SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMERIPATH, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
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AMERIPATH, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1999
To the Stockholders of AmeriPath, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders
(the "Annual Meeting") of AmeriPath, Inc., a Delaware corporation (the
"Company"), will be held at the Palm Beach Gardens Marriott Hotel, 4000 RCA
Boulevard, Palm Beach Gardens, Florida, at 11:00 a.m., local time, on Wednesday,
May 5, 1999, for the following purposes:
(1) To elect two (2) members to the Company's Board of
Directors to hold office until the 2002 Annual Meeting or until their
successors are duly elected and qualified;
(2) To consider and vote upon a proposal to approve the
Company's Amended and Restated 1996 Stock Option Plan; and
(3) To transact such other business as may properly come
before the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on March 26,
1999 as the record date for determining those stockholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
Robert P. Wynn
SECRETARY
Riviera Beach Florida
March 31, 1999
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE ENCOURAGED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON AT THE MEETING.
<PAGE>
1999 ANNUAL MEETING OF STOCKHOLDERS
OF
AMERIPATH, INC.
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PROXY STATEMENT
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TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of AmeriPath, Inc., a Delaware corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), for use at the 1999 Annual Meeting of
Stockholders of the Company to be held at the Palm Beach Gardens Marriott Hotel,
4000 RCA Boulevard, Palm Beach Gardens, Florida, at 11:00 a.m., local time, on
Wednesday, May 5, 1999, and at any adjournments or postponements thereof (the
"Annual Meeting").
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is March 31, 1999. Stockholders
should review the information in this Proxy Statement together with the
Company's Annual Report to Stockholders for the year ended December 31, 1998
which accompanies this Proxy Statement. 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.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in doing so.
<PAGE>
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the Company's stockholders will consider and
vote upon the following matters:
(1) To elect two (2) members to the Company's Board of
Directors to hold office until the 2002 Annual Meeting or until their
successors are duly elected and qualified;
(2) To consider and vote upon a proposal to approve the
Company's Amended and Restated 1996 Stock Option Plan (the "Stock
Option Plan"); and
(3) To transact such other business as may properly come
before the Annual Meeting and any adjournments or postponements
thereof.
If you sign and return the enclosed proxy, the proxies named therein
will have authority to vote your shares of AmeriPath Common Stock at the Annual
Meeting as indicated therein. Unless you indicate otherwise on the enclosed
proxy, all shares of AmeriPath Common Stock represented by valid proxies
(including your shares) received pursuant to this solicitation (and which have
not been revoked in accordance with the procedures set forth herein) will be
voted (a) for the election of the respective nominees for director named below,
(b) in favor of the proposal to approve the Company's Stock Option Plan, and (c)
by the proxies in their discretion upon any other proposals that may properly
come before the meeting. In the event a stockholder specifies a different choice
by means of the enclosed proxy, his shares will be voted in accordance with the
specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on March 26, 1999
as the record date (the "Record Date") for determining stockholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of March 12,
1999, there were 21,085,891 shares of Common Stock issued and outstanding, all
of which are entitled to be voted at the Annual Meeting. Each share of Common
Stock is entitled to one vote on each matter submitted to stockholders for
approval at the Annual Meeting. Stockholders do not have the right to cumulate
their votes for directors.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum for stockholders to take action at the meeting.
If a quorum is present at the Annual Meeting, the nominees for director shall be
elected by a plurality of the votes of the shares present in person or by proxy
at the Annual Meeting and entitled to vote on the election of directors. The
affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting will be required for
approval of the proposal to approve the Company's Stock Option Plan. If less
than a majority of the outstanding shares entitled to vote are represented at
the Annual Meeting, a majority of the shares so represented may adjourn the
Annual Meeting to another date, time or place.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote at the Annual Meeting and
will be counted as votes cast at the Annual Meeting, but will not be counted as
votes cast for or against any given matter.
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Shares represented by proxies reflecting abstentions will be considered
as shares present and entitled to vote for purposes of determining the presence
of a quorum and will be counted as votes cast for purposes of determining the
outcome of any matter submitted to the shareholders for a vote, but will not be
counted as votes "for" or "against" any matter subject to the abstention. The
inspectors of election will treat shares referred to as "broker or nominee
non-votes" (shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or persons entitled to vote and the
broker or nominee does not have discretionary voting power on a particular
matter) as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. For purposes of determining the outcome of
any matter as to which the proxies reflect broker or nominee non-votes, shares
represented by such proxies will be treated as not present and not entitled to
vote on that subject matter and therefore will not be considered by the
inspectors of election when counting votes cast on the matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters). Accordingly, broker or nominee non-votes will not
have the same effect as a vote against the election of any director or against
the proposal to approve the Company's Stock Option Plan. Abstentions will not
have the same effect as a vote against the election of any director, but
abstentions will have the same effect as a vote against the proposal to approve
the Stock Option Plan.
