AMERIPATH INC, S-1/A, 1997-03-27

AMERIPATH INC
S-1/A, 1997-03-27
MISC HEALTH & ALLIED SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1997

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

AMENDMENT NO. 6

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

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>

---------------------
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)
---------------------
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)
---------------------
COPIES OF COMMUNICATIONS TO:

<TABLE>
<C> <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>

---------------------
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. [ ]
---------------------
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.
================================================================================
<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.

PROSPECTUS (Subject to Completion)

Issued March 27, 1997

6,200,000 Shares

AmeriPath (LOGO)

COMMON STOCK
------------------------

OF THE 6,200,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 5,700,000 SHARES
ARE BEING SOLD BY THE COMPANY AND 500,000 SHARES ARE BEING SOLD BY 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 THE
SALE OF THE SHARES OF COMMON STOCK BY THE SELLING STOCKHOLDERS. SEE "USE OF
PROCEEDS." PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC
OFFERING PRICE PER SHARE WILL BE BETWEEN $13 AND $15. SEE "UNDERWRITERS" FOR A
DISCUSSION OF THE FACTORS CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING
PRICE.
---------------------

THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET,
SUBJECT TO OFFICIAL NOTICE OF ISSUANCE, UNDER THE SYMBOL "PATH."

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

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
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.
---------------------

PRICE $ A SHARE
---------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
-------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
Total(3)................... $ $ $ $
</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
"Underwriters."
(2) Before deducting expenses payable by the Company estimated at $2,500,000.
(3) The Company and certain stockholders have granted the Underwriters an
option, exercisable within 30 days of the date hereof, to purchase up to
an aggregate of 930,000 additional Shares of Common Stock at the price to
public less underwriting discounts and commissions, for the purpose of
covering over-allotments, if any. If the Underwriters exercise such option
in full, 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 "Underwriters."

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

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Latham & Watkins, counsel for the Underwriters. It is expected that delivery
of the Shares will be made on or about , 1997 at the office of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
---------------------

MORGAN STANLEY & CO.
Incorporated
DEAN WITTER REYNOLDS INC.

HAMBRECHT & QUIST

PIPER JAFFRAY INC.

THE ROBINSON-HUMPHREY
COMPANY, INC.
, 1997
<PAGE> 3
[Map of the United States showing the locations of Ameripath operations
including summary information regarding the Company; Operations in Five States;
12 Outpatient Laboratories; 46 Hospital Contracts; 585 Employees; More than 80
Anatomic Pathologists]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

2
<PAGE> 4

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON STOCK
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.

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

Until , 1997 (25 days from the date of this Prospectus), all
dealers effecting transactions in the Common Stock, 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.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 4
Risk Factors........................... 9
The Company............................ 16
Use of Proceeds........................ 19
Dividend Policy........................ 19
Dilution............................... 20
Capitalization......................... 21
Selected Consolidated Financial Data... 22
Unaudited Pro Forma Consolidated
Financial Data....................... 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 28
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business............................... 38
Management............................. 51
Certain Transactions................... 57
Principal and Selling Stockholders..... 59
Description of Capital Stock........... 60
Shares Eligible for Future Sale........ 62
Underwriters........................... 64
Legal Matters.......................... 66
Experts................................ 66
Additional Information................. 66
Index to Consolidated Financial
Statements........................... F-1
</TABLE>

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

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

3
<PAGE> 5

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 Practices' 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 predecessors 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 believes it is the leading physician practice management company
focused on anatomic pathology services, based on an analysis of geographic
breadth, number of physicians, number of hospital contracts, number of practices
and net revenue. 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 three 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 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 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
4
<PAGE> 6

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 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.
5
<PAGE> 7

Effective January 1, 1994, American Laboratory Associates, Inc. ("ALA")
acquired (the "1994 Acquisition") 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, and entered into related financing
transactions in order to capitalize the Company and diversify its shareholder
base. In February 1996, AmPath was formed as a holding company in a share
exchange. The 1994 Acquisition is further described in this Summary in Footnote
2 to Summary Consolidated Financial Information as well as in "The Company,"
"Certain Transactions -- 1994 Acquisition" and Note 1 to the Consolidated
Financial Statements.

THE OFFERING

Common Stock Offered by the
Company........................... 5,700,000 shares(1)

Common Stock Offered by the Selling
Stockholders...................... 500,000 shares(2)

Common Stock Outstanding After the
Offering.......................... 17,051,356 shares(2)

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 the
Company's 10% junior subordinated notes
due December 31, 2001 (the "Junior
Notes"); (ii) to repay the outstanding
principal amount of 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"

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

(1) Includes up to 310,000 shares reserved for sale, at the initial public
offering price, to directors, officers, employees and their relatives, and
other persons having certain relationships with the Company. Any of such
reserved shares not purchased by such persons will be offered to the public.
See "Underwriters."

(2) The number of shares outstanding after this 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 on 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 certain of 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
970,211 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."

6
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION(1)
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
1992 1993 1994(2) 1995 1996 1996(3)
------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenue................................... $11,443 $13,419 $14,461 $16,024 $42,558 $86,784
Operating costs:
Cost of services............................ 8,791 10,803 7,026 8,517 20,106 39,597
Selling, general and administrative
expense................................... 1,696 1,634 2,287 2,644 8,483 15,316
Provision for doubtful accounts............. 787 953 1,003 1,161 3,576 7,955
Amortization expense........................ -- -- 678 678 1,958 5,054
Non-recurring charge(4)..................... -- -- -- -- 910 910
------- ------- ------- ------- ------- -------
Total.................................. 11,274 13,390 10,994 13,000 35,033 68,832
------- ------- ------- ------- ------- -------
Income from operations........................ 169 29 3,467 3,024 7,525 17,952
Interest expense.............................. (62) (48) (1,584) (1,504) (3,540) (2,184)
Other income (expense), net................... 10 9 (46) (46) (431) (368)
------- ------- ------- ------- ------- -------
Income (loss) before income taxes............. 117 (10) 1,837 1,474 3,554 15,400
Provision for income taxes(5)................. -- -- 692 572 1,528 6,543
------- ------- ------- ------- ------- -------
Net income (loss)............................. $ 117 $ (10) $ 1,145 $ 902 $ 2,026 $ 8,857
======= ======= ======= ======= ======= =======
Supplemental pro forma data:(6)
Pro forma net income per share.............. $ .14 $ .11 $ .22 $ .50
======= ======= ======= =======
Pro forma weighted average shares
outstanding............................... 8,085 8,085 9,382 17,833
======= ======= ======= =======
OPERATING DATA(7):
Pathologists.................................. 5 5 6 6 81
Hospital contracts............................ -- -- -- -- 46
Outpatient laboratories....................... 1 1 1 1 12
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
ACTUAL AS ADJUSTED(8)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,262 $ 2,262
Total assets.............................................. 157,854 157,854
Long term debt, including current portion................. 97,239 26,625
Convertible Preferred Stock(9)............................ 6,217 --
Stockholders' equity...................................... 24,903 101,734
</TABLE>

(footnotes on following page)
7
<PAGE> 9

(1) The summary consolidated financial data for the years ended December 31,
1992 and 1993 are that of PDK prior to the 1994 Acquisition. The summary
consolidated financial data as of and for the years ended December 31, 1994,
1995 and 1996 are for AmeriPath, Inc. and Subsidiaries, including ALA, after
the 1994 Acquisition.
(2) In connection with the 1994 Acquisition, ALA was capitalized through the
issuance of 1,425,600 shares of common stock to Drs. Poulos, Demaray and
Kowalczyk (the "PDK shareholders"), in exchange for an aggregate of $1.0
million in cash, and ALA 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
(i) 3,208,120 shares of the Convertible Preferred Stock for $5.5 million,
and (ii) $7.5 million of the Junior Notes. In the 1994 Acquisition, ALA
acquired the net assets of PDK for: (i) approximately $20.5 million in cash,
funded by the Summit and Schroder investment and financed partially by
borrowings of $7.5 million under a line of credit; (ii) the issuance of $3.5
million of Senior Notes; and (iii) the issuance of 8% non-negotiable
subordinated contingent notes (the "ALA Contingent Notes") in the maximum
principal amount of $2.5 million. The 1994 Acquisition was accounted for
using the purchase method of accounting. Cost of services includes $3.1
million and $4.4 million in 1992 and 1993, respectively, representing
compensation paid to PDK shareholders in excess of the compensation of such
shareholders following the 1994 Acquisition. Net income for the years ended
December 31, 1994, 1995 and 1996 does not reflect dividends payable on the
Convertible Preferred Stock. See "The Company," "Certain
Transactions -- 1994 Acquisition" and Note 1 to the Consolidated Financial
Statements.
(3) 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, 1996. The
Recent Acquisitions were financed in part by borrowings of $78.6 million
under the Credit Facility (which replaced the line of credit in May 1996),
and resulted in the issuance of 2,037,308 shares of Common Stock and the
1,833,433 shares of Restricted Stock.
(4) In connection with closing ALA's clinical operations in May 1996, the
Company recorded a non-recurring charge to operations aggregating $910,000,
which included severance payments, write-downs of property, equipment and
other assets to estimated realizable values, and the write-off of the
unamortized balances of intangible assets associated with the clinical
operations. See Note 17 to the Consolidated Financial Statements.
(5) Prior to the 1994 Acquisition, PDK 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 do not include a
provision for income taxes.
(6) 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; and (iii) 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.
(7) Operating data is measured as of the end of the period indicated.
(8) 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
December 31, 1996.
(9) Includes Convertible Preferred Stock of $5.2 million plus accrued and unpaid
dividends of $1.0 million at December 31, 1996.
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<PAGE> 10

RISK FACTORS

Reliance upon Government Programs. The Company derived 57.0%, 39.0% and an
estimated 36.3% of collections for the years ended December 31, 1995 and 1996
and on a pro forma basis for the year ended December 31, 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 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 and affiliations involve numerous short and long term risks,
including diversion of management's attention, failure to retain key personnel
and contracts of the practices, government investigations of the activities of
practices prior to being acquired, inability to integrate businesses without
material disruption, amortization of acquired intangible assets and the effects
of contingent purchase price payments and one-time

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<PAGE> 11

acquisition expenses. There can be no assurance that the Recent Acquisitions or
any future acquisition or affiliation will be successfully integrated into the
Company's operations or that practices, once acquired by or affiliated with the
Company 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
and 1996 and on a pro forma basis for the year ended December 31, 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 combine their operations. At December 31, 1996, the Direct Subsidiaries had
46 hospital contracts, 20 of

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<PAGE> 12

which were with hospitals owned by Columbia/HCA Healthcare Corporation
("Columbia/HCA"). For the year ended December 31, 1996 and on a pro forma basis
for the same period, 19.0% and 23.7%, respectively, of net revenue was generated
directly from contracts with hospitals owned by Columbia/HCA. If 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 a Practice's operations would exceed the cash required to satisfy
the Company's contingent obligations with respect to that Practice 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 1994 Acquisition and 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, a management service agreement and
laboratory contracts acquired in the acquisitions were approximately $74.1
million at December 31, 1996 representing approximately 46.9% 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 28.4 years. Goodwill, which relates to the
excess of cost over the fair value of net assets of businesses acquired, was
approximately $57.4 million at December 31, 1996 representing approximately
36.4% 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 33.8 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 portion of the carrying value of intangible
assets may no longer be recoverable, in which case an additional charge to
earnings may be necessary.

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<PAGE> 13

Although at December 31, 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 the PA Contractors, the 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 or
affiliation with 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 or affiliate with 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 established, 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 is in the process of organizing a controlled non-profit
corporate subsidiary in Texas which will merge with or own the PA Contractor
organized in Texas (the "Texas PA") by June 1997 and will assume the management
service agreement from such Texas PA. In Texas and Ohio, a wholly-owned
Subsidiary performs only laboratory, technical and non-medical administrative
services and does not exercise

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<PAGE> 14

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 "Business -- 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 tissue samples and specimens 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 and as a result of the grant of stock
options. These interests include Contingent Notes, Common Stock and Restricted
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 be no

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<PAGE> 15

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
such operations, 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 past, 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, to 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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<PAGE> 16

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 "Underwriters." 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 $14.65 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. The
Securities and Exchange Commission (the "Commission") has adopted amendments
that, effective April 29, 1997, reduce the holding periods under Rule 144. See
"Dilution," "Shares Eligible for Future Sale" and "Underwriters."

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.
Such provisions cannot be amended without the affirmative vote of at least 80%
of the combined voting power of the outstanding shares of capital stock. 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 Company's Certificate of Incorporation and Bylaws."

15
<PAGE> 17

THE COMPANY

AmeriPath believes it is the leading physician practice management company
focused on anatomic pathology services, based on an analysis of geographic
breadth, number of physicians, number of hospital contracts, number of practices
and net revenue. 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
three 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).

As a result of the 1994 Acquisition and the investment by Summit and
Schroder, the Company acquired the net assets of PDK, an outpatient pathology
practice formed in 1982 in Fort Lauderdale, Florida. 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 -- 1994 Acquisition."

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 Company believes that 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 hospital contracts, number of practices and 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 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 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 PA Contractor organized
in Ohio (the "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 references below to numbers of facilities, contracts and
employees, including pathologists, are as of December 31, 1996.

16
<PAGE> 18

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 149 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 15
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 27 people, including three
pathologists who each specialize in dermatopathology. CPI operates an outpatient
dermatopathology laboratory and a dermatology practice.

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,

17
<PAGE> 19

including three pathologists, and operates the largest outpatient
dermatopathology laboratory in Cincinnati. Together with CPI, Richfield Labs
established the Company's presence in Ohio.

Under separate long-term management agreements between a PA Contractor
Subsidiary and each Ohio PA Contractor, the Company has control over all
non-medical functions of the PA Contractors, including all administrative,
management, billing and support functions. The PA Contractors and the physicians
they employ have control over all functions relating to the provision of medical
services. The PA Contractor Subsidiary receives a management fee from each Ohio
PA Contractor equal to the net revenue (less practice expenses) of the pathology
practice. The Company does not receive the net revenue from the dermatology
practice of CPI, which net revenue is paid to the Affiliated Physicians in this
Practice as compensation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Acquisitions" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Practices."

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.

18
<PAGE> 20

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 the Junior Notes; (ii) approximately $3.5 million to repay the
outstanding principal amount of 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 $82.7
million balance of indebtedness under the Credit Facility outstanding at
February 28, 1997.

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 February 28, 1997, $82.7 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 1994 Acquisition, PDK 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.

19
<PAGE> 21

DILUTION

The net tangible book value (deficit) of the Company at December 31, 1996,
was approximately $(87.9) million, or $(15.18) 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 decrease
in net tangible book value (deficit) per share of $7.89 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 December 31, 1996 would have
been approximately $(11.0) million, or $(0.65) per share. This represents an
immediate decrease in net tangible book value (deficit) of $6.64 per share to
existing stockholders and an immediate dilution of $14.65 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 December 31,
1996...................................................... $(15.18)
Pro forma decrease in net tangible book value (deficit) per
share attributable to:
Conversion of Convertible Preferred Stock................. 7.89
New investors............................................. 6.64
-------
Pro forma net tangible book value (deficit) per share after
the offering.............................................. (.65)
-------
Dilution per share to new investors......................... $ 14.65
=======
</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 $15.74 per share to new investors.

The following table sets forth, on a pro forma basis, at December 31, 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. 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 December
31, 1996, there were outstanding options to purchase 970,211 shares of Common
Stock at a weighted average exercise price of $4.12 per share. Options to
purchase 97,200 shares were exercisable at December 31, 1996. See
"Management -- Option Plan" and Note 11 to the Consolidated Financial
Statements.

