL shall compensate AmeriPath for such
additional costs. However, if as a result of any costs, SBCL shall compensate
AmeriPath for such additional costs. However, if as a result of any such
prohibition, restriction or change AmeriPath's costs are reduced, AmeriPath
shall pay SBCL an amount equal to such reduction. With respect to any such
prohibitions, restrictions or changes that require amendment of this Agreement,
if this Agreement is not so amended in writing prior to the effective date of
said change, this Agreement shall terminate, unless otherwise agreed upon.

<PAGE> 7
AMERIPATH DBA DERRICK AND ASSOCIATES PATHOLOGY
SMITHKLINE BEECHAM CLINICAL LABORATORIES
OCTOBER 96
PAGE 7

8. Notice. All notices hereunder shall be in writing, personally
delivered or sent by certified mail, return receipt requested, addressed to the
other party as follows:

If to AmeriPath: AmeriPath dba Derrick and Associates Pathology
8100 Chancellor Drive, Suite #130
Orlando, FL 32809
Attention: Sherry R. Larson, COO

If to SBCL: General; Manager
SmithKline Beecham Clinical Laboratories, Inc.
4225 East Fowler Avenue
Tampa, FL 33617
Attention: Doug Elhart

With a copy to: SmithKline Beecham
Law Department (FP2225)
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101
Attention: Jan M. Festa, Esq.

and

Foley and Lardner
111 North Orange Avenue
P.O. Box 2193
Orlando, FL 32802-2193
Attention: Chris Rolle, Esq.

Either party may change its address to which notices shall be sent by a notice
similarly sent.

10. Section Headings. Section headings contained in this Agreement
for reference purposes only and shall not affect, in any way, the meaning and
interpretation of this Agreement.

11. Parties as Independent Contractors. The parties to this
Agreement understand and agree that no agency, employment, partnership or joint
venture is created by this Agreement, and the businesses operated by SBCL and
AmeriPath are separate. The parties further agree that neither party is the
general agent of the other and no representation shall be made by either party
that would create apparent agency, employment, partnership or joint venture.
Neither party will have the authority to act for the other in any manner, nor
to create obligations or debts that would be binding upon the other.

12. Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall in all respects be governed by the substantive law
of the state of Florida, including all matters of construction, validity and
performance, but without giving effect to Florida choice-of-law or
conflict-of-law principles.
<PAGE> 8
AMERIPATH DBA DERRICK AND ASSOCIATES PATHOLOGY
SMITHKLINE BEECHAM CLINICAL LABORATORIES
OCTOBER 96
PAGE 8

13. No Third Party Beneficiaries. This Agreement is solely between
SBCL and AmeriPath, and no other parties shall have any rights or privileges
hereunder either as third party beneficiaries or otherwise.

IN WITNESS WHEREOF, the duly authorized representatives of the parties
have executed this Agreement in duplicate effective as of the date first above
written, each party to retain a duplicate original/.

SMITHKLINE BEECHAM CLINICAL
LABORATORIES, INC. ("SBCL")

By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------

AMERIPATH FLORIDA INC., DBA
DERRICK AND ASSOCIATES PATHOLOGY
("AMERIPATH")

By: /s/ SHERRY LARSO
-----------------------------------
Name: Sherry Larson
Title: CCO

<PAGE> 1
Exhibit 21.1

AMERIPATH, INC. SUBSIDIARIES(1)
-------------------------------

AmeriPath Alabama, Inc. (Alabama) d/b/a SkinPath
AmeriPath Florida, Inc. (Florida) d/b/a D&P Pathology
Derrick and Associates Pathology
Gulf Coast Pathology Associates
Drs. Seidenstein, Levine and Associates
Volusia Pathology Group
American Laboratory Associates
Florida Pathology Associates
AmeriPath Kentucky, Inc. (Kentucky) d/b/a Pathology Associates
AmeriPath Ohio, Inc. (Delaware)
AmeriPath Texas, Inc. (Texas) d/b/a Freeman-Cockerell Laboratories

- ----------
(1) Other affiliated entities include AmeriPath Cleveland, Inc. (Ohio) d/b/a
CPI, Cutaneous Pathology and Immunofluorescence Laboratory; AmeriPath
Cincinnati, Inc. (Ohio) d/b/a Richfield Laboratory of Dermatopathology;
and Clay J. Cockerell, M.D., P.A. (Texas)

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITORS'S CONSENT AND REPORT ON SCHEDULES

To the Board of Directors and Stockholders of AmeriPath, Inc.:

We consent to the use in this Registration Statement of AmeriPath, Inc. on
Form S-1 of our report dated November 19, 1996 (January 13, 1997, as to the
effects of the 1.8 for 1 stock split discussed in Note 1), appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the references to us under the headings "Selected Consolidated Financial Data"
and "Experts" in such Prospectus.

Our audits of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedule of AmeriPath, Inc., listed in Item 16(b). This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

We have also previously audited, in accordance with generally accepted auditing
standards, the balance sheets as of December 31, 1992 and 1993, and the related
statements of income, stockholders' equity, and cash flows for the year ended
December 31, 1992 (none of which are presented herein); and we expressed an
unqualified opinion on those financial statements. In our opinion, the
information as of December 31, 1992 and 1993 and for the year ended December
31, 1992, set forth under the heading "Selected Consolidated Financial Data" in
the Prospectus, is fairly stated in all material respects in relation to the
financial statements from which it has been derived.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida

January 21, 1997

<PAGE> 1
EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of AmeriPath, Inc. on Form
S-1 of our reports appearing in the Prospectus, which is part of this
Registration Statement, as follows: dated September 27, 1996 on the financial
statements of Demaray and Poulos, P.A.; dated September 27, 1996 on the
financial statements of Amazon and Rosen, M.D., P.A.; dated October 15, 1996 on
the financial statements of SkinPath, P.C.; dated October 19, 1996 on the
financial statements of Drs. Seidenstein, Levine & Associates, P.A.; and dated
November 13, 1996 on the financial statements of Fernandez and Kalemeris, P.A.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida

January 21, 1997

<PAGE> 1
EXHIBIT 23.4

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of AmeriPath, Inc. on Form
S-1 of our reports appearing in the Prospectus, which is part of this
Registration Statement as follows: dated October 1, 1996 on the financial
statements of Derrick and Associates Pathology, Inc.; and dated
November 1, 1996 on the financial statements of Volusia Pathology Group, M.D.,
P.A. We also consent to the reference to us under the heading "Experts" in
such Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Orlando, Florida

January 21, 1997

<PAGE> 1
EXHIBIT 23.5

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of AmeriPath, Inc. on Form
S-1 of our reports appearing in the Prospectus, which is part of this
Registration Statement, as follows: dated October 2, 1996 on the combined
financial statements of Pathology Associates P.S.C. and Technical Pathology
Services, Inc.; dated November 1, 1996 on the financial statements of Beno
Michel, M.D., Inc.; and dated November 8, 1996 on the financial statements of
David R. Barron, M.D., Inc. We also consent to the reference to us under the
heading "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Cincinnati, Ohio

January 21, 1997

<PAGE> 1
EXHIBIT 23.6

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of AmeriPath, Inc. on Form
S-1 of our report dated November 12, 1996 on the combined financial statements
of Clay J. Cockerell, M.D., P.A. and Freeman-Cockerell Laboratories, Inc.
appearing in the Prospectus, which is part of this Registration Statement. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Dallas, Texas

January 21, 1997