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BENEFICIAL SECURITY OWNERSHIP
The following table sets forth, as of March 12, 1999, information with
respect to the beneficial ownership of the Company's Common Stock by (i) the
Company's Chief Executive Officer and each of the other "Named Executive
Officers" (as defined below in "Executive Compensation--Summary Compensation
Table"), (ii) each director of the Company, (iii) all directors and executive
officers of the Company as a group and (iv) each holder of five percent (5%) or
more of the Company's outstanding shares of Common Stock. The Company is not
aware of any beneficial owner of more than five percent of the outstanding
shares of Common Stock other than as set forth in the following table.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OF BENEFICIAL OWNER (1) OWNED (2) SHARES
- - ---------------------------- ------------ -----------
<S> <C> <C>
Summit (3)................................................................... 1,785,776 8.5%
T. Rowe Price Associates, Inc. (4)........................................... 2,097,654 9.9%
James C. New (5)............................................................. 255,014 1.2%
Alan Levin, M.D.(6).......................................................... 57,200 *
Leslie B. Rosen, M.D. (7).................................................... 73,000 *
Robert P. Wynn (8)........................................................... 154,400 *
Gary A. Davis (9)............................................................ 1,400 *
Timothy M. Kilpatrick, M.D.(10).............................................. 2,925 *
Thomas S. Roberts (3) ....................................................... 1,785,776 8.5%
C. Arnold Renschler, M.D. (11)............................................... 3,000 *
E. Roe Stamps, IV (3) ....................................................... 1,785,776 8.5%
All directors and executive officers as a group (10 persons) (12)............ 2,397,091 11.2%
</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 21,085,891 shares of Common Stock outstanding as of March 12,
1999. Pursuant to the rules of the Securities and Exchange Commission,
shares of Common Stock which a person had the right to acquire within
60 days pursuant to the exercise of stock options or the conversion of
a convertible security are deemed to be outstanding for the purpose of
computing the percentage ownership of such person but are not deemed
outstanding for the purpose of computing the percentage ownership of
any other person.
3. Includes 1,254,547, 11,922 and 519,307 shares of Common Stock held by
Summit Ventures III, L.P., Summit Investors II, L.P. and Summit
Subordinated Debt Fund, L.P. (collectively, "Summit"), respectively,
each of which is a limited partnership. Summit Partners III, L.P. is
the general partner of Summit Ventures III, L.P.,. and Summit Partners
SD, L.P. is the general partner of Summit Subordinated Debt Fund, L.P.
Stamps, Woodsum & Co. III is the general partner of Summit Partners
III, L.P. and Summit Partners SD, L.P.
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Thomas S. Roberts is a director of the Company and is a General Partner
of Stamps, Woodsum & Co. III and Summit Investors II, L.P. E. Roe
Stamps, IV is a director of the Company and is Managing General Partner
of Stamps, Woodsum & Co. III and Summit Investors II, L.P. Mr. Roberts
and Mr. Stamps both disclaim beneficial ownership of all such shares of
Common Stock. The address of Summit and Messrs. Roberts and Stamps is
600 Atlantic Avenue, Boston, Massachusetts 02210. This disclosure of
Summit's beneficial ownership is based solely upon information set
forth in Summit's Schedule 13G dated February 10, 1999.
4. Represents shares beneficially owned by T. Rowe Price Associates, Inc.
("Price"), as to which Price has sole voting power with respect to
397,454 of such shares and sole dispositive power with respect to all
such shares. The address of Price is 100 E. Pratt Street, Baltimore,
Maryland 21202. This disclosure of Price's beneficial ownership is
based solely upon information set forth in Price's Schedule 13G, as
amended.
5. Includes 216,007 shares subject to stock options which are exercisable
or become exercisable within 60 days. Does not include 184,004 shares
subject to presently unexercisable stock options.
6. Includes 7,200 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 41,600 shares
subject to presently unexercisable stock options.
7. Includes 5,000 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 20,000 shares
subject to presently unexercisable stock options. As of February 24,
1999, Dr. Rosen remains as an employed physician of the Company, but
was no longer an executive officer the Company.
8. Includes 150,400 shares subject to stock options which are exercisable
or become exercisable within 60 days. Does not include 63,200 shares
subject to presently unexercisable options.
9. Includes 1,400 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 10,600 shares
subject to presently unexercisable stock options.
10. Includes 1,000 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 4,000 shares
subject to presently unexercisable stock options.
11. Includes 1,000 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 4,000 shares
subject to presently unexercisable stock options.
12. In addition to the shares beneficially owned by officers and directors
named in the table above (see footnotes 3, 5, 6, 8, 9, 10 and 11), the
shares indicated include 137,376 shares beneficially owned by executive
officers of AmeriPath who are not named in the table above, of which
137,176 shares are outstanding and 200 shares are subject to stock
options which are exercisable or become exercisable within 60 days.