20
<PAGE> 22

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996, (i) on an actual basis, and (ii) 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>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Credit Facility(1).......................................... $ 81,652 $ 22,038
Senior Notes(1)............................................. 3,500 --
Junior Notes(1)............................................. 7,500 --
Subordinated Notes(2)....................................... 4,587 4,587
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 December 31,
1996(3)(4)............................................. 6,217 --
Common stockholders' equity:
Common stock, $.01 par value, 8,000,000 shares authorized;
5,792,747 issued and outstanding and 17,051,356 shares
issued and outstanding as adjusted(4)(5)............... 58 171
Additional paid-in capital................................ 22,093 98,811
Note receivable from officer(6)........................... (270) (270)
Retained earnings......................................... 3,022 3,022
-------- --------
Total common stockholders' equity................. 24,903 101,734
-------- --------
Total capitalization.............................. $128,359 $128,359
======== ========
</TABLE>

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

(1) The decrease in the Credit Facility, the Senior Notes and the Junior Notes
from the Actual to the As Adjusted results from the application of the
estimated net proceeds of the offering by the Company. See "Use of
Proceeds."
(2) Includes current maturities of $1.8 million for the Company's 7% and 8%
subordinated notes with maturities varying from 1997 to 2001 (the
"Subordinated Notes").
(3) 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 -- 1994 Acquisition."
(4) 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 the authorization of
2,000,000 shares of Preferred Stock. See "Description of Capital Stock."
(5) Excludes (i) 1,620,000 shares of Common Stock reserved for issuance under
the Option Plan, of which options to purchase 970,211 shares of Common Stock
have been granted at December 31, 1996, and options to purchase 97,200
shares of Common Stock were exercisable at December 31, 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 "Management -- Director Option Plan."
(6) Represents a loan to the Company's President and Chief Executive Officer in
connection with his purchase of Common Stock. See "Certain Transactions."

21
<PAGE> 23

SELECTED CONSOLIDATED FINANCIAL DATA

The Selected Consolidated Financial Data set forth below as of and for each
of the five years in the period ended December 31, 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 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>
YEAR ENDED DECEMBER 31,(1)
-----------------------------------------------
1992 1993 1994(2) 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenue.............................................. $11,443 $13,419 $14,461 $16,024 $42,558
Operating costs:
Cost of services....................................... 8,791 10,803 7,026 8,517 20,106
Selling, general and administrative expense............ 1,696 1,634 2,287 2,644 8,483
Provision for doubtful accounts........................ 787 953 1,003 1,161 3,576
Amortization expense................................... -- -- 678 678 1,958
Non-recurring charge(3)................................ -- -- -- -- 910
------- ------- ------- ------- -------
Total............................................. 11,274 13,390 10,994 13,000 35,033
------- ------- ------- ------- -------
Income from operations................................... 169 29 3,467 3,024 7,525
Interest expense......................................... (62) (48) (1,584) (1,504) (3,540)
Other income (expense), net.............................. 10 9 (46) (46) (431)
------- ------- ------- ------- -------
Income (loss) before income taxes........................ 117 (10) 1,837 1,474 3,554
Provision for income taxes(4)............................ -- -- 692 572 1,528
------- ------- ------- ------- -------
Net income (loss)........................................ $ 117 $ (10) $ 1,145 $ 902 $ 2,026
======= ======= ======= ======= =======
Supplemental pro forma data:(5)
Pro forma net income per share......................... $ .14 $ .11 $ .22
======= ======= =======
Pro forma weighted average shares outstanding.......... 8,085 8,085 9,382
======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,(1)
------------------------------------------------
1992 1993 1994(2) 1995 1996
------ ------ -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 113 $ 322 $ 103 $ 58 $ 2,262
Total assets............................................ 2,437 2,676 20,836 20,034 157,854
Long term debt, including current portion............... 752 513 17,005 15,146 97,239
Convertible Preferred Stock(6).......................... -- -- 5,735 6,085 6,217
Stockholders' equity (deficit)(2)....................... 1,169 913 (2,776) (2,224) 24,903
</TABLE>

(footnotes on following page)

22
<PAGE> 24

(1) The selected consolidated financial data as of and for the years ended
December 31, 1992 and 1993 are that of PDK prior to the 1994 Acquisition.
The selected consolidated financial data as of and for the years ended
December 31, 1994, 1995 and 1996 are for Ameripath, Inc. and Subsidiaries,
including ALA, after the 1994 Acquisition.
(2) In connection with the 1994 Acquisition, ALA was capitalized through the
issuance of 1,425,600 shares of common stock to the PDK shareholders in
exchange for an aggregate of $1.0 million in cash, and ALA issued to Summit
and Schroder an aggregate of: (i) 3,208,120 shares of Convertible Preferred
Stock for $5.5 million, and (ii) $7.5 million of Junior Notes. In the 1994
Acquisition, ALA acquired the net assets of PDK, for: (i) approximately
$20.5 million in cash, funded by the Summit and Schroder investment and
financed partially by borrowings of $7.5 million under a line of credit;
(ii) the issuance of $3.5 million of Senior Notes; and (iii) the issuance of
ALA Contingent Notes in the maximum principal amount of $2.5 million. The
1994 Acquisition was accounted for using the purchase method of accounting.
The purchase price was allocated to the net assets acquired based on the
fair values at the date of acquisition. The shareholders of PDK held
approximately 20% of the voting interests and served as the management group
of the Company following the acquisition. Accordingly, 20% of the purchase
price in excess of the carryover basis of the PDK shareholders, or
approximately $4.6 million, was deemed to be a distribution to the PDK
shareholders. Such amount was not allocated to the net assets acquired and
was charged to additional paid in capital in accordance with Emerging Issues
Task Force ("EITF") No. 88-16. Cost of services includes $3.1 million and
$4.4 million in 1992 and 1993, respectively, representing compensation paid
to PDK's shareholders in excess of the compensation of such shareholders
following the 1994 Acquisition. Net income for the years ended December 31,
1994, 1995 and 1996 does not reflect dividends payable on the Convertible
Preferred Stock. See "The Company," "Certain Transactions -- 1994
Acquisition" and Note 1 to the Consolidated Financial Statements.
(3) In connection with closing ALA's clinical operations in May 1996, the
Company recorded a non-recurring charge to operations aggregating $910,000,
which included severance payments, write-downs of property, equipment and
other assets to estimated realizable values, and the write-off of the
unamortized balances of intangible assets associated with the clinical
operations. See Note 17 to the Consolidated Financial Statements.
(4) Prior to the 1994 Acquisition, PDK 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 do not include a
provision for income taxes.
(5) 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; and (iii) 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.
(6) Includes Convertible Preferred Stock of $5.2 million plus accrued and unpaid
dividends of $1.0 million at December 31, 1996.

23
<PAGE> 25

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following Unaudited Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996 gives effect to: (i) the Recent Acquisitions,
other than the acquisition of D&P which occurred on January 1, 1996, (the
"Acquisitions") which include the acquisitions of 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, 1996. 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 Financial Data has been prepared by
the Company based, in part, on the financial statements of the 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
Financial Data is not intended to be indicative of the results that would have
occurred if the Acquisitions had occurred on January 1, 1996, or which may be
realized in the future.

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------------------
PRO FORMA OFFERING PRO FORMA
HISTORICAL ACQUISITIONS(A) ADJUSTMENTS(B) PRO FORMA ADJUSTMENTS AS ADJUSTED
---------- --------------- -------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Patient services.......... $41,516 $44,556 $ (2,770) $ 83,302 $ -- $ 83,302
Management service
agreement............... 1,042 -- 2,440 3,482 -- 3,482
------- ------- -------- -------- ------ --------
Total............... 42,558 44,556 (330) 86,784 -- 86,784
Operating costs:
Cost of services.......... 20,106 30,377 (10,886) 39,597 -- 39,597
Selling, general and
administrative
expense................. 8,483 7,872 (1,039) 15,316 -- 15,316
Provision for doubtful
accounts................ 3,576 4,379 7,955 -- 7,955
Amortization expense...... 1,958 -- 3,096(c) 5,054 -- 5,054
Non-recurring charge...... 910 -- -- 910 -- 910
------- ------- -------- -------- ------ --------
Total............... 35,033 42,628 (8,829) 68,832 -- 68,832
------- ------- -------- -------- ------ --------
Income from operations...... 7,525 1,928 8,499 17,952 -- 17,952
Interest expense............ (3,540) (71) (4,521)(d) (8,132) 5,948(g) (2,184)
Other income (expense),
net....................... (431) (9) 58(e) (382) 14(h) (368)
------- ------- -------- -------- ------ --------
Income before income
taxes..................... 3,554 1,848 4,036 9,438 5,962 15,400
Provision for income
taxes..................... 1,528 289 2,401(f) 4,218 2,325(f) 6,543
------- ------- -------- -------- ------ --------
Net income.................. $ 2,026 $ 1,559 $ 1,635 $ 5,220 $3,637 $ 8,857
======= ======= ======== ======== ====== ========
Supplemental pro forma data:
Pro forma net income per
share................... $ .22 $ .43 $ .50
======= ======== ========
Pro forma weighted average
shares outstanding(i)... 9,382 12,133 17,833
======= ======== ========
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial data.

24
<PAGE> 26

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

<TABLE>
<S> <C>
(a) Represents the historical results of operations of the
Acquisitions (the Recent Acquisitions other than the
acquisition of D&P which occurred on January 1, 1996) from
January 1, 1996 to the date of acquisition.
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. The performance-based fee is determined on an annual
basis and is based, pursuant to the PA Management Agreement
of the Texas PA, on the achievement of discretionary
performance criteria as set forth in the annual operating
plan for the Texas PA. The performance fee and the criteria
therefor may vary from year to year based on the goals and
objectives of the Texas PA and may include, among other
things, identifying, recruiting and retaining physicians,
expanding the business of the Texas PA and providing the
Texas PA with certain operational efficiencies. 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 Texas PA. 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. For purposes of the Unaudited Pro
Forma Consolidated Statement of Operations, the annual base
fee is equal to the current base fee of $400,000 and the
performance fee assumes that the PA Contractor Subsidiary
will achieve its goals and objectives. The following
displays the Texas PA's pro forma net revenue and practice
expenses, and the fees to the PA Contractor Subsidiary for
management and other services:
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
Texas PA:
Net revenue............................................... $1,143 $3,913
Practice expenses......................................... 101 431
------ ------
Management service agreement revenue...................... $1,042 $3,482
====== ======
Components of management service agreement revenue:
Reimbursement of expenses and overhead.................... $ 878 $2,837
Base management fee....................................... 100 400
Performance fee........................................... 64 245
------ ------
Total.............................................. $1,042 $3,482
====== ======
</TABLE>

25
<PAGE> 27

<TABLE>
<S> <C>
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 organizing 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.
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 EITF is addressing accounting and reporting issues
relating to physician practice management company
affiliations with medical practices in EITF No. 97-2. 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
and the ability of a physician practice management company
to account for business combinations as purchases of assets
or poolings-of-interests.
(b) Represents the pro forma adjustments to net revenue, cost of
services and selling, general and administrative expense to:
(1) increase compensation expense for the net profits of the
dermatology practice (the "Derm Practice") which are payable
to the practicing dermatologists; (2) eliminate certain
non-recurring expenses directly related to the Acquisitions
and related transactions ("Non-Recurring"); (3) 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 (4) reclassify the net revenue and
expenses to display the results of operations of the Texas
PA as discussed in Note (a) above ("Management Service
Agreement"). The following table summarizes these
adjustments:
</TABLE>

<TABLE>
<CAPTION>
MANAGEMENT
PHYSICIAN SERVICE
DERM PRACTICE NON-RECURRING COMPENSATION AGREEMENT TOTAL
------------- ------------- ------------ ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Patient services.................... $ -- $ -- $ -- $ (2,770) $ (2,770)
Management service agreement........ -- -- -- 2,440 2,440
Cost of services.................... 111 -- (10,667) (330) (10,886)
Selling, general and administrative
expense........................... -- (1,039) -- -- (1,039)
(c) Represents additional amortization expense for both net
identifiable intangible assets and goodwill based upon the
Company's preliminary allocation of purchase price as if the
Acquisitions all occurred as of January 1, 1996. The net
identifiable intangible assets related to the Acquisitions
total approximately $62.5 million and are being amortized
over periods ranging from 10 to 40 years. The amortization
periods of identifiable intangible assets, except the
management service agreement, were estimated by the Company
based on reports of independent consultants. The
identifiable intangible asset related to the management
service agreement is being amortized over 35 years. 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 net goodwill related to the
Acquisitions is approximately $53.8 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.
</TABLE>

26
<PAGE> 28
The following table summarizes the values assigned to each
of the identifiable intangible assets and goodwill and the
related weighted average amortization periods of the
Acquisitions:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
AMORTIZATION
VALUE PERIOD
-------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Hospital contracts.......................................... $ 27,750 36.5
Physician referral lists.................................... 27,331 18.8
Laboratory contracts........................................ 1,800 10.0
Management service agreement................................ 6,429 35.0
Goodwill.................................................... 54,390 34.1
--------
Total.............................................. $117,700
========
(d) Represents interest expense related to amounts borrowed to
finance the Acquisitions as if such borrowings had occurred
as of January 1, 1996. The amount outstanding under the
Credit Facility of $81.7 million at December 31, 1996
includes borrowings of approximately $76.9 million used in
the Acquisitions and related transaction fees at an interest
rate of 8.25% for the year ended December 31, 1996. In
addition, the adjustment includes interest expense in
connection with the Subordinated Notes.
(e) Represents an adjustment to record the amortization of
deferred debt issuance costs as if the Credit Facility was
in place as of January 1, 1996.
(f) Represents the incremental tax effect of the pro forma and
offering adjustments related to the Acquisitions and the
provision for income taxes related to three Acquisitions
during the year ended December 31, 1996, which did not
provide 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.
(g) 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 January 1, 1996.
(h) 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.
(i) 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; and (iii) 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>

27
<PAGE> 29

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 in 1996, 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 5.01(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 accounts.

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

28
<PAGE> 30

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 year ended
December 31, 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 decreased 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.

During 1996, the Company ceased the unprofitable operation of a clinical
laboratory resulting in a non-recurring charge of $910,000 to operations as the
result of severance payments, write-downs of property, equipment and other
assets to estimated realizable values, and the write-off of the unamortized
balances of intangible assets associated with the clinical operations. The
Company also 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 $24.8 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

29
<PAGE> 31

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. 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 less practice
expenses 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 fee. The performance-based fee is
determined on an annual basis and is based, pursuant to the PA Management
Agreement of the Texas PA, on the achievement of discretionary performance
criteria as set forth in the annual operating plan for the Texas PA. The
performance fee and the criteria therefor may vary from year to year based on
the goals and objectives of the Texas PA and may include, among other things,
identifying, recruiting and retaining physicians, expanding the business of the
Texas PA and providing the Texas PA with certain operational efficiencies. 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 less practice expenses of the Texas PA in 1997. Each
of the PA Management Agreements has a term of 40 years and is subject to
renegotiation at the end of such term. See "Business -- Government Regulation,"
"Risk Factors -- Effect of Government Regulation" and "Risk
Factors -- Dependence on Pathologists."

Other than the acquisitions of the assets of PDK and 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
(a) 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 December 31, 1996, net intangible assets were $131.5
million, including $74.1 million of net identifiable intangible assets and $57.4
million of goodwill principally due to the Recent Acquisitions. Virtually all of
the Recent Acquisitions' aggregate purchase price of approximately $108.0
million was recorded as either identifiable intangible assets or goodwill. For a
discussion of the preliminary allocation of the purchase price in the Recent
Acquisitions, see

30
<PAGE> 32

Note 3 to the Consolidated Financial Statements. Net identifiable intangible
assets include hospital contracts, physician referral lists, a management
service agreement, and laboratory contracts acquired in connection with the 1994
Acquisition and the Recent Acquisitions and are being amortized on a straight
line basis over periods ranging from 10 to 40 years. For the year ended December
31, 1996, amortization of net identifiable intangible assets on a pro forma
basis for the 1994 Acquisition and the Recent Acquisitions was $3.0 million.
Goodwill represents the excess of cost over the fair value of the net assets of
the 1994 Acquisition and the Recent Acquisitions and is being amortized on a
straight line basis over periods ranging from 15 to 35 years. For the year ended
December 31, 1996, amortization of goodwill on a pro forma basis for the 1994
Acquisition and the Recent Acquisitions was $2.1 million. 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."