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<PAGE>
ELECTION OF DIRECTORS; NOMINEES
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors constituting the Company's Board of Directors shall not be
less than three nor more than twelve, as determined from time to time by
resolution of the Board of Directors. The size of the Board of Directors is
currently fixed at six directors.
The Company's Certificate of Incorporation divides the Board of
Directors into three classes. Each class of directors serves staggered three
year terms or until their successors are elected and qualified.
The current classes of the Board of Directors and their terms of office
are as follows:
<TABLE>
<CAPTION>
TERM
CLASS DIRECTORS EXPIRATION
----- --------- ----------
<S> <C> <C>
I James C. New 2001
I E. Roe Stamps, IV 2001
II Thomas S. Roberts 1999
II Timothy M. Kilpatrick, M.D. 1999
III Alan Levin, M.D. 2000
III C. Arnold Renschler, M.D. 2000
</TABLE>
The two directors in Class II, Thomas S. Roberts and Timothy M.
Kilpatrick, M.D., have been nominated for re-election at the Annual Meeting.
Each Class II director elected at the Annual Meeting will hold office until the
annual meeting of shareholders to be held in 2002.
In connection with one of the Company's 1997 acquisitions in Texas, the
Company agreed to nominate one of the sellers of such practice, if designated by
such sellers and acceptable to the Company, to the next available vacancy for
inside directors on the Board of Directors of the Company.
The Company is considering expanding the size of its Board of Directors
by adding one or more additional independent directors who can add unique value
and perspective to the Board. If added, any such director shall serve until the
annual meeting following his or her appointment to the Board.
All proxies will be voted for Mr. Roberts and Dr. Kilpatrick, absent
contrary instructions. The Board of Directors has no reason to believe that the
nominees will refuse or be unable to accept election; however, in the event that
any nominee is unwilling or unable to accept election or if any other unforeseen
contingencies should arise, each proxy that does not specifically direct
otherwise will be voted for the remaining nominees, if any, and for such other
person(s) as may be designated by the Board of Directors.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- - ---- --- ---------------------
<S> <C> <C>
James C. New (1)..................... 53 Chairman of the Board, President, Chief
Executive Officer and Director
Alan Levin, M.D. (1)................. 47 Chief Operating Officer and Director
Robert P. Wynn....................... 52 Executive Vice President, Chief Financial
Officer and Secretary
Dennis M. Smith, Jr., M.D. .......... 47 Senior Vice President and Medical Director
Gary A. Davis ....................... 35 Vice President, Sales and Marketing
Stephen V. Fuller.................... 44 Vice President, Human Resources
Thomas S. Roberts (1) (2) (3)........ 35 Director
Timothy M. Kilpatrick, M.D........... 43 Director and Managing Director of Derrick and
Associates Pathology Group
C. Arnold Renschler, M.D. (2)........ 57 Director
E. Roe Stamps, IV (3)................ 52 Director
</TABLE>
- - ------------
(1) Member of Acquisition Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
JAMES C. NEW was appointed Chairman of the Board of Directors in
February 1999, and 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 Chief Executive Officer and as a director of
RehabClinics, Inc., one of the largest outpatient rehabilitation companies in
the country, which he founded 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, both HMOs.
From 1993 through 1996, Mr. New was the Chairman of the Acquisition Committee
and member 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 of the Company in June 1996
after the Company acquired Derrick and Associates Pathology Group. Prior to
that, he served on the Board of Directors of Derrick since 1987, as Treasurer
from 1990 to 1994, and President from 1995 until the Company's acquisition of
Derrick. Dr. Levin has over 15 years experience as a pathologist and is board
certified in anatomic and clinical pathology. He served as the medical director
of the inpatient pathology laboratory at Columbia Medical Center, Port St.
Lucie, Florida from 1983 until 1997, and presently is a member of that
hospital's Board
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of Trustees. 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 Beach, Florida.
ROBERT P. WYNN has served as the Executive Vice President, Chief
Financial Officer and Secretary since February 1996. He served as Vice President
and Chief Operating Officer of American Laboratory Associates, the predecessor
to AmeriPath, 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 was an audit partner with
Deloitte Haskins & Sells, certified public accountants (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.
DENNIS M. SMITH, JR., M.D. became the Senior Vice President and Medical
Director of AmeriPath effective March 1, 1999. He also functions as the Regional
Managing Director of its Florida Region and has held that position since May
1998. Dr. Smith was the Vice President of Laboratory Physicians, Jacksonville,
Inc. from 1984 through December 1997 when it was acquired by AmeriPath, and has
been the Managing Director of that practice since December 1997. Dr. Smith holds
the position of Director of Laboratories at Columbia Memorial Hospital in
Jacksonville. Currently, Dr. Smith chairs the Board of Trustees of the National
Blood Foundation and sits on the Board of Directors of the National Blood Data
Resource Center, the Florida-Georgia Blood Alliance, and Immucor, Inc. He is a
member of Vanderbilt University's School of Engineering's Committee of Visitors
and of the Pan American Health Organization's Advisory Committee on
International Blood Bank Standards. Dr. Smith was previously President of the
American Association of Blood Banks and Director and Executive Head of the
American Red Cross Blood Services, Nashville Region.
GARY A. DAVIS has been Vice President of Sales and Marketing since
January 1998. He was previously the National Director of Field Sales for
AmeriPath in 1997 and a Director of Sales and Marketing for American Laboratory
Associates from 1990 to 1996. Mr. Davis was employed by American Laboratory
Associates in various areas of increasing responsibility since 1984, including
as General Manager from 1987 to 1991. Mr. Davis received his Bachelor of Science
in Communications from Trinity International University.
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 20 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 February
1996, was Chairman of the Board from February 1996 to February 1999 and was a
director of American Laboratory Associates from 1994 to 1996. Mr. Roberts is a
General Partner of Summit Investors II, L.P. and Stamps, Woodsum & Co. III,
general partnerships, the latter of which is the general partner of Summit
Partners III, L.P. and Summit Partners SD, L.P., which is the general partner of
Summit Ventures III, L.P. and Summit Subordinated Debt Fund L.P., respectively.
Mr. Roberts has been employed with Summit in various
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positions since 1989. Mr. Roberts is also a director of AMX Corporation as well
as several privately held companies.
TIMOTHY M. KILPATRICK, M.D. has been a director and an affiliated
physician of the Company since June 1996 when the Company acquired Derrick and
Associates Pathology Group. He has also been Managing Director of Derrick since
October 1996 and a stockholder 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 over 12
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.
C. ARNOLD RENSCHLER, M.D. has been a director of the Company since
April 1997. Since December 1997, he has been President and CEO of PharMerica,
Inc. and a member of its Board of Directors. From June 1996 to November 1997,
Dr. Renschler was President and Chief Executive Officer of Pharmacy Corporation
of America, a division of Beverly Enterprises, Inc. From January 1990 to June
1996, he held various positions, including serving as a Director, President and
Chief Operating Officer and Chief Clinical Officer at NovaCare, Inc. Dr.
Renschler is certified in pediatric medicine. He received his B.A. from Walla
Walla College and his M.D. from Loma Linda University School of Medicine. He
completed his internal medicine residency at Georgetown University Hospital in
Washington, D.C., and his pediatric residency at Stanford University in Palo
Alto, California.
E. ROE STAMPS, IV has been a director of the Company since February
1996 and was a director of American Laboratory Associates from 1994 to 1996. Mr.
Stamps has more than 24 years experience in venture capital investing and is a
Managing General Partner of Stamps, Woodsum & Co. III and Summit Investors II,
L.P. Mr. Stamps is also a director of Pediatrix Medical Group, Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's year ended December 31, 1998, the Company's Board
of Directors held four formal meetings and took a number of other actions by
written consent. During 1998, no director attended fewer than 75% of the
aggregate of (i) the number of meetings of the Board of Directors held during
the period he served on the Board, and (ii) the number of meetings of committees
of the Board of Directors held during the period he served on such committees.
The only committees of the Board of Directors are the Audit Committee,
the Compensation Committee and the Acquisition Committees.
Mr. Roberts and Dr. Renschler are the current members of the Audit
Committee, which held one meeting during 1998. The duties and responsibilities
of the Audit Committee include (i) recommending to the Board of Directors the
appointment of the Company's independent public accountants and any termination
of engagement, (ii) reviewing the plan and scope of independent audits, (iii)
reviewing the Company's significant accounting policies and internal controls,
(iv) having general responsibility for all related auditing matters, and (v)
reporting its recommendations and findings to the full Board of Directors.
Messrs. Roberts and Stamps are the current members of the Compensation
Committee, which held two meetings during 1998 and took a number of other
actions by written consent. The Compensation Committee reviews and approves the
compensation of the Company's executive officers and administers the Company's
stock option plans.
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Messrs. New and Roberts and Dr. Levin are the current members of the
Acquisition Committee which held four meetings during 1998 and took a number of
other actions by written consent. The Acquisition Committee is authorized to
review and approve acquisitions by the Company with a purchase price of less
than $15 million. The Acquisition Committee reviews and recommends acquisitions
of $15 million or more to the Board of Directors, for the Board's approval. The
Small Acquisition Committee, of which Mr. New is the sole member, is authorized
to review and approve acquisitions by the Company with a purchase price up to $3
million.