31
<PAGE> 33

PRACTICES

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

<TABLE>
<CAPTION>
1996
AFFILIATED TOTAL HOSPITAL OUTPATIENT PRO FORMA
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 6 123 -- X $15,813
Associates
Cutaneous Pathology & Beachwood, OH 3 27 -- X 3,979
Immunofluorescence
Laboratory
D&P Pathology Fort Lauderdale, FL 9 9 3 2,121
Derrick and Orlando, FL 24 149 14 X 21,833
Associates
Pathology
Florida Pathology Miami Beach, FL 2 15 1 X 3,559
Associates
Freeman-Cockerell Dallas, TX 2 40 -- X 3,482
Laboratories
Gulf Coast Pathology Cape Coral, FL 5 31 3 X 8,686
Associates
Pathology Associates Lexington, KY 8 57 16 X 5,080
Richfield Laboratory Cincinnati, OH 3 32 -- X 6,201
of Dermatopathology
Drs. Seidenstein, Fort Myers, FL 9 40 5 7,293
Levine & Associates
SkinPath Birmingham, AL 3 22 1 X 2,726
Volusia Pathology Ormond Beach, FL 7 34 3 X 6,011
Group
-- --- -- -------
Totals 81 579 46 $86,784
== === == =======
</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 20 administrative and executive personnel of AmPath. Does
include the Affiliated Physicians employed by the Ohio PAs and the Texas PA.

32
<PAGE> 34

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
---------------------------
YEAR ENDED
DECEMBER 31,
---------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Net revenue................................................. 100.0% 100.0% 100.0%
Operating costs:
Cost of services.......................................... 48.6 53.2 47.2
Selling, general and administrative expense............... 15.8 16.5 19.9
Provision for doubtful accounts........................... 6.9 7.2 8.4
Amortization expense...................................... 4.7 4.2 4.7
Non-recurring charge...................................... -- -- 2.1
----- ----- -----
Total operating costs............................. 76.0 81.1 82.3
----- ----- -----
Income from operations...................................... 24.0 18.9 17.7
Interest expense............................................ (11.0) (9.4) (8.3)
Other income (expense), net................................. (0.3) (0.3) (1.0)
----- ----- -----
Income before income taxes.................................. 12.7 9.2 8.4
Provision for income taxes.................................. 4.8 3.6 3.6
----- ----- -----
Net income.................................................. 7.9% 5.6% 4.8%
===== ===== =====
</TABLE>

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

The Company completed the acquisition of eleven Practices in 1996, the
results of which are included in the Company's operating results from the date
of acquisition. Changes in operations between the year ended December 31, 1995
and the year ended December 31, 1996 were primarily due to these acquisitions.

Net revenue increased by $26.5 million, or 165.6%, to $42.6 million for the
year ended December 31, 1996 from $16.0 million for the year ended December 31,
1995. Of this increase, $26.7 million was attributable to the Recent
Acquisitions, and $1.1 million to same practice growth, offset by the decline in
net revenue of $1.3 million from the Company's clinical laboratory which ceased
operations on May 31, 1996. Same practice net revenue increased $1.1 million, or
8.3%, to $14.8 million 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 $11.6 million, or 136.1%, to $20.1 million
for the year ended December 31, 1996 from $8.5 million for the year ended
December 31, 1995. Of this increase, $13.0 million was attributable to the
Recent Acquisitions, offset by a decrease of $1.1 million attributable to the
Company's clinical laboratory which ceased operations on May 31, 1996. In
addition, same practice cost of services decreased by $273,000 for the year
ended December 31, 1996 compared to the same period in 1995 due to increased
productivity by the Affiliated Physicians. In connection with closing ALA's
clinical operations in 1996, the Company recorded a non-recurring charge to
operations aggregating $910,000, which included severance payments, write-downs
of property, equipment and other assets to estimated realizable values, and the
write-off of the unamortized balances of intangible assets associated with the
clinical operations.

Selling, general and administrative expense increased by $5.8 million, or
220.8%, to $8.5 million for the year ended December 31, 1996 from $2.6 million
for the year ended December 31, 1995. Of this increase, $2.4 million was
attributable to the Recent Acquisitions. 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.

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<PAGE> 35

Provision for doubtful accounts increased by $2.4 million, or 208.0%, to
$3.6 million for the year ended December 31, 1996 from $1.2 million for the year
ended December 31, 1995. The provision for doubtful accounts as a percentage of
net revenue was 8.4% and 7.2% for the years ended December 31, 1996 and 1995,
respectively. This increase was primarily attributable to the Recent
Acquisitions, which acquisitions increased the percentage of net revenue
attributable to services provided in inpatient laboratories. 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 increased by $1.3 million, or 188.8%, to $2.0 million
for the year ended December 31, 1996 from $700,000 for the year ended December
31, 1995. This increase is attributable to the amortization of goodwill and net
identifiable intangible assets from the Recent Acquisitions. Amortization
expense is expected to increase as a result of identifiable intangible assets
and goodwill arising from the Recent Acquisitions and future acquisitions as
well as any contingent payments required to be 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
" -- Recent Acquisitions."

Interest expense increased by $2.0 million, or 135.4%, to $3.5 million for
the year ended December 31, 1996 from $1.5 million for the year ended December
31, 1995. This increase was attributable to indebtedness incurred to finance the
Recent Acquisitions.

Other expense, net increased by $385,000 to $431,000 for the year ended
December 31, 1996 from $46,000 for the year ended December 31, 1995 due
primarily to the write-off of deferred debt issuance costs related to the
replacement of a line of credit with the Credit Facility.

The effective income tax rate was approximately 43.0% for the year ended
December 31, 1996 as compared to 38.8% for the year ended December 31, 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 21.2%, to $8.5 million for
the year ended December 31, 1995 from $7.0 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 53.2% in 1995 from
48.6% 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%

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<PAGE> 36

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.

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 38.8% for the year ended
December 31, 1995 compared to 37.7% for the year ended December 31, 1994.

QUARTERLY RESULTS

The following table presents certain unaudited quarterly financial data for
each of the quarters in the years ended December 31, 1995 and 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>
1995 CALENDAR QUARTERS 1996 CALENDAR QUARTERS
------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............................. $3,929 $4,267 $3,980 $3,848 $4,853 $4,837 $11,150 $21,718
Operating costs:
Cost of services...................... 2,029 2,191 2,112 2,185 2,485 2,223 5,771 9,627
Selling, general and administrative
expense............................. 631 663 637 713 924 898 2,020 4,641
Provision for doubtful accounts....... 290 303 317 251 309 336 1,010 1,921
Amortization expense.................. 170 170 169 169 152 152 510 1,144
Non-recurring charge.................. -- -- -- -- -- 910 -- --
------ ------ ------ ------ ------ ------ ------- -------
Total.......................... 3,120 3,327 3,235 3,318 3,870 4,519 9,311 17,333
------ ------ ------ ------ ------ ------ ------- -------
Income from operations.................. 809 940 745 530 983 318 1,839 4,385
Interest expense........................ (401) (384) (366) (353) (374) (393) (870) (1,903)
Other income (expense), net............. (21) 27 (19) (33) (2) (199) 58 (288)
------ ------ ------ ------ ------ ------ ------- -------
Income (loss) before income taxes....... 387 583 360 144 607 (274) 1,027 2,194
Provision for income taxes.............. 150 226 140 56 232 (105) 392 1,009
------ ------ ------ ------ ------ ------ ------- -------
Net income (loss).............. $ 237 $ 357 $ 220 $ 88 $ 375 $ (169) $ 635 $ 1,185
====== ====== ====== ====== ====== ====== ======= =======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

In the 1994 Acquisition, 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 connection with the 1994 Acquisition, 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 connection with the 1994
Acquisition, the Company also entered into the line of credit and borrowed $7.5
million thereunder. See "Certain Transactions." In April 1996, the ALA
Contingent Note obligations were satisfied by the issuance of 194,400 shares of
Common Stock.

Following the 1994 Acquisition, 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 has funded these requirements
with cash generated from operations and with borrowings under the line of

35
<PAGE> 37

credit and the Credit Facility. The Company generated cash from operations of
$2.3 million for each of the years ended December 31, 1994 and 1995 and $551,000
for the year ended December 31, 1996. The decrease of approximately $1.8 million
was primarily attributable to a decrease in accounts payable and accrued
expenses.

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 December 31, 1995 and 1996, the Company had working capital
of $1.4 million and $5.3 million, respectively, including $58,000 and $2.3
million, 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. Net accounts receivable increased by $12.6
million to $14.7 million at December 31, 1996 from $2.1 million at December 31,
1995, primarily as a result of the Recent Acquisitions, particularly the
acquisitions of the Practices that derive net revenue from services provided in
inpatient laboratories. Typically, the billing and collection cycle for
inpatient billings is longer than that for outpatient billings. See Note 4 to
the Consolidated Financial Statements.

At December 31, 1996, of the $85.0 million available under the Credit
Facility, $81.7 million 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 December
31, 1996, amounted to available funds of $9.9 million, of which $400,000 was
outstanding; and (ii) 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 year ended December 31, 1996, the Company
received advances under the Credit Facility of $89.3 million and repaid $11.8
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 $492,000, $488,000 and $996,000 in 1994, 1995
and 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 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

36
<PAGE> 38

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 $98.2 million as of February 28, 1997 to $27.6 million. The
Company may reborrow under the Credit Facility to fund future acquisitions,
working capital and for general corporate purposes.

The Company anticipates that its outstanding indebtedness following the
consummation of this offering will be an aggregate of $27.6 million under the
Credit Facility and Subordinated Notes. 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 and for the year
ended December 31, 1996, capital expenditures of the Company approximated 2.3%
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 the 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 or increase the Credit Facility, secure
additional bank borrowings or complete additional debt or equity financings on
terms favorable to the Company.

37
<PAGE> 39

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.

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<PAGE> 40

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 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

39
<PAGE> 41

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 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

40
<PAGE> 42

oversight, centralize reporting and other administrative functions. The
Company intends to achieve 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 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 three 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. The

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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.
The Company acquired an outpatient billing and collections software program and
upgraded its computer hardware in 1995 to increase operating efficiency and
storage capacity at its Fort Lauderdale administrative office, and will be
upgrading the software and hardware in 1997 to handle the integration of
out-patient billing for certain of the Recent Acquisitions. In addition, 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 $526,000 in information systems in
1995 and 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 professional reputations of
the Affiliated Physicians by hiring experienced personnel and applying
professional

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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 11 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 national clinical laboratories in
a defined geographic area. These contracts have terms of one to three years and

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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 -- Effect of 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

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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%, 39.0% and an estimated 36.3% of collections for
the years ended December 31, 1995 and 1996 and on a pro forma basis for the year
ended December 31, 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

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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.

In Texas, corporate practice of medicine restrictions generally provide
that only certain 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.

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 the Company's state health care regulatory counsel,
Jenkens & Gilchrist, a professional corporation, Bricker & Eckler, Wyatt,
Tarrant & Combs and Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.,
the Company believes that it is in compliance with the laws in Texas, Ohio,
Kentucky, Florida and Alabama, respectively, 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.

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

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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 "Risk Factors -- 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 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

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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 $15.0 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 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 or affiliation with 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 or
affiliate with practices on favorable terms.

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<PAGE> 51

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 599 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 246 laboratory
technicians, 59 couriers and 213 billing, marketing and administrative staff, of
which 20 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> 52

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................ 52 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.

Within 60 days following consummation of this offering, the Company's Board
of Directors intends to appoint two persons who are not currently affiliated
with the Company as additional directors. Each of such directors will serve on
the Compensation Committee and the Audit Committee.

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 1991 until August 1993. Prior to joining IMI, Mr. Wynn, a certified
public accountant, was an audit partner

51
<PAGE> 53

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
1994 Acquisition 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 1994 Acquisition 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 1994 Acquisition 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 Directors attended in
person by such director, $500 for each meeting of a committee of the Board of
Directors

52
<PAGE> 54

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 Director
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 1994 Acquisition, 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.

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<PAGE> 55

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 213,942 158,631
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 50,694
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.

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 49% $ 1.67 1/1/06 $7,607,032 $12,470,781
Alan Levin, M.D........... 36,000 5% 10.00 9/26/06 460,800 947,160
Michael J. Demaray,
M.D..................... -- -- -- -- -- --
Robert P. Wynn............ -- -- -- -- -- --
Annette L. Bell........... 18,000 2% 10.00 9/26/06 230,400 473,580
</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 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.

54
<PAGE> 56

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. Mr. New is eligible to receive an annual 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. For the year ended December 31, 1996, the Compensation Committee of
the Board of Directors determined that Mr. New exceeded the performance
objectives of his employment agreement and awarded a bonus to Mr. New in excess
of the percentages specified in such agreement. 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.

In connection with the Share Exchange, the Company assumed ALA's employment
agreement with Mr. Wynn. The agreement, as amended, provides that Mr. Wynn shall
receive a base salary of $148,000 per year and may receive a discretionary bonus
based on his performance. For the year ended December 31, 1996, Mr. Wynn
received 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 Affiliated Physicians. These agreements
have terms of five years and provide for annual base salaries of $255,000,
$350,000 and $255,000, respectively. Each

55
<PAGE> 57

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 401(k) Plan, employees may contribute up to 15% of their compensation, as
defined. Employer contributions are discretionary. During 1994, 1995 and 1996,
the Company elected not to make a contribution to the 401(k) Plan. The Company
expects to make a contribution to the 401(k) Plan in 1997.

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 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 may be 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 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
have 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

56
<PAGE> 58

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 970,211 shares of Common Stock under the Option Plan at a weighted
average exercise price of $4.12 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.

CERTAIN TRANSACTIONS

1994 ACQUISITION

Pursuant to the 1994 Acquisition: (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 1994 Acquisition, Drs. Demaray,
Poulos and Kowalczyk owned 100% of the then issued and outstanding shares of
common stock of ALA. However, after the 1994 Acquisition, the owners of PDK held
19.8% of the voting interest. 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 1994 Acquisition, each of Drs. Demaray, Poulos and Kowalczyk
received in exchange for the net 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

57
<PAGE> 59

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 the Share Exchange.

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 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
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> 60

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 47.1 481,000 4,863,816 28.5
E. Roe Stamps, IV(4).............................. 5,344,816 47.1 481,000 4,863,816 28.5
All directors and executive officers as a group
(9 persons)(4)(6)(8)............................ 6,381,075 55.4 481,000 5,900,075 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 11,351,356 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. In addition to the information contained in footnotes 4, 5, 6,
7 and 8 below, in the event the over-allotment option is exercised in full,
Alexander P. Kowalczyk, M.D. and Evangelos G. Poulos, M.D., both of whom
beneficially own less than 5% of the outstanding shares of Common Stock,
will each sell 80,000 shares of Common Stock.
(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 this 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 Schroder Incorporated, Schroder Ventures, L.P., and Schroder
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 1.0%, after this
offering. The address of Schroder is 1 Beacon Street, Suite 4500, Boston,
Massachusetts 02108.
(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
this 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 this 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 1.0% after this
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> 61

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 53
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

60
<PAGE> 62

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> 63

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 adopted amendments to the holding periods under Rule 144 that reduce the two
year period to one year and the three year period to two years. The amendments
become effective on April 29, 1997. The Commission has proposed additional
amendments to Rule 144, including the definition of Affiliate and the holding
periods under the rule. The additional proposals have not yet been adopted by
the Commission.

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<PAGE> 64

OPTIONS

As of December 31, 1996, options to purchase a total of 970,211 shares of
Common Stock were outstanding. All of these shares are subject to the Lock-up
Agreements. The Company intends to file one or 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
970,211 shares of Common Stock have agreed not to, directly or indirectly,
without the prior written consent of Morgan Stanley & Co. Incorporated, 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 "Underwriters."

REGISTRATION RIGHTS

Following the consummation of this offering and subject to the Lock-up
Agreements, Summit and Schroder will be entitled to require the Company to
register under the Securities Act a total of 5,058,608 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 and subject to certain
limitations, including the Lock-up Agreements, 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
1,620,000 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, including the Lock-up
Agreements, on the number of shares to be included in the registration by the
underwriter of such offering.