DIRECTOR COMPENSATION
The Company pays each director who is not an employee a $1,000 fee for
each meeting of the Board of Directors and $500 for each meeting of a committee
of the Board of Directors for those meetings attended in person by such
directors. In addition, each director who is not an employee of the Company is
eligible to receive options to purchase shares of Common Stock under the
Company's 1996 Director's Stock Option Plan, in connection with his initial
election to the Board of Directors (5,000 options upon initial election) and
discretionary grants of options to purchase additional shares from time to time
thereafter. The Company also reimburses all Directors for out-of-pocket expenses
incurred in connection with the rendering of services as a director.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid during
the prior three years to the Company's Chief Executive Officer and each of the
Company's four other most highly compensated executive officers whose total
annual salary and bonus was $100,000 or more for 1998 (the Chief Executive
Officer and such other executive officers are sometimes referred to herein as
the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) ---------------
------------------------ NUMBER OF
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) OPTIONS GRANTED
- - --------------------------- ----------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
James C. New 1998 300,000 200,000 40,000
Chairman of the Board, President and 1997 275,000 166,375 - -
Chief Executive Officer 1996 213,942 158,361 360,011
Alan Levin, M.D. (2) 1998 263,756 96,250 20,000
Chief Operating Officer 1997 250,096 37,187 - -
1996 112,732 100,000 36,000
Robert P. Wynn 1998 159,140 86,225 20,000
Executive Vice President and 1997 148,105 60,770 - -
Chief Financial Officer 1996 141,605 50,694 - -
Gary A. Davis (3) 1998 80,554 99,000 5,000
Vice President, Sales and Marketing
Leslie B. Rosen, M.D. (4) 1998 400,000 20,000 - -
Vice President and Medical Director 1997 400,000 - - 25,000
1996 400,000 - - - -
</TABLE>
- - ------------
(1) The column for "Other Annual Compensation" has been omitted because
there is no compensation required to be reported in such column. The
aggregate amount of perquisites and other personal benefits provided to
each Named Executive Officer is less than the lesser of 10% of the
total annual salary and bonus of such officer or $50,000.
(2) Dr. Levin became the Chief Operating Officer of the Company as of
September 27, 1996.
(3) Mr. Davis became an executive officer as of January 1, 1998.
(4) As of February 24, 1999, Dr. Rosen remains as an employee of the
Company, but was no longer an executive officer.
11
<PAGE>
OPTION GRANTS TABLE
The following table sets forth certain information regarding options
granted to the Named Executive Officers during 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS GRANTED EXERCISE FOR OPTION TERM (2)
UNDERLYING TO EMPLOYEES IN PRICE PER EXPIRATION ------------------------
NAME OPTIONS GRANTED YEAR SHARE (1) DATE 5% 10%
- - ---- --------------- ---------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James C. New 40,000 15.6% $14.06 5/29/08 $353,690 $896,321
Alan Levin, M.D. 20,000 7.8% $14.06 5/29/08 $176,845 $448,160
Robert P. Wynn 20,000 7.8% $14.06 5/29/08 $176,845 $448,160
Gary A. Davis 5,000 1.9% $14.06 5/29/08 $ 44,211 $112,040
</TABLE>
- - ------------
(1) All options were granted under the Company's Amended and Restated 1996
Stock Option Plan at exercise prices equal to or greater than the fair
market value of the Common Stock on the date of the grant, and vest
over five years with a ten year term.
(2) These assumed annual rates of appreciation were used in compliance with
the rules of the Securities and Exchange Commission and are not
intended to forecast future price appreciation of the Common Stock.
OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUE TABLE
The following table sets forth information regarding exercise of
options during 1998 and the options held at December 31, 1998 by each of the
Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT YEAR END (#) AT 1998 YEAR END (1)
OPTIONS AMOUNT ------------------------- -------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. New -- -- 216,007 184,004 $1,569,936 $1,046,624
Alan Levin, M.D. 7,200 $45,000 7,200 41,600 -- --
Robert P. Wynn -- -- 150,400 63,200 $1,177,331 $338,170
Gary A. Davis -- -- 1,400 10,600 -- --
Leslie B. Rosen, M.D. -- -- 5,000 20,000 -- --
</TABLE>
- - ------------
(1) The indicated value of the options is a computation of the difference
between the applicable option exercise price and the closing market
price of the Common Stock as of December 31, 1998 ($8.938) multiplied
by the number of shares of Common Stock underlying such option.
12
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. New effective
January 1, 1996, pursuant to which Mr. New is eligible to receive an annual
bonus up to 50% of his base salary upon attaining mutually agreed upon
objectives relating to the Company's performance, and a potential additional
amount of bonus for exceeding the objectives. For the year ended December 31,
1998, the Compensation Committee of the Board of Directors determined that Mr.
New exceeded his performance objectives for 1998 and awarded a bonus to Mr. New
that exceeded 50% of his base salary. 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 24 months.
In February 1996, the Company assumed Mr. Wynn's employment agreement
with American Laboratory Associates. The agreement provides that Mr. Wynn may
receive an annual discretionary bonus based on his achievement of performance
objectives determined by the Company. Upon termination of his employment without
cause, Mr. Wynn shall receive his base salary for a period of 12 months.
The Company entered into an employment agreement with Dr. Levin, in his
capacity as an affiliated physician, as of June 30, 1996 in connection with the
Company's 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 AmeriPath and amended his existing employment
agreement. These agreements provide for aggregate annual base salary of
$255,000. Upon termination by the Company other than for cause, Dr. Levin will
receive his annual salary for one year.