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<PAGE> 65

UNDERWRITERS

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
Company and the Selling Stockholders have agreed to sell an aggregate of
6,200,000 shares of the Company's Common Stock and the Underwriters named below,
for whom Morgan Stanley & Co. Incorporated, Dean Witter Reynolds Inc., Hambrecht
& Quist, Piper Jaffray Inc. and The Robinson-Humphrey Company, Inc. are serving
as Representatives, have severally agreed to purchase the respective number of
shares of Common Stock set forth opposite their names below:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
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 to pay for and accept delivery of shares of Common Stock offered
hereby are subject to the approval of certain legal matters by their counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all the shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the Price to Public set forth on the cover page
hereof and part to certain dealers at a price which represents a concession not
in excess of $ per share under the public offering price. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $
per share to other Underwriters or to certain dealers. After the initial
offering of the shares of Common Stock, the offering price and other selling
terms may from time to time be varied by the Underwriters.

The Underwriters have informed the Company and the Selling Stockholders
that they do not intend sales to discretionary accounts to exceed 5% of the
total number of shares of Common Stock offered by them.

The Common Stock has been approved for quotation on the Nasdaq National
Market, subject to official notice of issuance, under the symbol "PATH."

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover overallotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the

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<PAGE> 66

market price of the Common Stock above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.

Pursuant to the Underwriting Agreement, the Company and certain
stockholders have granted to the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 930,000 additional shares of
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The Underwriters may exercise such
option to purchase solely for the purpose of covering over-allotments, if any,
made in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Common Stock as the number set forth
next to such Underwriter's name in the preceding table bears to the total number
of shares of Common Stock offered by the Underwriters hereby.

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

The Company, its executive officers and directors, the Selling
Stockholders, and certain other stockholders of the Company who in the aggregate
beneficially own substantially all of the outstanding shares of Common Stock
immediately prior to this offering have agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated, they will not, for a period of 180
days after the date of this Prospectus, (a) 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 Common Stock (provided that
such shares or securities are currently owned by such person or are thereafter
acquired from the Company) or (b) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
such shares of Common Stock, whether any such transaction described in clause
(a) or (b) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, other than (i) the sale to the Underwriters of
the shares of Common Stock offered hereby; (ii) the issuance by the Company of
shares of Common Stock pursuant to the acquisition of anatomic pathology
practices that has been approved by the Board of Directors or by an authorized
committee thereof; or (iii) the issuance by the Company of shares of Common
Stock upon the exercise of an option or warrant or the conversion of a security
outstanding on the date of this Prospectus or disclosed herein and of which the
Underwriters have been advised in writing.

The Company, the Selling Stockholders, certain other stockholders and the
Underwriters have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.

PRICE OF OFFERING

Prior to this offering, there has been no public market for the shares of
Common Stock. Consequently, the initial public offering price will be determined
by negotiation among the Company, the Selling Stockholders and the Underwriters.
Among the factors to be considered in determining the initial public offering
price will be the Company's record of operations, the Company's current
financial condition and future prospects, the experience of its management, the
economics of the industry in general, the general condition of the equity
securities market and the market prices of similar securities of companies
considered comparable to the Company and such other factors as may be deemed
relevant. There can be no assurance that a regular trading market for the shares
of Common Stock will develop after this offering or, if developed, that a public
trading market can be sustained. There can also be no assurance that the prices
at which the Common Stock will sell in the public market after this offering
will not be lower than the price at which it is issued by the Underwriters in
this offering.

65
<PAGE> 67

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., Fort Lauderdale, 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, 1995 and 1996
and for each of the three years in the period ended December 31, 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 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.

66
<PAGE> 68

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, 1995 and
1996...................................................... F-5
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996.......................... F-6
Consolidated Statements of Convertible Preferred Stock and
Common Stockholders' Equity (Deficit) for the years ended
December 31, 1994, 1995 and 1996.......................... F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.......................... F-8
Notes to Consolidated Financial Statements.................. F-9

ACQUIRED BUSINESSES
DEMARAY AND POULOS, P.A.
Independent Auditors' Report................................ F-26
Balance Sheets as of December 31, 1994 and 1995............. F-27
Statements of Operations and Retained Earnings for the years
ended December 31, 1994 and 1995.......................... F-28
Statements of Cash Flows for the years ended December 31,
1994 and 1995............................................. F-29
Notes to Financial Statements............................... F-30
AMAZON AND ROSEN, M.D., P.A. D/B/A FLORIDA PATHOLOGY
ASSOCIATES
Independent Auditors' Report................................ F-33
Balance Sheets as of December 31, 1994 and 1995 and June 30,
1996...................................................... F-34
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-35
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-36
Notes to Financial Statements............................... F-37
DERRICK AND ASSOCIATES PATHOLOGY, INC.
Independent Auditors' Report................................ F-41
Balance Sheets as of December 31, 1994 and 1995 and June 30,
1996...................................................... F-42
Statements of Operations for the years ended December 31,
1994 and 1995 and the Six Months Ended June 30, 1995
(Unaudited) and 1996...................................... F-43
Statements of Shareholders' Equity for the years ended
December 31, 1994 and 1995 and the Six Months Ended June
30, 1996.................................................. F-44
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-45
Notes to Financial Statements............................... F-46
SKINPATH, P.C.
Independent Auditors' Report................................ F-52
Balance Sheets as of December 31, 1995 and July 31, 1996.... F-53
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-54
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-55
Notes to Financial Statements............................... F-56
</TABLE>

F-1
<PAGE> 69
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PATHOLOGY ASSOCIATES, P.S.C. AND TECHNICAL PATHOLOGY
SERVICES, INC.
Independent Auditors' Report................................ F-60
Combined Balance Sheets as of December 31, 1994 and 1995 and
July 31, 1996............................................. F-61
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-62
Combined Statements of Stockholders' Equity for the years
ended December 31, 1994 and 1995 and the Seven Months
Ended July 31, 1996....................................... F-63
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-64
Notes to Combined Financial Statements...................... F-65
VOLUSIA PATHOLOGY GROUP, M.D., P.A.
Independent Auditors' Report................................ F-70
Balance Sheets as of December 31, 1994 and 1995 and
September 30, 1996........................................ F-71
Statements of Operations for the years ended December 31,
1994 and 1995 and the Nine Months Ended September 30, 1995
(Unaudited) and 1996...................................... F-72
Statements of Shareholders' Equity for the years ended
December 31, 1994 and 1995 and the Nine Months Ended
September 30, 1996........................................ F-73
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-74
Notes to Financial Statements............................... F-75
DAVID R. BARRON, M.D., INC. D/B/A RICHFIELD LABORATORY OF
DERMATOPATHOLOGY
Independent Auditors' Report................................ F-79
Balance Sheets as of December 31, 1995 and September 30,
1996...................................................... F-80
Statements of Operations for the year ended December 31,
1995 and the Nine Months Ended September 30, 1995
(Unaudited) and 1996...................................... F-81
Statements of Stockholders' Equity for the year ended
December 31, 1995 and the Nine Months Ended September 30,
1996...................................................... F-82
Statements of Cash Flows for the year ended December 31,
1995 and the Nine Months Ended September 30, 1995
(Unaudited) and 1996...................................... F-83
Notes to Financial Statements............................... F-84
BENO MICHEL, M.D., INC. D/B/A CUTANEOUS PATHOLOGY &
IMMUNOFLUORESCENSE LABORATORY
Independent Auditors' Report................................ F-87
Balance Sheets as of December 31, 1994 and 1995 and
September 30, 1996........................................ F-88
Statements of Operations for the years ended December 31,
1994 and 1995 and the Nine Months Ended September 30, 1995
(Unaudited) and 1996...................................... F-89
Statements of Stockholders' Equity for the years ended
December 31, 1994 and 1995 and the Nine Months Ended
September 30, 1996........................................ F-90
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-91
Notes to Financial Statements............................... F-92
DRS. SEIDENSTEIN, LEVINE & ASSOCIATES, P.A.
Independent Auditors' Report................................ F-95
Balance Sheets as of December 31, 1994 and 1995 and
September 30, 1996........................................ F-96
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-97
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-98
Notes to Financial Statements............................... F-99
</TABLE>

F-2
<PAGE> 70
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CLAY J. COCKERELL, M.D., P.A. AND FREEMAN-COCKERELL
LABORATORIES, INC.
Independent Auditors' Report................................ F-103
Combined Balance Sheets as of December 31, 1994 and 1995 and
September 30, 1996........................................ F-104
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-105
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-106
Notes to Combined Financial Statements...................... F-107
FERNANDEZ AND KALEMERIS, P.A. D/B/A GULF COAST PATHOLOGY
ASSOCIATES
Independent Auditors' Report................................ F-111
Balance Sheets as of December 31, 1995 and September 30,
1996...................................................... F-112
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-113
Statements of Cash Flows for the year ended December 31,
1995 and the Nine Months Ended September 30, 1995
(Unaudited) and 1996...................................... F-114
Notes to Financial Statements............................... F-115
</TABLE>

F-3
<PAGE> 71

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, 1995 and 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, 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, 1995
and 1996 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP
Certified Public Accountants
Fort Lauderdale, Florida

March 6, 1997

F-4
<PAGE> 72

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------ DECEMBER 31,
1995 1996 1996
------- -------- ------------
(UNAUDITED)
(NOTE 2)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 58 $ 2,262 $ 2,262
Accounts receivable, net.................................. 2,114 14,691 14,691
Inventories............................................... 162 269 269
Other current assets...................................... 130 1,012 1,012
------- -------- --------
Total current assets............................... 2,464 18,234 18,234
------- -------- --------
PROPERTY AND EQUIPMENT, NET................................. 1,460 3,932 3,932
------- -------- --------
OTHER ASSETS:
Deferred tax asset........................................ 912
Goodwill, net............................................. 3,987 57,385 57,385
Identifiable intangibles, net............................. 10,915 74,099 74,099
Other..................................................... 296 4,204 4,204
------- -------- --------
Total other assets................................. 16,110 135,688 135,688
------- -------- --------
TOTAL ASSETS....................................... $20,034 $157,854 $157,854
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 1,027 $ 9,890 $ 9,890
Current portion of long-term debt......................... 1,762 1,762
Deferred tax liability.................................... 1,307 1,307
------- -------- --------
Total current liabilities.......................... 1,027 12,959 12,959
LONG-TERM LIABILITIES:
Credit Facility........................................... 4,146 81,652 81,652
Senior Notes due to common stockholders................... 3,500 3,500 3,500
Junior Notes due to preferred stockholders................ 7,500 7,500 7,500
Subordinated Notes........................................ 2,825 2,825
Dividend payable -- Convertible Preferred Stock........... 1,019
Deferred tax liability.................................... 18,298 18,298
------- -------- --------
Total liabilities.................................. 16,173 126,734 127,753
------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 3, 10 and 13)

CONVERTIBLE PREFERRED STOCK
Series A 6% Redeemable Cumulative Convertible Preferred
Stock -- $.01 par value, 5,000 shares authorized; 3,208
and 3,088 shares issued and outstanding at December 31,
1995 and 1996, respectively; $6,313 minimum aggregate
liquidation preference at December 31, 1996............. 6,085 6,217
------- --------
COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 8,000 shares authorized,
1,426, 5,793 and 11,351 shares issued and outstanding at
December 31, 1995 and 1996 and pro forma,
respectively............................................ 14 58 114
Additional paid-in capital................................ (3,605) 22,093 27,235
Note receivable from officer.............................. (270) (270)
Retained earnings......................................... 1,367 3,022 3,022
------- -------- --------
Total common stockholders' equity (deficit)........ (2,224) 24,903 30,101
------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........ $20,034 $157,854 $157,854
======= ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 73

AMERIPATH, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Net revenue:
Patient services.......................................... $14,461 $16,024 $41,516
Management service agreement.............................. 1,042
------- ------- -------
Total............................................. 14,461 16,024 42,558
------- ------- -------
Operating costs:
Cost of services.......................................... 7,026 8,517 20,106
Selling, general and administrative expense............... 2,287 2,644 8,483
Provision for doubtful accounts........................... 1,003 1,161 3,576
Amortization expense...................................... 678 678 1,958
Non-recurring charge...................................... 910
------- ------- -------
Total............................................. 10,994 13,000 35,033
------- ------- -------
Income from operations...................................... 3,467 3,024 7,525
Interest expense............................................ (1,584) (1,504) (3,540)
Other income (expense), net................................. (46) (46) (431)
------- ------- -------
Income before income taxes.................................. 1,837 1,474 3,554
Provision for income taxes.................................. 692 572 1,528
------- ------- -------
Net income.................................................. $ 1,145 $ 902 $ 2,026
======= ======= =======

Pro forma net income per share information (unaudited):
Pro forma net income per share............................ $ .14 $ .11 $ .22
======= ======= =======
Pro forma weighted average common and common equivalent
shares outstanding..................................... 8,085 8,085 9,382
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 74

AMERIPATH, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON
------------------------------------------ STOCK
ADDITIONAL --------------- ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN CAPITAL TOTAL SHARES AMOUNT PAID-IN CAPITAL EARNINGS
------ ------ --------------- ------ ------ ------ --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
Excess purchase price deemed
distributed to the PDK
shareholders................. (4,574)
Accrued dividends on
Convertible Preferred
Stock........................ 330 330 $ (330)
Net income..................... 1,145
----- --- ------ ------ ------ --- ------- ------
BALANCES, DECEMBER 31, 1994...... 3,208 32 5,703 5,735 1,426 14 (3,605) 815
Accrued dividends on
Convertible Preferred
Stock........................ 350 350 (350)
Net income..................... 902
----- --- ------ ------ ------ --- ------- ------
BALANCES, DECEMBER 31, 1995...... 3,208 32 6,053 6,085 1,426 14 (3,605) 1,367
Conversion of Convertible
Preferred Stock to common
stock........................ (120) (1) (206) (207) 216 2 205
Dividends paid on Convertible
Preferred Stock converted.... (32) (32)
Settlement of ALA Contingent
Notes........................ 194 2 240
Stock issued in connection with
Recent Acquisitions.......... 3,871 39 24,790
Stock issued for loan fees..... 86 1 463
Accrued dividends on
Convertible Preferred
Stock........................ 371 371 (371)
Net income..................... 2,026
----- --- ------ ------ ------ --- ------- ------
BALANCES, DECEMBER 31, 1996...... 3,088 $31 $6,186 $6,217 5,793 $58 $22,093 $3,022
===== === ====== ====== ====== === ======= ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 75

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------------
1994 1995 1996
-------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 1,145 $ 902 $ 2,026
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization........................... 1,265 1,253 3,056
(Gain) loss on disposal of assets....................... (10) 28 775
Deferred income taxes................................... 374 243 (950)
Provision for doubtful accounts......................... 1,003 1,161 3,576
Changes in assets and liabilities:
Increase in accounts receivable....................... (1,354) (1,534) (3,766)
(Increase) decrease in inventories.................... (49) 6 (107)
(Increase) decrease in other current assets........... (166) 39 (632)
(Increase) decrease in other assets................... (37) 21 (1,426)
Increase (decrease) in accounts payable and accrued
expenses............................................. 154 183 (2,001)
-------- ------- --------
Net cash flows provided by operating
activities....................................... 2,325 2,302 551
-------- ------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (492) (488) (996)
Purchase of subsidiaries, net of cash acquired............ (20,189) (73,073)
-------- ------- --------
Net cash flows used in investing activities........ (20,681) (488) (74,069)
-------- ------- --------

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) (250)
Deferred offering costs................................... (992)
Principal payments on long-term debt...................... (1,021) (240)
Net borrowings under Credit Facility...................... 77,506
Note receivable from officer.............................. (270)
Dividends paid to convertible preferred stockholders...... (32)
-------- ------- --------
Net cash flows provided by (used in) financing
activities....................................... 18,459 (1,859) 75,722
-------- ------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 103 (45) 2,204
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 103 58
-------- ------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 103 $ 58 $ 2,262
======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................. $ 1,540 $ 1,504 $ 2,856
Income taxes.............................................. $ 409 $ 63 $ 2,835
</TABLE>

See accompanying notes to consolidated financial statements.

F-8
<PAGE> 76

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT 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., and subsidiaries,
including American Laboratory Associates, Inc. ("ALA").

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. In connection
with its capitalization, ALA issued 1,425,600 shares of common stock to the
PDK shareholders 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 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"), 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
fund a portion of the acquisition of PDK. The Company also paid a financing
fee of $190 to Summit.

Effective January 1, 1994, ALA acquired the net assets of PDK (the "1994
Acquisition") for approximately $20,511 in cash, the issuance of $3,500 8%
Senior Subordinated Notes (the "Senior Notes") due in 1998, and the
issuance of 8% Subordinated Contingent Notes (the "ALA Contingent Notes")
in the maximum principal amount of $2,500 to the owners of PDK (See Note
13). The acquisition of the net assets of PDK was accounted for using the
purchase method of accounting. The purchase price was allocated to the net
assets acquired based on the fair values at the date of acquisition as
determined by management based on independent consultant's reports,
prepared in 1994. The PDK shareholders held approximately 20% of the voting
interests and served as the management group of the Company following the
acquisition. Accordingly, 20% of the purchase price in excess of the
carryover basis of the PDK shareholders, or $4,574, was deemed to be a
distribution to the PDK shareholders. Such amount was not allocated to the
net assets acquired and was charged to additional paid-in capital in
accordance with Emerging Issues Task Force No. 88-16. Such excess is shown
as "Excess purchase price deemed distributed to the PDK shareholders" in
stockholders' equity. In addition to the PDK shareholders, the shareholders
of the Company included Summit and Schroder holding approximately 77% and
3%, respectively of the voting interests at the date of the acquisition.

F-9
<PAGE> 77

AMERIPATH, INC. AND SUBSIDIARIES

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

As a result of the allocation of purchase price, approximately $4,271 was
allocated to goodwill as follows:

<TABLE>
<S> <C>
Purchase price.............................................. $24,011
Less -- Excess purchase price deemed distributed to PDK
shareholders.............................................. (4,574)
-------
19,437
-------
Net assets acquired:
Working capital........................................... 402
Property and equipment, net............................... 1,521
Identifiable intangible assets............................ 11,987
Long-term debt............................................ (274)
Deferred income taxes..................................... 1,530
-------
15,166
-------
Goodwill arising from 1994 Acquisition...................... $ 4,271
=======
</TABLE>

Subsequent to the 1994 Acquisition, 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., its wholly-owned subsidiaries, and two companies in which the Company
has the controlling financial interest by means other than direct record
ownership of voting stock, as discussed in Note 3. All significant
intercompany accounts and transactions have been eliminated.

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.

F-10
<PAGE> 78

AMERIPATH, INC. AND SUBSIDIARIES

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

The Company's consolidated financial instruments consist mainly of cash and
cash equivalents, accounts receivable, accounts payable, the Credit
Facility 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 Credit
Facility bears interest at a variable market rate, and thus has a carrying
amount that approximates fair value.

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 December 31, 1995 and
1996 was $10,400 and $10,900, respectively.

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, a management service agreement and laboratory contracts
acquired in connection with acquisitions. Such assets, except the
management service agreement, 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. The management service agreement was assigned
a value equal to the excess of the cost over the fair value of the acquired
net assets and is being amortized over 35 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.

F-11
<PAGE> 79

AMERIPATH, INC. AND SUBSIDIARIES

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

DEFERRED DEBT ISSUANCE COSTS

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.

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, net of allowances, as of December 31, 1996 amounted
to approximately $2,202. Unbilled receivables as of December 31, 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.

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. Adoption of the statement in 1996 did not have a material effect on
the Company's financial statements.

PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)

The unaudited pro forma consolidated balance sheet at December 31, 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 December 31, 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 $1,019 as of December 31, 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.

F-12
<PAGE> 80

AMERIPATH, INC. AND SUBSIDIARIES

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

3. RECENT 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 the sellers of ten 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 the next 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 additional purchase price for the
Practices.

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 3,870,741 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
CONTINGENT
PAYMENTS
DATE TOTAL ---------------
ACQUIRED CONSIDERATION COMMON STOCK PERIOD
RECENT ACQUISITIONS: IN 1996 PAID ISSUED (SHARES) (YEARS) AMOUNT
-------------------- ----------- ------------- --------------- ------- ------
<S> <C> <C> <C> <C> <C>
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
Freeman-Cockerell Laboratories,
Inc.............................. October 1 4,806 90,000 5 1,050
Volusia Pathology Group, M.D.,
P.A.............................. October 3 7,344 169,814 5 1,841
David R. Barron, M.D., Inc......... October 4 17,700 455,999 5 3,400
Drs. Seidenstein, Levine &
Associates, P.A.................. October 10 15,657 477,721 5 5,687
Beno Michel, M.D., Inc............. October 15 8,833 262,800 3 1,500
Fernandez & Kalemeris, M.D.,
P.A.............................. November 1 16,700 900,000 5 6,750
</TABLE>

F-13
<PAGE> 81

AMERIPATH, INC. AND SUBSIDIARIES

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

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. When the Company obtains final
information, management believes that adjustments, if any, 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, 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
included in the consolidated financial statements.

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.
(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 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 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 the Texas
PA. 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 which is reported as management service agreement revenue in
the consolidated statement of operations. Although the Texas PA is not
included in the consolidated financial statements, the net revenue and
expenses of the Texas PA are displayed in Note 4.

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"). The Company is in the process of forming a Texas
501(a) corporation 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

F-14
<PAGE> 82

AMERIPATH, INC. AND SUBSIDIARIES

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

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 it in the Company's consolidated financial statements.

The accompanying consolidated financial statements include the results of
operations of the Recent Acquisitions from the date acquired through
December 31, 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 years ended December
31, 1995 and 1996 after giving effect to amortization of goodwill and
identifiable intangible assets, interest expense on the long-term debt
incurred in connection with 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 by the Company.

The unaudited pro forma information for the years ended December 31, 1995
and 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,
-----------------
1995 1996
------- -------
<S> <C> <C>
Net revenue................................................. $83,188 $86,784
======= =======
Net income.................................................. $ 5,467 $ 5,220
======= =======
Net income per share........................................ $ .45 $ .43
======= =======
</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 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,
-----------------
1995 1996
------- -------
<S> <C> <C>
Gross accounts receivable................................... $ 4,037 $30,841
Less: Allowance for contractual and other adjustments....... (908) (6,910)
Allowance for uncollectible accounts.................. (1,015) (9,240)
------- -------
Accounts receivable, net.................................... $ 2,114 $14,691
======= =======
</TABLE>

F-15
<PAGE> 83

AMERIPATH, INC. AND SUBSIDIARIES

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

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

<TABLE>
<CAPTION>
1995 1996
----- -----
<S> <C> <C>
Government programs......................................... 45.7% 35.2%
Third-party payors.......................................... 27.6 41.9
Private pay patients........................................ 15.3 17.7
Other....................................................... 11.4 5.2
----- -----
100.0% 100.0%
===== =====
</TABLE>

Net patient services revenue consisted of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Gross revenue............................................ $17,027 $19,121 $ 56,381
Less contractual and other adjustments................... (2,566) (3,097) (14,865)
------- ------- --------
Net patient services revenue................... $14,461 $16,024 $ 41,516
======= ======= ========
</TABLE>

A significant portion of the Company's net revenue is generated by the
hospital-based practices through contracts with 46 hospitals, as of
December 31, 1996, primarily as a result of the Recent Acquisitions
discussed in Note 3. Columbia/HCA Healthcare Corporation owns 20 of these
hospitals. For the year ended December 31, 1996, approximately 19.0% of net
revenue was generated directly from contracts with hospitals owned by
Columbia/HCA. 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.

The components of management service agreement revenue, and the net revenue
and expenses from the date of affiliation (October 1, 1996) to December 31,
1996 of the Texas PA are as follows:

<TABLE>
<S> <C>
Texas PA:
Net revenue............................................... $1,143
Practice expenses......................................... 101
------
Management service agreement revenue.............. $1,042
======
Components of management service agreement revenue:
Reimbursement of expenses and overhead.................... $ 878
Base management fee....................................... 100
Performance fee........................................... 64
------
Total............................................. $1,042
======
</TABLE>

F-16
<PAGE> 84

AMERIPATH, INC. AND SUBSIDIARIES

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

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIFE ----------------
(YEARS) 1995 1996
----------- ------ -------
<S> <C> <C> <C>
Laboratory and data processing............................ 5 $1,617 $ 4,993
Leasehold improvements.................................... 20 413 1,038
Furniture and fixtures.................................... 7 197 1,006
Mobile lab units.......................................... 3 42 99
Automotive vehicles....................................... 3 48 393
Construction in progress.................................. 7 121
------ -------
2,324 7,650
Less accumulated depreciation............................. (864) (3,718)
------ -------
Property and equipment, net............................... $1,460 $ 3,932
====== =======
</TABLE>

Depreciation expense was $521, $512 and $862 for the years ended December
31, 1994, 1995 and 1996, respectively.

6. INTANGIBLE ASSETS

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

<TABLE>
<CAPTION>
AMORTIZATION
PERIODS
(YEARS)
DECEMBER 31, ----------------
----------------------- WEIGHTED
1995 1996 RANGE AVERAGE
------- ------------- ----- --------
<S> <C> <C> <C> <C>
Hospital contracts.............................. $29,015 35-40 36.5
Physician referral lists........................ $11,987 38,863 17-30 22.2
Management service agreement.................... 6,429 35 35.0
Laboratory contracts............................ 1,800 10 10.0
------- -------
11,987 76,107
Accumulated amortization........................ (1,072) (2,008)
------- -------
Balance, net.................................... $10,915 $74,099
======= =======
Goodwill........................................ $ 4,271 $58,264 15-35 33.8
Accumulated amortization........................ (284) (879)
------- -------
Balance, net.................................... $ 3,987 $57,385
======= =======
</TABLE>

The amortization periods for the identifiable intangible assets, except the
management service agreement, were determined by the Company based on
reports of independent consultants. The amortization period for the
identifiable intangible asset related to the management service agreement
was determined by reference to the term of the agreement. 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 30.8 years.

F-17
<PAGE> 85

AMERIPATH, INC. AND SUBSIDIARIES

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

7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------ ------
<S> <C> <C>
Accounts payable............................................ $ 287 $ 848
Accrued compensation........................................ 432 1,572
Accrued acquisition costs................................... 1,648
Accrued interest............................................ 683
Income taxes payable........................................ 175 567
Other accrued expenses...................................... 133 3,072
Amounts due to former owners of the Recent Acquisitions..... 1,500
------ ------
$1,027 $9,890
====== ======
</TABLE>

8. LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
<S> <C> <C>
Credit Facility............................................. $ 4,146 $81,652
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
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
Subordinated Notes issued and assumed in connection with the
Recent Acquisitions, payable in varying amounts through
2001, with interest at the rate of 7% and 8%.............. 4,587
------- -------
15,146 97,239
Less current portion........................................ (1,762)
------- -------
Long term debt, net of current portion...................... $15,146 $95,477
======= =======
</TABLE>

As of December 31, 1996, the maturities of long-term debt were as follows:

<TABLE>
<S> <C>
1997........................................................ $ 1,762
1998........................................................ 86,578
1999........................................................ 628
2000........................................................ 401
2001........................................................ 7,870
-------
Total....................................................... $97,239
=======
</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 Eurodollar
rate plus 2.50%. The Credit Facility also requires the quarterly payment of
an

F-18
<PAGE> 86

AMERIPATH, INC. AND SUBSIDIARIES

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

annual commitment fee equal to 0.375% of the unused portion of the
commitment until the commitment is terminated. During 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 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 December 31, 1996, the effective
interest rate was approximately 8.25%.

The Company believes that it is in compliance with all of its existing
covenants at December 31, 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 year ended December 31, 1996, the Company paid accrued dividends
in the amount of $32 with respect to the 120,004 shares of Convertible
Preferred Stock that were converted into 216,007 shares of common stock by
the holders of the Convertible Preferred Stock in their sale of shares of
common stock to the Company's President and 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
December 31, 1996, the Company has reserved 5,558,609 shares of common
stock for the conversion of the Convertible Preferred Stock.

F-19
<PAGE> 87

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT 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 December 31, 1996:

<TABLE>
<S> <C>
1997........................................................ $1,204
1998........................................................ 1,117
1999........................................................ 1,044
2000........................................................ 851
2001........................................................ 790
Thereafter.................................................. 1,541
------
$6,547
======
</TABLE>

Rent expense under operating leases for 1994, 1995 and 1996 was $153, $170,
and $499 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 December 31, 1996,
970,211 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 December 31,
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.

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

F-20
<PAGE> 88

AMERIPATH, INC. AND SUBSIDIARIES

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

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 1996............................ 738,011 1.67 10.00 5.28
Cancelled.................................. (19,800) 8.33 10.00 9.85
-------
Outstanding December 31, 1996.............. 970,211 $1.11 $10.00 $4.12
======= ===== ====== =====
</TABLE>

Options to purchase 97,200 shares are exercisable at December 31, 1996. The
weighted-average remaining contractual life of those options outstanding at
December 31, 1996 is 8.9 years.

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, 1994, 1995 and 1996, the Company
elected not to make contributions to the 401(k) Plan.

In addition, in connection with the Recent Acquisitions, 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 December 31, 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 1994 Acquisition, the
Company issued Subordinated Contingent notes in the amount of $2,500 which
have an interest rate of 8% (the "ALA Contingent 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

F-21
<PAGE> 89

AMERIPATH, INC. AND SUBSIDIARIES

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

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. The issuance of shares has been accounted for as an
additional cost of the 1994 Acquisition.

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 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 $140, in 1994, 1995
and 1996.

Note Receivable from Officer -- In connection with the employment of the
Company's President and 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.

F-22
<PAGE> 90

AMERIPATH, INC. AND SUBSIDIARIES

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

15. INCOME TAXES

The provision for income taxes for the years ended December 31, 1994, 1995
and 1996 consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995 1996
----- ----- -------
<S> <C> <C> <C>
Current:
Federal................................................... $272 $281 $2,133
State..................................................... 46 48 345
---- ---- ------
Total current provision........................... 318 329 2,478
---- ---- ------
Deferred:
Federal................................................... 319 207 (817)
State..................................................... 55 36 (133)
---- ---- ------
Total deferred provision (benefit)................ 374 243 (950)
---- ---- ------
Total provision for income taxes.................. $692 $572 $1,528
==== ==== ======
</TABLE>

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

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate...................................... 34.0% 34.0% 34.0%
State income taxes, net of federal income tax benefit....... 3.6 3.7 3.6
Non-deductible items, primarily goodwill.................... 4.6
Other....................................................... .1 1.1 .8
---- ---- ----
Effective rate.............................................. 37.7% 38.8% 43.0%
==== ==== ====
</TABLE>

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

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------ --------
<S> <C> <C>
Deferred tax assets:
Intangible assets acquired................................ $ 741
Property and equipment.................................... 41 $ 307
Allowance for doubtful accounts........................... 142 1,839
Accrued liabilities....................................... 401
Other..................................................... 23 49
------ --------
Total deferred tax assets................................... 947 2,596
------ --------
Deferred tax liabilities:
Change from cash to accrual basis by the Recent
Acquisitions........................................... (3,547)
Intangible assets acquired................................ (18,643)
Other..................................................... (35) (11)
------ --------
Total deferred tax liabilities.............................. (35) (22,201)
------ --------
Net deferred tax asset (liability)................ $ 912 $(19,605)
====== ========
</TABLE>

F-23
<PAGE> 91

AMERIPATH, INC. AND SUBSIDIARIES

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

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 1994
Acquisition and the Recent Acquisitions consummated during the year ended
December 31, 1996:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1996
------- --------
<S> <C> <C>
Assets acquired............................................. $21,201 $140,910
Liabilities assumed......................................... (1,764) (32,944)
Debt issued................................................. (3,500) (4,511)
Excess purchase price deemed distributed to PDK
shareholders.............................................. 4,574
Common stock issued......................................... (24,829)
------- --------
Cash paid................................................... 20,511 78,626
Less cash acquired.......................................... (322) (5,553)
------- --------
Net cash paid..................................... $20,189 $ 73,073
======= ========
</TABLE>