The Company entered into an employment agreement with Mr. Davis
effective January 1, 1998. The agreement provides that Mr. Davis is eligible to
receive a bonus up to 30% of base compensation for 1998 based upon attaining
mutually agreed upon goals and an additional bonus up to $60,000 based upon
accomplishing 1998 net revenue goals. The bonus granted Mr. Davis in 1998
included an additional discretionary bonus in excess of the bonus provided for
under his agreement. Upon termination of his employment without cause, Mr. Davis
shall receive his base salary for a period of 6 months.
The Company entered into an employment agreement with Dr. Rosen in his
capacity as an affiliated physician as of June 30, 1996 in connection with the
Company's acquisition of Florida Pathology Associates. Effective June 1, 1997,
the Company entered into an additional agreement with Dr. Rosen pursuant to
which Dr. Rosen became Vice President and Medical Director of AmeriPath and
amended his existing employment agreement. These agreements provide for an
aggregate annual salary of $400,000. Upon termination by the Company other than
for cause, Dr. Rosen will receive his annual salary for one year. In February
1999, Dr. Rosen was replaced as the Company's Medical Director in order to
afford him more time to build the Company's dermatopathology practice in South
Florida.
In addition to their roles as executive officers and directors of the
Company, Drs. Levin and Rosen are also employed by the Company as affiliated
physicians and have entered into separate employment agreements with the Company
that govern their relationship as affiliated physicians. Each such employment
agreement provides for a covenant not to compete during the affiliated
physician's employment and for a period of two years thereafter.
13
<PAGE>
Each of the named executive officers holds options to purchase Common
Stock granted under the Company's Amended and Restated 1996 Stock Option Plan.
Such options generally may become fully exercisable upon: (i) a merger,
consolidation, reorganization, liquidation, or dissolution in which the Company
does not survive; (ii) a sale, lease, exchange or other disposition of all or
substantially all of the Company's property or other assets; (iii) certain
specified changes in control of the Company.
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or pension plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
Since 1996, the Compensation Committee of the Board of Directors has
consisted of Messrs. Roberts and Stamps. All compensation decisions affecting
Mr. New were approved by the Compensation Committee and by the Company's Board
of Directors, except for Mr. New.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Securities and Exchange Commission, the
Company is required to provide a report explaining the rationale and
considerations that led to fundamental compensation decisions affecting the
Company's executive officers (including the Named Executive Officers) during the
past fiscal year. The report of the Company's Compensation Committee is set
forth below.
The Compensation Committee is responsible for determining and making
recommendations to the Board of Directors concerning executive compensation,
including base salaries, bonuses and the basis for their awards, stock options
and other benefits.
The three principal components of the Company's executive compensation
are salary, bonus and stock options. These components are designed to facilitate
fulfillment of the compensation objectives of the Company's Board of Directors
and the Compensation Committee, which objectives include (i) attracting,
retaining and motivating qualified management, (ii) recognizing individual
initiative and achievement, (iii) rewarding management for short and long term
accomplishments and (iv) aligning management compensation with the achievement
of the Company's goals and performance.
It is the Compensation Committee's view that senior executives'
interests should complement those of the stockholders. Accordingly, consistent
with prior practice, it is anticipated that a substantial portion of senior
executive compensation above a base salary will be provided through bonuses tied
to certain indicators of Company performance and through the grant of stock
options, thus creating incentives for executives to achieve long term Company
objectives and increase stockholder value. Base salaries for new management
employees are determined initially by evaluating the responsibilities of the
position in question and the experience of the individual, and by reference to
the competitive marketplace for managerial talent, including a comparison of
base salaries for similar positions at comparable companies. Annual bonuses are
determined by evaluating the competitive marketplace, the performance of the
Company, the performance of the executive and the responsibilities assumed by
the executive.
14
<PAGE>
The Compensation Committee has reviewed the Company's existing
management compensation arrangements and has consulted with the Chief Executive
Officer to evaluate the Company's current compensation programs, and believes
that they are consistent with the philosophy of the Compensation Committee.
Additionally, the Compensation Committee has made certain recommendations for
the present year regarding evaluation criteria in connection with the incentive
compensation to be awarded to the Company's senior management.
EXECUTIVE OFFICER COMPENSATION. The determination of 1998 executive
officer compensation by the Compensation Committee was made after a review and
consideration of a number of factors, including each executive's level of
responsibility and commitment, level of performance (with respect to specific
areas of responsibility and on an overall basis), past and present contribution
to and achievement of Company goals and performance, compensation levels at
comparable companies and historical compensation levels, and following
consultation with and recommendations from the Company's Chief Executive
Officer. In addition, the executive officers who are physicians that sold their
practices to the Company, have previously existing employment agreements that
designate a substantial portion of such officers' compensation. See "Employment
Agreements" above.