17. NON-RECURRING CHARGE

In May 1996, the Company ceased the unprofitable operation of a clinical
laboratory resulting in a non-recurring charge of $910 to operations which
included severance payments, write-downs of property, equipment and other
assets to estimated realizable values, and the write-off of the unamortized
balances of intangible assets associated with the clinical operations. The
following is a summary of the net revenue and operating costs, including
the non-recurring charge, of such clinical laboratory:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net revenue.............................................. $1,712 $2,385 $1,046
Operating costs.......................................... 2,179 2,814 2,102
</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. 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. Shares issued in the Recent
Acquisitions are included in the weighted average share calculation from
the date of acquisition. The following presents the

F-24
<PAGE> 92

AMERIPATH, INC. AND SUBSIDIARIES

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

calculation of the pro forma weighted average common shares and common
equivalent shares outstanding for each period (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 AND 1995 1996
------------- -----
<S> <C> <C>
Shares outstanding for all periods presented................ 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.......... 194 194
Recent Acquisitions....................................... 1,297
Effects of stock options.................................... 690 690
----- -----
2,310 3,823
Planned conversion of Convertible Preferred Stock........... 5,775 5,559
----- -----
Pro forma weighted average common and common equivalent
shares outstanding........................................ 8,085 9,382
===== =====
</TABLE>

F-25
<PAGE> 93

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-26
<PAGE> 94

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-27
<PAGE> 95

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-28
<PAGE> 96

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-29
<PAGE> 97

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-30
<PAGE> 98

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-31
<PAGE> 99

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-32
<PAGE> 100

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-33
<PAGE> 101

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-34
<PAGE> 102

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-35
<PAGE> 103

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-36
<PAGE> 104

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-37
<PAGE> 105

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-38
<PAGE> 106

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-39
<PAGE> 107

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-40
<PAGE> 108

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-41
<PAGE> 109

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-42
<PAGE> 110

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-43
<PAGE> 111

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
RECEIVABLE
CLASS A CLASS 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-44
<PAGE> 112

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-45
<PAGE> 113

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-46
<PAGE> 114

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-47
<PAGE> 115

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
-------------------------
1994 1995 JUNE 30, 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-48
<PAGE> 116

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-49
<PAGE> 117

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-50
<PAGE> 118

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-51
<PAGE> 119

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-52
<PAGE> 120

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-53
<PAGE> 121

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-54
<PAGE> 122

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-55
<PAGE> 123

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-56
<PAGE> 124

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-57
<PAGE> 125

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-58
<PAGE> 126

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-59
<PAGE> 127

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-60
<PAGE> 128

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-61
<PAGE> 129

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-62
<PAGE> 130

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-63
<PAGE> 131

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-64
<PAGE> 132

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-65
<PAGE> 133

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
======== ======== =======

1995
- -------------------------------------------------------
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
======== ======== =======
1996
- -------------------------------------------------------
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-66
<PAGE> 134

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-67
<PAGE> 135

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-68
<PAGE> 136

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-69
<PAGE> 137

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-70
<PAGE> 138

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-71
<PAGE> 139

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-72
<PAGE> 140

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 A CLASS 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-73
<PAGE> 141

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-74
<PAGE> 142

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-75
<PAGE> 143

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-76
<PAGE> 144

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-77
<PAGE> 145

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-78
<PAGE> 146

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-79
<PAGE> 147

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-80
<PAGE> 148

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-81
<PAGE> 149

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-82
<PAGE> 150

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-83
<PAGE> 151

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-84
<PAGE> 152

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-85
<PAGE> 153

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-86
<PAGE> 154

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-87
<PAGE> 155

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-88
<PAGE> 156

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-89
<PAGE> 157

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-90
<PAGE> 158

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-91
<PAGE> 159

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-92
<PAGE> 160

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-93
<PAGE> 161

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-94
<PAGE> 162

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-95
<PAGE> 163

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-96
<PAGE> 164

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-97
<PAGE> 165

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-98
<PAGE> 166

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-99
<PAGE> 167

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-100
<PAGE> 168

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-101
<PAGE> 169

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-102
<PAGE> 170

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-103
<PAGE> 171

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-104
<PAGE> 172

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-105
<PAGE> 173

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-106
<PAGE> 174

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-107
<PAGE> 175

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-108
<PAGE> 176

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-109
<PAGE> 177

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-110
<PAGE> 178

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-111
<PAGE> 179

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-112
<PAGE> 180

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-113
<PAGE> 181

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-114
<PAGE> 182

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-115
<PAGE> 183

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-116
<PAGE> 184

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-117
<PAGE> 185

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-118
<PAGE> 186

AmeriPath (LOGO)
<PAGE> 187

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.......................... 50,000
Printing expenses........................................... 350,000
Accounting fees and expenses................................ 1,200,000
Legal fees and expenses..................................... 600,000
Healthcare regulatory consulting fees and expenses.......... 200,000
Fees and expenses (including legal fees) for qualifications
under state securities laws............................... 22,500
Registrar and Transfer Agent's fees and expenses............ 3,500
Miscellaneous............................................... 35,709
----------
Total.................................................. $2,500,000
==========
</TABLE>

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 1994 Acquisition: (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.

II-1
<PAGE> 188

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).

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.; 57,500 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.**
</TABLE>

II-2
<PAGE> 189
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S> <C>
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.**
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**
10.25 -- Share Exchange Agreement, dated as of February 15, 1996, by
and among American Laboratory Associates, Inc., AmeriPath,
Inc. and the holders of common and convertible preferred
stock of American Laboratory Associates, Inc.**
10.26 -- Trust Agreement, dated as of October 15, 1996, between
AmeriPath, Inc. and Beno Michel, as trustee**
10.27 -- Trust Agreement, dated as of September 30, 1996, between
AmeriPath, Inc. and David R. Barron, M.D. as trustee**
10.28 -- Form of Nonqualified Stock Option Agreement**
10.29 -- Stock Purchase Agreement, dated as of October 15, 1996, by
and among AmeriPath, Inc., Beno Michel, M.D., Inc. and Beno
Michel, M.D.**
10.30 -- Stock Purchase Agreement, dated as of October 10, 1996, by
and among AmeriPath, Inc., Drs. Seidenstein, Levine and
Associates, Inc., Seidenstein, Levine Real Estate
Partnership, Lawrence Seidenstein, M.D., Steven E. Levine,
M.D. and David M. Reardon, M.D.**
10.31 -- Stock Issuance Agreement, dated as of June 26, 1996, among
AmeriPath, Inc., The First National Bank of Boston, FSC
Corp., NationsBank, N.A. (South) and Atlantic Equity
Corporation**
10.32 -- Stock Issuance Agreement, dated as of August 29, 1996, among
AmeriPath, Inc., The First National Bank of Boston, FSC
Corp., NationsBank, N.A. (South) and Atlantic Equity
Corporation**
10.33 -- Stock Issuance Agreement, dated as of November 4, 1996,
among AmeriPath, Inc., The First National Bank of Boston and
FSC Corp.**
21.1 -- Subsidiaries of AmeriPath**
</TABLE>

II-3
<PAGE> 190

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S> <C>
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)
23.7 -- Consent of Jenkens & Gilchrist a professional corporation
23.8 -- Consent of Bricker & Eckler
23.9 -- Consent of Wyatt, Tarrant & Combs
24.1 -- Reference is made to the Signatures section of this
Registration Statement for the Power of Attorney contained
therein**
</TABLE>

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

** 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.

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> 191

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 March 27, 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 March 27, 1997
- -------------------------------------------------------- Executive Officer and
James C. New Director (principal
executive officer)

* Chief Operating Officer March 27, 1997
- -------------------------------------------------------- and Director
Alan Levin, M.D.

/s/ ROBERT P. WYNN Executive Vice President March 27, 1997
- -------------------------------------------------------- and Chief Financial
Robert P. Wynn Officer (principal
financial officer and
principal accounting
officer)

* Executive Vice President, March 27, 1997
- -------------------------------------------------------- Medical Director and
Michael J. Demaray, M.D. Director

* Chairman of the Board and March 27, 1997
- -------------------------------------------------------- Director
Thomas S. Roberts

* Director March 27, 1997
- --------------------------------------------------------
Timothy Kilpatrick, M.D.

* Director March 27, 1997
- --------------------------------------------------------
E. Roe Stamps, IV

*By: /s/ JAMES C. NEW
--------------------------------------------------
James C. New
Attorney-in-fact
</TABLE>

II-5
<PAGE> 192

AMERIPATH, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 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, 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
====== ======= ======= ======== =======
Year ended December 31, 1996:
Allowances for contractual, other
adjustments and uncollectible
accounts........................... $1,923 $18,441 $13,758 $(17,972) $16,150
====== ======= ======= ======== =======
</TABLE>

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

(1) Represents the allowances for contractual, other adjustments and
uncollectible accounts related to the Recent Acquisitions as defined in the
Prospectus.

S-1

<PAGE> 1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

AMERIPATH, INC.

ARTICLE I

The name of the corporation (hereinafter called the "Corporation") is
AMERIPATH, INC.

ARTICLE II

The address,including street number, street, city and county, of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of Newcastle, 19805; and the name of the
registered agent of the Corporation at such address is CORPORATION SERVICE
COMPANY.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Law").

ARTICLE IV

1. AUTHORIZED CAPITAL STOCK. The aggregate number of shares of all
classes of stock which the Corporation shall have authority to issue is
32,000,000 shares, consisting of (a) 30,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock") and (b) 2,000,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock").

2. PROVISIONS RELATING TO PREFERRED STOCK.

(a) GENERAL. The Preferred Stock may be issued from time to
time in one or more classes or series, the shares of each class or
series to have such designations and powers, preferences and rights,
and qualifications, limitations and restrictions thereof as are stated
and expressed herein and in the resolution or resolutions providing for
the issue of such class or series adopted by the Board of Directors
(the "Board") as hereinafter prescribed.

(b) PREFERENCES. Subject to the rights of the holders of the
Corporation's Common Stock, authority is hereby expressly granted to
and vested in the Board to

<PAGE> 2

authorize the issuance of the Preferred Stock from time to time in one
or more classes or series, to determine and take necessary proceedings
fully to effect the issuance and redemption of any such Preferred Stock
and, with respect to each class or series of the Preferred Stock, to
fix and state by the resolution or resolutions from time to time
adopted providing for the issuance thereof the following:

(i) whether or not the class or series is to have
voting rights, full or limited, or is to be without voting
rights;

(ii) the number of shares to constitute the class or
series and the designations thereof;

(iii) the preferences and relative, participating,
optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any,
with respect to any class or series;

(iv) whether or not the shares of any class or series
shall be redeemable and if redeemable the redemption price or
prices, and the time or times at which and the terms and
conditions upon which, such shares shall be redeemable and the
manner of redemption;

(v) whether or not the shares of a class or series
shall be subject to the operation of retirement or sinking
funds to be applied to the purchase or redemption of such
shares for retirement, and if such retirement or sinking fund
or funds be established, the annual amount thereof and the
terms and provisions relative to the operation thereof;

(vi) the dividend rate, whether dividends are payable
in cash, stock of the Corporation, or other property, the
conditions upon which and the times when such dividends are
payable, the preference to or the relation to the payment of
the dividends payable on any other class or classes or series
of stock, whether or not such dividend shall be cumulative or
noncumulative, and if cumulative, the date or dates from which
such dividends shall accumulate;

(vii) the preferences, if any, and the amounts
thereof that the holders of any class or series thereof shall
be entitled to receive upon the voluntary or involuntary
dissolution of, or upon any distribution of the assets of, the
Corporation;

(viii) whether or not the shares of any class or
series shall be convertible into, or exchangeable for, the
shares of any other class or classes or of any other series of
the same or any other class or classes of the Corporation's
capital stock and the conversion price or prices or ratio or
ratios or the rate or rates at which such conversion or
exchange may be made,

- 2 -

<PAGE> 3

with such adjustments, if any, as shall be stated and
expressed or provided for in such resolution or resolutions;
and

(ix) such other special rights and protective
provisions with respect to any class or series as the Board
may deem advisable.

The shares of each class or series of the Preferred Stock may vary from
the shares of any other series thereof in any or all of the foregoing respects.
The Board may increase the number of shares of Preferred Stock designated for
any existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The Board may decrease the number of shares of the
Preferred Stock designated for any existing class or series by a resolution,
subtracting from such series unissued shares of the Preferred Stock designated
for such class, or series, and the shares so subtracted shall become authorized,
unissued and undesignated shares of the Preferred Stock.

3. PROVISIONS RELATING TO THE COMMON STOCK.

(a) VOTING RIGHTS. Except as otherwise required by law or as
may be provided by the resolutions of the Board authorizing the
issuance of any class or series of the Preferred Stock, as hereinabove
provided, all rights to vote and all voting power shall be vested
exclusively in the holders of the Common Stock.

(b) DIVIDENDS. Subject to the rights of the holders of the
Preferred Stock, the holders of the Common Stock shall be entitled to
receive when, as and if declared by the Board, out of funds legally
available therefor, dividends payable in cash, stock or otherwise.

(c) LIQUIDATING DISTRIBUTIONS. Upon any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or
involuntary, and after the holders of the Preferred Stock shall have
been paid in full the amounts to which they shall be entitled (if any)
or a sum sufficient for such payment in full shall have been set aside,
the remaining net assets of the Corporation shall be distributed pro
rata to the holders of the Common Stock in accordance with their
respective rights and interests to the exclusion of the holders of the
Preferred Stock.

ARTICLE V

BYLAWS

In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware:

- 3 -

<PAGE> 4

A. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the Bylaws of the
Corporation.

B. Elections of Directors need not be by written ballot unless
the by-laws of the Corporation shall so provide.

C. The books of the Corporation may be kept at such place within
or without the State of Delaware as the Bylaws of the
Corporation may provide or as may be designated from time to
time by the Board of Directors of the Corporation.

D. Any action required or permitted to be taken at any meeting of
the Board of Directors, may be taken without a meeting only if
all of the Directors consent thereto in writing.

ARTICLE VI

LIMITATION OF LIABILITY

No director shall be personally liable to the Corporation or the
holders of shares of capital stock for monetary damages for breach of fiduciary
duty as a director, except (i) for any breach of the duty of loyalty of such
director to the Corporation or such holders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Law, or (iv) for any transaction from which
such director derives an improper personal benefit. No amendment to or repeal of
this provision shall apply to or have any effect on the liability or alleged
liability of any Director for or with respect to any acts or omissions of such
Director occurring prior to such amendment or repeal. If the Law of the
Corporation's state of incorporation is hereafter amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of this Corporation shall be eliminated or limited
to the fullest extent then permitted. No repeal or modification of this Article
VI shall adversely affect any right of or protection afforded to a director of
the Corporation existing immediately prior to such repeal or modification.

ARTICLE VII

INDEMNIFICATION

This Corporation shall indemnify and may advance expenses to its
officers and directors to the fullest extent permitted by law in existence
either now or hereafter in effect. Without limiting the generality of the
foregoing, the Bylaws may provide for indemnification and advancement of
expenses to officers, directors, employees and agents on such terms and
conditions as the Board of Directors may from time to time deem appropriate or
advisable.

- 4 -

<PAGE> 5

ARTICLE VIII

DIRECTORS

1. NUMBER AND TERM OF DIRECTORS. The Corporation's Board shall consist
of at least three directors, with the exact number to be fixed from time to time
in the manner provided in the Corporations's Bylaws. No decrease in the number
of directors shall have the effect of shortening the term of any incumbent
director. The Board shall be divided into three classes, Class I, Class II and
Class III. The number of directors elected to each class shall be as nearly
equal in number as possible. Each director in Class I shall be elected to an
initial term of one year, each director in Class II shall be elected to an
initial term of two years and each director in Class III shall be elected to an
initial term of three years, in each case and until his or her successor is duly
elected and qualified or until his or her earlier resignation, death or removal
from office. Upon the expiration of the initial terms of office for each class
of directors, the directors of each class shall be elected for a term of three
years to serve until their successors are duly elected and qualified or until
their earlier resignation, death or removal from office.

2. DIRECTOR VACANCIES. Whenever any vacancy on the Board shall occur
due to death, resignation, retirement, disqualification, removal, increase in
the number of directors, or otherwise, a majority of directors in office,
although less than a majority of the entire Board, may fill the vacancy or
vacancies for the balance of the unexpired term or terms, at which time a
successor or successors shall be duly elected by the stockholders and qualified.
The Board shall apportion any increase or decrease in directorship among the
classes as nearly equal in number as possible. Notwithstanding the provisions of
any other Article herein, only the remaining directors of the Corporation shall
have the authority, in accordance with the procedure stated above, to fill any
vacancy that exists on the Board.

3. REMOVAL. A director may only be removed from office prior to the
expiration of his term: (i) if he has been convicted of a felony or if he has
been adjudged by a court of competent jurisdiction to be liable for gross
negligence or misconduct in the performance of his duty to the Corporation and
such conviction or adjudications are no longer subject to direct appeal; (ii) by
an affirmative vote of at least two-thirds of the outstanding shares of all
classes of capital stock entitled to vote for the election of directors; or
(iii) by the vote of two-thirds of the directors in office.

4. AMENDMENTS. Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, this Article VIII shall
not be altered, amended or repealed except by an affirmative vote of the holders
of at least eighty percent (80%) of the combined voting power of the outstanding
shares of capital stock entitled to vote for the election of directors.

- 5 -

<PAGE> 6

ARTICLE IX

SPECIAL MEETINGS OF STOCKHOLDERS

Except as otherwise required by law and subject to the rights of the
holders of the Preferred Stock, special meetings of stockholders of the
Corporation may be called only by (i) the Chairman of the Board, (ii) the Board
pursuant to a resolution approved by a majority of the entire Board or (iii) the
Company's President. Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, this Article IX shall not
be altered, amended or repealed except by an affirmative vote of the holders of
at least eighty percent (80%) of the combined voting power of the outstanding
shares of all capital stock entitled to vote for the election of directors.

ARTICLE X

NO STOCKHOLDER ACTION WITHOUT A MEETING

Any action required or permitted to be taken by the stockholders of the
Corporation shall be taken at a duly called annual or special meting of such
holders and may not be taken by any consent in writing by such holders.
Notwithstanding anything contained in this Amended and Restated Certificate of
Incorporation to the contrary, this Article X shall not be altered, amended or
repealed except by an affirmative vote of the holders of at least eighty percent
(80%) of the combined voting power of the outstanding shares of all capital
stock entitled to vote for the election of directors.

ARTICLE XI

AMENDMENTS

Except as provided herein, from time to time any of the provisions of
this Amended and Restated Certificate of Incorporation may be amended, altered
or repealed, and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted in the manner and at the
time prescribed by said laws, and all rights at any time conferred upon the
stockholders of the Corporation by this Amended and Restated Certificate of
Incorporation are granted subject to the provisions of this Article.

- 6 -

<PAGE> 1

AMENDED AND RESTATED

BYLAWS

AMERIPATH, INC.

(A DELAWARE CORPORATION)

<PAGE> 2

TABLE OF CONTENTS
<TABLE>
<CAPTION>

PAGE
----
<S> <C>
ARTICLE 1 CERTIFICATE OF INCORPORATION ....................................... - 1 -
Section 1.1 Contents ................................................... - 1 -
Section 1.2 Certificate in Effect ...................................... - 1 -

ARTICLE 2 MEETINGS OF STOCKHOLDERS ........................................... - 1 -
Section 2.1 Place ...................................................... - 1 -
Section 2.2 Annual Meeting ............................................. - 2 -
Section 2.3 Special Meetings ........................................... - 2 -
Section 2.4 Notice of Meetings ......................................... - 3 -
Section 2.5 Affidavit of Notice ........................................ - 3 -
Section 2.6 Quorum ..................................................... - 3 -
Section 2.7 Voting Requirements ........................................ - 4 -
Section 2.8 Proxies and Voting ......................................... - 4 -
Section 2.9 No Stockholder Action Without Meeting ...................... - 4 -
Section 2.10 Stockholder List ........................................... - 5 -
Section 2.11 Record Date ................................................ - 5 -
Section 2.12 Advance Notice of Stockholder Proposed
Business at Annual Meeting.................................. - 6 -

ARTICLE 3 DIRECTORS .......................................................... - 8 -
Section 3.1 Number; Election and Term of Office ........................ - 8 -
Section 3.2 Duties ..................................................... - 9 -
Section 3.3 Compensation ............................................... - 9 -
Section 3.4 Reliance on Books .......................................... - 9 -
Section 3.6 Amendments ................................................. - 11 -
Section 4.1 Place ...................................................... - 12 -
Section 4.2 Annual Meeting ............................................. - 12 -
Section 4.3 Regular Meetings ........................................... - 12 -
Section 4.4 Special Meetings ........................................... - 12 -
Section 4.5 Quorum ..................................................... - 12 -
Section 4.6 Action Without Meeting ..................................... - 13 -
Section 4.7 Telephone Meetings ......................................... - 13 -

ARTICLE 5 COMMITTEES OF DIRECTORS ............................................ - 13 -
Section 5.1 Designation ................................................ - 13 -
Section 5.2 Records of Meetings ........................................ - 14 -

ARTICLE 6 NOTICES ............................................................ - 15 -
Section 6.1 Method of Giving Notice .................................... - 15 -
Section 6.2 Waiver ..................................................... - 15 -
</TABLE>

i
<PAGE> 3

<TABLE>
<S> <C> <C>
ARTICLE 7 OFFICERS ........................................................... - 15 -
Section 7.1 In General ................................................. - 15 -
Section 7.2 Annual Appointment ......................................... - 16 -
Section 7.3 Election of Other Officers ................................. - 16 -
Section 7.4 Salaries ................................................... - 16 -
Section 7.5 Term of Office ............................................. - 16 -
Section 7.6 Duties of Chairman of the Board, Chief
Executive Officer, Chief Operating
Officer, Chief Financial Officer,
Medical Director and President ............................. - 16 -
Section 7.7 The Chairman of the Board of Directors ..................... - 16 -
Section 7.8 The Chief Executive Officer ................................ - 17 -
Section 7.9 The President .............................................. - 17 -
Section 7.10 The Chief Operating Officer ................................ - 18 -
Section 7.11 The Chief Financial Officer ................................ - 18 -
Section 7.12 The Medical Director ....................................... - 18 -
Section 7.13 Duties of Vice-President ................................... - 19 -
Section 7.14 Duties of Secretary ........................................ - 19 -
Section 7.15 Duties of Assistant Secretary .............................. - 19 -
Section 7.16 Duties of Treasurer ........................................ - 20 -
Section 7.17 Duties of Assistant Treasurer .............................. - 20 -

ARTICLE 8 RESIGNATIONS, REMOVALS AND VACANCIES ............................... - 21 -
Section 8.1 Directors .................................................. - 21 -
Resignations ............................................... - 21 -
Removals ................................................... - 21 -
Vacancies .................................................. - 21 -
Section 8.2 Officers ................................................... - 21 -
Section 8.3 Amendments ................................................. - 22 -

ARTICLE 9 CERTIFICATE OF STOCK ............................................... - 22 -
Section 9.1 Issuance of Stock .......................................... - 22 -
Section 9.2 Right to Certificate; Form ................................. - 22 -
Section 9.3 Facsimile Signature ........................................ - 23 -
Section 9.4 Lost Certificates .......................................... - 23 -
Section 9.5 Transfer of Stock .......................................... - 24 -
Section 9.6 Registered Stockholders .................................... - 24 -

ARTICLE 10 INDEMNIFICATION ................................................... - 24 -
Section 10.1 Third Party Actions ........................................ - 24 -
Section 10.2 Derivative Actions ......................................... - 25 -
Section 10.3 Expenses ................................................... - 26 -
Section 10.4 Authorization .............................................. - 26 -
Section 10.5 Advance Payment of Expenses ................................ - 26 -
Section 10.6 Non-Exclusiveness .......................................... - 27 -

</TABLE>

ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 10.7 Insurance .................................................. - 27 -
Section 10.8 Constituent Corporations ................................... - 27 -
Section 10.9 Additional Indemnification ................................. - 28 -

ARTICLE 11 EXECUTION OF PAPERS ............................................... - 28 -

ARTICLE 12 FISCAL YEAR ....................................................... - 28 -

ARTICLE 13 SEAL .............................................................. - 29 -

ARTICLE 14 OFFICES ........................................................... - 29 -

ARTICLE 15 AMENDMENTS ........................................................ - 29 -

</TABLE>

iii

<PAGE> 5

AMERIPATH, INC.

BYLAWS

ARTICLE 1

CERTIFICATE OF INCORPORATION

Section 1.1 CONTENTS. The name, location of principal office and
purposes of the Corporation shall be as set forth in its Certificate of
Incorporation. These Bylaws, the powers of the Corporation and of its Directors
and stockholders, and all matters concerning the conduct and regulation of the
business of the Corporation shall be subject to such provisions in regard
thereto, if any, as are set forth in said Certificate of Incorporation. The
Certificate of Incorporation is hereby made a part of these Bylaws.

Section 1.2 CERTIFICATE IN EFFECT. All references in these Bylaws to
the Certificate of Incorporation shall be construed to mean the Certificate of
Incorporation of the Corporation as from time to time amended, including (unless
the context shall otherwise require) all certificates and any agreement of
consolidation or merger filed pursuant to the Delaware General Corporation Law,
as amended.

ARTICLE 2

MEETINGS OF STOCKHOLDERS

Section 2.1 PLACE. All meetings of the stockholders may be held at such
place either within or without the State of Delaware as shall be designated from
time to time by the Board of Directors, the Chairman of the Board of Directors
or the President and stated in the notice of the meeting or in any duly executed
waiver of notice thereof.

<PAGE> 6

Section 2.2 ANNUAL MEETING. Annual meetings of stockholders, shall be
held on the second Tuesday of April in each year, if not a legal holiday, and,
if a legal holiday, then on the next secular day following, at 10:00 A.M., or at
such other date and time as shall be designated from time to time by the Board
of Directors, the Chairman of the Board of Directors or the President and stated
in the notice of the meeting. If such annual meeting has not been held on the
day herein provided therefor, a special meeting of the stockholders in lieu of
the annual meeting may be held, and any business transacted or elections held at
such special meeting shall have the same effect as if transacted or held at the
annual meeting, and in such case all references in these Bylaws, except in this
Section 2.2, to the annual meeting of the stockholders shall be deemed to refer
to such special meeting.

Section 2.3 SPECIAL MEETINGS. Except as otherwise required by law and
subject to the rights of the holders of the Preferred Stock, special meetings of
stockholders of the Corporation may be called only by (i) the Board of Directors
pursuant to a resolution approved by a majority of the entire Board, (ii) the
Corporation's President or (iii) the Chairman of the Board of the Corporation.
Special meetings of the stockholders may be held at such time and date, and at
such place as shall be designated by the Board of Directors and set forth in the
notice of meeting required pursuant to Section 2.4. Notwithstanding anything
contained in these Bylaws to the contrary, this Section 2.3 shall not be
altered, amended or repealed except by an affirmative vote of the holders of at
least eighty percent (80%) of the combined voting power of the outstanding
shares of all capital stock entitled to vote for the election of directors. Only
such business as is set forth in the notice of a special meeting may be
transacted at such Special Meeting.

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<PAGE> 7

Section 2.4 NOTICE OF MEETINGS. A written notice of all meetings of
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the special meeting is
called, shall be given to each stockholder entitled to vote at such meeting.
Except as otherwise provided by law, such notice shall be given not less than
ten nor more than sixty days before the date of the meeting. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.

Section 2.5 AFFIDAVIT OF NOTICE. An affidavit of the Secretary or an
Assistant Secretary or the transfer agent of the Corporation that notice of a
stockholders meeting has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.

Section 2.6 QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented by proxy at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, except as hereinafter provided, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

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<PAGE> 8

Section 2.7 VOTING REQUIREMENTS. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of any applicable statute or of the Certificate of Incorporation, a different
vote is required in which case such express provision shall govern and control
the decision of such question.

Section 2.8 PROXIES AND VOTING. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period. Persons holding stock in a fiduciary capacity shall be entitled
to vote the shares so held, and persons whose stock is pledged shall be entitled
to vote the pledged shares, unless in the transfer by the pledgor on the books
of the Corporation he shall have expressly empowered the pledgee to vote said
shares, in which case only the pledgee, or his proxy, may represent and vote
such shares. Shares of the capital stock of the Corporation owned by the
Corporation shall not be voted, directly or indirectly.

Section 2.9 NO STOCKHOLDER ACTION WITHOUT MEETING. Any action required
or permitted to be taken by the stockholders of the Corporation shall be taken
at a duly called annual or special meeting of such holders and may not be taken
by any consent in writing by such holders. Notwithstanding anything contained in
these Bylaws to the contrary, this Section 2.9 shall not be altered, amended or
repealed except by an affirmative vote of the holders of at

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<PAGE> 9

least eighty percent (80%) of the combined voting power of the outstanding
shares of all capital stock entitled to vote for the election of directors.

Section 2.10 STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The original or duplicate stock ledger shall be the only evidence as to
who are the stockholders entitled to examine such list, the stock ledger or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.

Section 2.11 RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than

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<PAGE> 10

sixty days prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting. If no record date is fixed by
the Board of Directors:

(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.

(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed.

(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.

Section 2.12 ADVANCE NOTICE OF STOCKHOLDER PROPOSED BUSINESS AT ANNUAL
MEETING. At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice

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<PAGE> 11

thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 120 days nor more
than 150 days prior to the first anniversary of the date of the Corporation'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 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made, whichever
first occurs. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such business.

Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 12; provided, however, that nothing in this
Section 12 shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting in accordance with said
procedure.

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<PAGE> 12

The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 12, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.

Notwithstanding anything contained in the Bylaws to the contrary, this
Section 12 shall not be altered, amended or repealed except by an affirmative
vote of the holders of at least eighty percent (80%) of the combined voting
power of the outstanding shares of all capital stock entitled to vote for the
election of directors.

ARTICLE 3

DIRECTORS

Section 3.1 NUMBER; ELECTION AND TERM OF OFFICE. The Corporation's
Board shall consist of not less than three nor more than twelve members, with
the exact number to be fixed from time to time in accordance with a resolution
adopted by a majority of the entire Board. No decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. The Board shall be divided into three classes. The number of directors
elected to each class shall be as nearly equal in number as possible. Each
director in the first class shall be elected to an initial term expiring at the
next ensuing annual meeting of stockholders, each director in the second class
shall be elected to an initial term expiring at the annual meeting of
stockholders held one year thereafter and each director in the third class shall
be elected to an initial term expiring at the annual meeting of stockholders
held one year thereafter, in each case until his or her successor is duly
elected and qualified or until his or her earlier resignation, death,

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<PAGE> 13

incapacity or removal from office. Upon the expiration of the initial terms of
office for each class of directors, the successor directors of each class shall
be elected for a full term of three years, to serve until their successors are
duly elected and qualified or until their earlier resignation, death, incapacity
or removal from office. The Board shall apportion any increase or decrease in
the number of directors among the classes as nearly equal in number as possible.

Section 3.2 DUTIES. The business of the Corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.

Section 3.3 COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as Directors. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.

Section 3.4 RELIANCE ON BOOKS. A member of the Board of Directors or a
member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or reports made to the Corporation by any of its officers, or
by an independent certified public accountant, or by an

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<PAGE> 14

appraiser selected with reasonable care by the Board of Directors or by any
committee, or in relying in good faith upon other records of the Corporation.

Section 3.5 STOCKHOLDER NOMINATIONS FOR DIRECTOR CANDIDATES. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of stockholders
by or at the direction of the Board of Directors by any nominating committee or
person appointed by the Board of Directors or by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 3.5. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation,
not less than 120 days nor more than 150 days prior to the first anniversary of
the date of the Corporation'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 10th day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address and residence address of the person,

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<PAGE> 15

(ii) the principal occupation or employment of the persons, (iii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the person, (iv) the consent of each nominee to serve as a director of
the Corporation if so elected, and (v) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Rule 14a under the Securities Exchange Act of
1934, as amended; and (b) as to the stockholder giving the notice, (i) the name
and record address of that stockholder, and (ii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.

The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.

Section 3.6 AMENDMENTS. Notwithstanding anything contained in the
Bylaws to the contrary, this Article 3 shall not be altered, amended or repealed
except by an affirmative vote of the holders of at least eighty percent (80%) of
the combined voting power of the outstanding shares of all capital stock
entitled to vote for the election of directors.