CHIEF EXECUTIVE OFFICER COMPENSATION. The principal factors considered
by the Compensation Committee and the Board of Directors in determining the 1998
salary and bonus for James C. New, the Chief Executive Officer of the Company,
included the factors described in the preceding paragraph and an analysis of the
compensation of chief executive officers of comparable public companies similar
in size and capitalization to the Company, and it was the view of the Committee
that Mr. New's 1998 compensation was reasonable in comparison. Based on such
factors, Mr. New's base salary was increased from $275,000 to $300,000 for 1998,
and his 1998 bonus was awarded based upon his achievement of performance
objectives during 1998 that the Committee established early in the year,
including the Company's attainment of revenue, earnings-per-share, practice
acquisition and other goals. Based on Mr. New's and the Company's performance in
1998, Mr. New's base salary for 1999 was increased to $350,000.
Thomas S. Roberts
E. Roe Stamps, IV
As Members of the
Compensation Committee
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Company's Common Stock with the cumulative total stockholder return on the
Nasdaq Stock Market Index and the Nasdaq Health Services Index commencing on
October 22, 1997 (the first day the Common Stock began trading on the Nasdaq
Stock Market) through December 31, 1998. The beginning price of the Company's
Common Stock used in the graph for October 22, 1997 was $16.00, the initial
public offering price. The closing price on October 22, 1997 was $19.75. The
graph assumes a $100 investment on October 22, 1997 in each of AmeriPath Common
Stock, the Nasdaq Stock Market Index and the Nasdaq Health Services Index.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
--------------------------------------------------------------
10/22/97 12/97 3/98 6/98 9/98 12/98
-------- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
AMERIPATH, INC. 100 106 115 74 93 56
NASDAQ STOCK MARKET (U.S.) 100 92 108 111 100 130
NASDAQ HEALTH SERVICES 100 87 95 87 66 74
</TABLE>
16
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to the Company's acquisition of Derrick in 1996, Dr. Levin
received in exchange for his interest in Derrick a Subordinated Contingent Note
in the maximum principal amount of $584,615. The Company paid $79,455, including
interest, to Dr. Levin in 1998 with respect to the Contingent Note based upon
operating earnings achieved in 1997.
Pursuant to the Company's acquisition of FPA in 1996, Dr. Rosen
received a Subordinated Note in the principal amount of $800,000 and a
Subordinated Contingent Note in the maximum principal amount of $1.3 million. In
January 1998, the Contingent Note was exchanged for a Non-Negotiable Replacement
Note in the principal amount of $333,333 (the "Replacement Note"). During 1998,
the Company paid Dr. Rosen $80,250, including interest, with respect to the
Replacement Note and $204,800, including interest, pursuant to the Subordinated
Note.
SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding shares of Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. Such persons are required by
SEC regulation to furnish the Company with copies of all such reports that they
file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required to be filed, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with during 1998, except that Dr. Rosen and Mr. Davis each
made one filing after the date due.
PROPOSAL TO APPROVE
THE COMPANY'S AMENDED AND RESTATED
1996 STOCK OPTION PLAN
GENERAL
Prior to the Company's initial public offering in October 1997, the
Company's Board of Directors and stockholders adopted the Company's Amended and
Restated 1996 Stock Option Plan (the "Plan"). Certain material features of the
Plan are discussed below, however, such description is subject to, and is
qualified in its entirety by, the full text of the Plan attached hereto as
Exhibit A.
The purpose of the Plan is to provide an additional incentive to retain
and motivate key employees and consultants or advisors who have an opportunity
to contribute to the success of the Company, through the encouragement of stock
ownership in the Company by such persons. In furtherance of this purpose, the
Plan authorizes, among other things, (a) the granting of incentive or
nonqualified stock options to purchase Common Stock to persons selected by the
administrators of the Plan from the class of all employees of the Company or any
subsidiary, including directors and officers who are employees, which class
presently consists of approximately 1,350 persons, (b) the provision of loans
for the purpose of financing the exercise price of options and the amount of
taxes payable in connection therewith, and (c) the use of already owned shares
of Common Stock as payment of the
17
<PAGE>
exercise price for options granted under the Plan. Consultants and advisors to
the Company are also eligible to receive options under the Plan, whether or not
they are employees of the Company.