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<PAGE> 16

ARTICLE 4

MEETINGS OF THE BOARD OF DIRECTORS

Section 4.1 PLACE. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.

Section 4.2 ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders or any special meeting held in lieu thereof, and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting.

Section 4.3 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.

Section 4.4 SPECIAL MEETINGS. Special meetings of the Board may be
called by the President on two days' notice to each Director either personally
or by mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
Directors unless the Board consists of only one Director, in which case special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of the sole Director.

Section 4.5 QUORUM. At all meetings of the Board a majority of the
Directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the

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<PAGE> 17

Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.

Section 4.6 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.

Section 4.7 TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.

ARTICLE 5

COMMITTEES OF DIRECTORS

Section 5.1 DESIGNATION.

(a) The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.

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<PAGE> 18

(b) In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

(c) Any such committee, to the extent provided in the
resolution of the Board of Directors designating the committee, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.

Section 5.2 RECORDS OF MEETINGS. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.

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ARTICLE 6

NOTICES

Section 6.1 METHOD OF GIVING NOTICE. Whenever, under any provision of
the law or of the Certificate of Incorporation or of these Bylaws, notice is
required to be given to any Director or stockholder, such notice shall be given
in writing by the Secretary or the person or persons calling the meeting by
leaving such notice with such Director or stockholder at his residence or usual
place of business or by mailing it addressed to such Director or stockholder, at
his address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Notice to Directors may
also be given by telegram.

Section 6.2 WAIVER. Whenever any notice is required to be given under
any provision of law or of the Certificate of Incorporation or of these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE 7

OFFICERS

Section 7.1 IN GENERAL. The officers of the Corporation shall be chosen
by the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, a
Chief Executive Officer, a Chief Financial Officer,

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<PAGE> 20

a Chief Operating Officer, a Medical Director and one or more Vice Presidents,
Executive Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide.

Section 7.2 ANNUAL APPOINTMENT. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a President, a
Secretary and a Treasurer.

Section 7.3 ELECTION OF OTHER OFFICERS. The Board of Directors may
appoint such other officers and agents as it shall deem appropriate who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.

Section 7.4 SALARIES. The salaries of all officers and agents of the
Corporation may be fixed by the Board of Directors.

Section 7.5 TERM OF OFFICE. The officers of the Corporation shall hold
office until their successors are chosen and qualify or until their earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time in the manner specified in Section 8.2.

Section 7.6 DUTIES OF CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,
CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER, MEDICAL DIRECTOR AND
PRESIDENT. The following officers of the Corporation, to the extent appointed by
the Board of Directors in accordance with these By-Laws, shall have and may
exercise the following respective duties and powers:

Section 7.7 THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors (the "Chairman"), if any, shall make his counsel available to
the other officers of the Corporation, shall be authorized to sign stock
certificates on behalf of the Corporation and shall

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<PAGE> 21

preside at all meetings of the Directors at which he is present, and, in the
absence of the Chief Executive Officer, shall preside at all meetings of the
stockholders, and shall also have such other or further duties and powers as may
from time to time be conferred upon him by the Board of Directors.

Section 7.8 THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of
the Corporation shall be the principal executive officer of the corporation,
with general executive powers and duties regarding the Corporation. The Chief
Executive Officer shall preside at all meetings of stockholders and, if he is a
Director, at all meetings of the Board of Directors if there shall be no
Chairman or in the absence of the Chairman, and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The Chief
Executive Officer shall also have and may exercise such other or further duties
and powers as may from time to time be conferred upon, or assigned to, him by
the Board of Directors. Absent a Board of Director resolution to the contrary,
the President shall be the Chief Executive Officer of the Corporation.

Section 7.9 THE PRESIDENT. The President shall be the chief
administrative officer of the Corporation and shall have powers and duties
consistent with such position. The President shall execute bonds, mortgages,
loans and other contracts requiring a seal, under the seal of the Corporation,
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly delegated
by the Board of Directors to some other officer or agent of the Corporation. The
President shall also have and may exercise such other or further duties and
powers as may from time to time be conferred upon, or assigned to, him by the
Chief Executive Officer, if any, or the Board of Directors.

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<PAGE> 22

Absent a Board of Director resolution to the contrary, the President shall be
the Chief Executive Officer, Chief Operating Officer of the Corporation.

Section 7.10 THE CHIEF OPERATING OFFICER. The Chief Operating Officer
of the Corporation shall be the principal officer responsible for the operations
of the Corporation, and shall have general and active management of the
day-to-day business, operations and affairs of the Corporation. The Chief
Operating Officer shall also have and may exercise such other or further duties
and powers as may from time to time be conferred upon, or assigned to, him by
the Chief Executive Officer, if any, or the Board of Directors. Absent a Board
of Director resolution to the contrary, the President shall be the Chief
Operating Officer of the Corporation.

Section 7.11 THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
of the Corporation shall be the principal officer responsible for the financial
and accounting systems of the Corporation, and shall have general and active
responsibility of the day-to-day financial systems and controls of the
Corporation. The Chief Financial Officer shall also have and may exercise such
other or further duties and powers as may from time to time be conferred upon,
or assigned to, him by the Chief Executive Officer, if any, or the Board of
Directors.

Section 7.12 THE MEDICAL DIRECTOR. The Medical Director of the
Corporation shall be the principal officer of the Corporation responsible for
the medical and health care aspects of the Corporation, and shall have general
and active responsibility with respect to all medical and health care decisions
of the Corporation. The Medical Director shall also have and may exercise such
other or further duties and powers as may from time to time be conferred upon,
or assigned to, him by the Chief Executive Officer, if any, or the Board of
Directors.

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<PAGE> 23

Section 7.13 DUTIES OF VICE-PRESIDENT. In the absence of the President
or in the event of his inability or refusal to act, the Vice-President (or in
the event there be more than one Vice- President, the Vice-Presidents in the
order designated by the Directors, or in the absence of any designation, then in
the order of their election) shall perform the duties of the President not
otherwise conferred upon the Chairman of the Board, if any, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.

Section 7.14 DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors, except as otherwise provided in these By-Laws, and shall perform such
other duties as may be prescribed by the Board of Directors or President, under
whose supervision he shall be. He shall have charge of the stock ledger (which
may, however, be kept by any transfer agent or agents of the Corporation under
his direction) and of the corporate seal of the Corporation.

Section 7.15 DUTIES OF ASSISTANT SECRETARY. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the

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<PAGE> 24

powers of the Secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.

Section 7.16 DUTIES OF TREASURER. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of this office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.

Section 7.17 DUTIES OF ASSISTANT TREASURER. The Assistant Treasurer, or
if there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the Treasurer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.

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<PAGE> 25

ARTICLE 8

RESIGNATIONS, REMOVALS AND VACANCIES

Section 8.1 DIRECTORS.

(a) Resignations. Any Director may resign at any time by
giving written notice to the Board of Directors or the President or the
Secretary. Such resignation shall take effect at the time specified therein; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.

(b) REMOVALS. Subject to any provisions of the Certificate of
Incorporation, the holders of stock entitled to vote for the election of
Directors may, at any meeting called for the purpose, by vote of a majority of
the shares of such stock outstanding, remove any Director or the entire Board of
Directors with or without cause and fill any vacancies thereby created. This
Section 8.1(b) may not be altered, amended or repealed except by the holders of
a majority of the shares of stock issued and outstanding and entitled to vote
for the election of the Directors.

(c) VACANCIES. Vacancies occurring in the office of Director
and newly created Directorships resulting from any increase in the authorized
number of Directors shall be filled by a majority of the Directors then in
office, though less than a quorum, unless previously filled by the stockholders
entitled to vote for the election of Directors, and the Directors so chosen
shall hold office subject to the Bylaws until the next annual election and until
their successors are duly elected and qualify or until their earlier resignation
or removal. If there are no Directors in office, then an election of Directors
may be held in the manner provided by statute.

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<PAGE> 26

Section 8.2 OFFICERS. Any officer may resign at any time by giving
written notice to the Board of Directors or the President or the Secretary. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. The Board of Directors may, at any meeting
called for the purpose, by vote of a majority of their entire number, remove
from office any officer of the Corporation or any member of a committee, with or
without cause. Any vacancy occurring in the office of President, Secretary or
Treasurer shall be filled by the Board of Directors and the officers so chosen
shall hold office subject to the By-Laws for the unexpired term in respect of
which the vacancy occurred and until their successors shall be elected and
qualify or until their earlier resignation or removal.

Section 8.3 AMENDMENTS. Notwithstanding anything contained in the
Bylaws to the contrary, this Article VIII shall not be altered, amended or
repealed except by an affirmative vote of the holders of at least eighty percent
(80%) of the combined voting power of the outstanding shares of all capital
stock entitled to vote for the election of directors.

ARTICLE 9

CERTIFICATE OF STOCK

Section 9.1 ISSUANCE OF STOCK. The Directors may, at any time and from
time to time, if all of the shares of capital stock which the Corporation is
authorized by its Certificate of Incorporation to issue have not been issued,
subscribed for, or otherwise committed to be issued, issue or take subscriptions
for additional shares of its capital stock up to the amount authorized in its
Certificate of Incorporation. Such stock shall be issued and the consideration
paid therefor in the manner prescribed by law.

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<PAGE> 27

Section 9.2 RIGHT TO CERTIFICATE; FORM. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation; provided that the Directors may provide by one or
more resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertified shares. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid shares, the total amount of the
consideration to be paid therefor, and the amount paid thereon shall be
specified.

Section 9.3 FACSIMILE SIGNATURE. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.

Section 9.4 LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct

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<PAGE> 28

as indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.

Section 9.5 TRANSFER OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.

Section 9.6 REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.

ARTICLE 10

INDEMNIFICATION

Section 10.1 THIRD PARTY ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines

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<PAGE> 29

and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

Section 10.2 DERIVATIVE ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of

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<PAGE> 30

liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.

Section 10.3 EXPENSES. To the extent that a Director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.

Section 10.4 AUTHORIZATION. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.

Section 10.5 ADVANCE PAYMENT OF EXPENSES. Expenses incurred by an
officer or Director in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of such officer or
Director to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the Corporation as authorized in this Article
10. Such expenses

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<PAGE> 31

incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.

Section 10.6 NON-EXCLUSIVENESS. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

Section 10.7 INSURANCE. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article 10.

Section 10.8 CONSTITUENT CORPORATIONS. The Corporation shall have power
to indemnify any person who is or was a director, officer, employee or agent of
a constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who is or was a Director, officer, employee or agent of
the Corporation, or is or

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<PAGE> 32

was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise.

Section 10.9 ADDITIONAL INDEMNIFICATION. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.

ARTICLE 11

EXECUTION OF PAPERS

Except as otherwise provided in these Bylaws or as the Board of
Directors may generally or in particular cases otherwise determine, all deeds,
leases, transfers, contracts, bonds, notes, checks, drafts and other instruments
authorized to be executed on behalf of the Corporation shall be executed by the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Secretary or Treasurer.

ARTICLE 12

FISCAL YEAR

The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.

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<PAGE> 33

ARTICLE 13

SEAL

The Corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.

ARTICLE 14

OFFICES

In addition to its principal office, the Corporation may have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.

ARTICLE 15

AMENDMENTS

The Board shall have the power to adopt, amend or repeal the Bylaws or
any part hereof. Certain provisions of the Bylaws, as stated herein, may not be
altered, amended or repealed except by an affirmative vote of the holders of at
least eighty percent (80%) of the combined voting power of the outstanding
shares of all capital stock entitled to vote for the election of directors.
Except for such provisions requiring an eighty percent (80%) vote to alter,
amend or repeal, the Bylaws may be altered, amended or repealed, and new bylaws
may be adopted, by the stockholders upon the affirmative vote of at least a
majority of the outstanding shares of capital stock of the Corporation entitled
to vote at a stockholders' meeting duly called for such purpose. Notwithstanding
anything contained in these Bylaws to the contrary, this Article 15 shall not be
altered, amended or repealed except by an affirmative vote of the holders of at
least eighty

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<PAGE> 34

percent (80%) of the combined voting power of the outstanding shares of all
capital stock entitled to vote for the election of directors.

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<PAGE> 1
[LETTERHEAD OF GREENBERG TRAURIG]

March 27, 1997

AmeriPath, Inc.
7289 Garden Road, Suite 200
Riviera Beach, FL 33404

Re: PUBLIC OFFERING OF COMMON STOCK

Gentlemen:

We have acted as special counsel to AmeriPath, Inc., a Delaware
corporation (the "Company"), in connection with its filing with the Securities
and Exchange Commission of a Registration Statement on Form S-1 (File No.
333-17065, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"). The Registration Statement relates to the sale by the
Company and certain selling stockholders of 5,700,000 and 500,000 shares,
respectively, of the Company's Common Stock, par value $.01 per share
(collectively, the "Shares").
<PAGE> 2
In connection with our rendering of this opinion, we have examined and
relied upon the original or a copy, certified to our satisfaction, of: (i) the
Amended and Restated Certificate of Incorporation (the "Amended Certificate")
and the Amended and Restated Bylaws of the Company (the "Amended Bylaws"); (ii)
resolutions of the Board of Directors of the Company authorizing the offering
and the issuance of the Shares and related matters; (iii) the Registration
Statement and exhibits thereto; and (iv) such other documents and instruments as
we have deemed necessary for the expression of opinions contained herein.

We are of the opinion that the Shares, when issued and delivered in
accordance with the Company's Amended and Restated Certificate of Incorporation
and the Underwriting Agreement filed as Exhibit 1.1 to the Registration
Statement, will be duly and validly authorized and issued and will be fully paid
and nonassessable.

The opinion expressed above is based upon and subject to our assumption
that the Amended Certificate, which has been approved by the Company's Board of
Directors and Stockholders prior to the date hereof, has been filed with and
accepted by the Secretary of State of Delaware.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Business -
Government Regulation" and "Legal Matters" in the Prospectus forming a part of
the Registration Statement.

Sincerely,

GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES

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

We consent to the use in this Amendment No. 6 to Registration Statement No.
333-17065 of AmeriPath, Inc. on Form S-1 of our report dated March 6, 1997,
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 of E.G. Poulos, M.D., M.J. Demaray, M.D. and A.P.
Kowalczyk, M.D., P.A. (the "Predecessor") as of December 31, 1992 and 1993, and
the related statements of income, stockholders' equity, and cash flows for the
years ended December 31, 1992 and 1993 (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 years
ended December 31, 1992 and 1993, 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

March 27, 1997

<PAGE> 1
EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 6 to Registration Statement No.
333-17065 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

March 27, 1997

<PAGE> 1
EXHIBIT 23.4

INDEPENDENT AUDITORS' CONSENT

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Orlando, Florida

March 27, 1997

<PAGE> 1
EXHIBIT 23.5

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 6 to Registration Statement No.
333-17065 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

March 27, 1997

<PAGE> 1
EXHIBIT 23.6

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 6 to Registration Statement No.
333-17065 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

March 27, 1997

<PAGE> 1

EXHIBIT 23.7

LEGAL EXPERT'S CONSENT

We consent to the reference to our firm under the heading "Business--
Government Regulation" in the Registration Statement of AmeriPath, Inc. on
Form S-1.

/s/ Jenkens & Gilchrist

JENKENS & GILCHRIST, A PROFESSIONAL CORPORATION
Dallas, Texas

March 26, 1997

<PAGE> 1

EXHIBIT 23.8

LEGAL EXPERT'S CONSENT

We consent to the reference to our firm under the heading "Business--
Government Regulation" in the Registration Statement of AmeriPath, Inc. on
Form S-1.

/s/ Bricker & Eckler

BRICKER & ECKLER
Columbus, Ohio

March 26, 1997

<PAGE> 1

EXHIBIT 23.9

LEGAL EXPERT'S CONSENT

We consent to the reference to our firm under the heading "Business--Government
Regulation" in the Registration Statement of AmeriPath, Inc. on Form S-1.

/s/ Wyatt, Tarrant & Combs

WYATT, TARRANT & COMBS
Louisville, Kentucky

March 27, 1997