The Company's reason for submitting the Plan for shareholder approval
at the Annual Meeting is for purposes of compliance with certain exclusions from
the limitations of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Plan became effective in 1996 while the Company was a
privately held corporation. In October 1997, the Company became a publicly held
corporation. As a result, the Company became subject to Section 162(m) of the
Code which denies a federal income tax deduction for all compensation received
by the chief executive officer and any of the four other most highly compensated
executives in excess of $1,000,000 for a taxable year. The Treasury Regulations
promulgated under Section 162(m) of the Code provide transition rules with
respect to companies that were privately held and became publicly held. These
rules provide that, for a limited time, the $1,000,000 limit will not apply to
any compensation, including stock based compensation, paid pursuant to a plan
that existed prior to the period the company became publicly held, provided that
the shareholders approve the material terms of such plan after the company
became publicly held. Accordingly, Section 162(m) of the Code can limit the
deductibility of annual compensation expense over $1.0 million per person with
respect to compensation of certain top executives in certain circumstances. The
Company believes that the Plan (if approved by shareholders at the meeting)
satisfies the requirements of Section 162(m) of the Code that avoid such expense
deduction limitation. Options granted under the Plan, when exercised, may result
in compensation expense to the Company for federal income tax purposes (see
"Federal Income Tax Consequences" below).
The Plan provides that it is to be administered by a committee
designated by the Board of Directors consisting of not less than two directors
(the "Committee"), each member of which must be a "non-employee director" as
defined under Rule 16b-3 under the Securities Exchange Act of 1934 and an
"outside director" for purposes of Section 162(m) of the Code (within the
meaning of Treasury Regulation Section 1.162-27(e)(3)). The Board has authority
to also administer the Plan in its discretion under certain circumstances. The
Compensation Committee of the Board has been appointed as the Committee to
administer the Plan, and the Company believes that the Compensation Committee
members satisfy the Committee eligibility requirements under the Plan. Among
other things, to qualify as a "non-employee director" or an "outside director,"
a director must not be an employee of the Company and must not receive
compensation from the Company in any capacity other than as a director (other
than certain limited amounts within specified limitations).
Subject to the terms of the Plan, the Committee in its sole discretion
determines the persons to be awarded options, the number of shares subject
thereto and the exercise price and other terms thereof. In addition, the
Committee has full power and authority to construe and interpret the Plan, and
the acts of the Committee are final, conclusive and binding upon all interested
parties, including the Company, its shareholders, its officers and employees,
recipients of grants under the Plan, and all persons or entities claiming by or
through such persons.
An aggregate of 2,200,000 shares of Common Stock (subject to adjustment
as described below) are reserved for issuance upon exercise of options granted
under the Plan. The shares acquired upon exercise of options granted under the
Plan will be authorized and issued shares of Common Stock. The Company's
shareholders will not have any preemptive rights to purchase or subscribe for
any Common Stock by reason of the reservation and issuance of Common Stock under
the Plan. If any option granted under the Plan should expire or terminate for
any reason other than having been exercised in full, the unpurchased shares
subject to that option will again be available for purposes of the Plan.
18
<PAGE>
OPTIONS GRANTED UNDER THE PLAN
The table below indicates, as of March 12, 1999, (i) the number of
options held by the persons and groups indicated, and (ii) the value of such
options as of such date:
<TABLE>
<CAPTION>
VALUE OF OPTIONS
OPTION GRANTEES NUMBER OF OPTIONS AT MARCH 12, 1999 (1)
- - --------------- ----------------- ---------------------
<S> <C> <C>
James C. New 400,011 $2,323,871
Chairman of the Board, President and
Chief Executive Officer
Alan Levin, M.D. 48,800 - -
Chief Operating Officer
Robert P. Wynn 213,600 $1,358,104
Executive Vice President and
Chief Financial Officer
Gary A. Davis 12,000 - -
Vice President, Sales and Marketing
Leslie B. Rosen, M.D. 25,000 - -
Vice President and Medical Director
All current executive officers as a 736,211 $3,681,975
group (6 persons) (2)
All current directors who are not 5,000 - -
executive officers as a group
(4 persons)
All employees as a group, other than 707,790 $242,460
executive officers
</TABLE>
- - ------------
(1) For purposes of this table, the value of each option equals the amount,
if any, by which the closing market price of a share of Common Stock on
March 12, 1999 ($8.125) exceeds the option's exercise price. The value
is calculated without regard to whether the option is currently
exercisable or not.
(2) For the purposes of this table, the amount of options held include
61,800 options held by executive officers who are not named in the
chart, and exclude the 25,000 options held by Dr. Rosen since he is not
an executive officer as of February 24, 1999.
CERTAIN TERMS AND CONDITIONS
All grants of options under the Plan must be evidenced by a written
agreement between the Company and the grantee. Such agreement shall contain such
terms and conditions as the Committee shall prescribe, consistent with the Plan,
including, without limitation, the exercise price, term and any restrictions on
the exercisability of the options granted. Options may be nonqualified stock
options or incentive stock options, as determined by the Committee under the
Plan (see "Federal Income Tax Consequences" below).
Under the Plan, the option price per share of Common Stock may be any
price determined by the Committee; provided, however, that in no event shall the
option price of any incentive stock option be less than the fair market value
per share of Common Stock on the date of grant (or less than 110% of fair market
value if granted to a holder of 10% or more of the Company's voting securities).
For purposes of
19
<PAGE>
the Plan, and for so long as the Company's Common Stock is listed on the Nasdaq
National Market, the term "fair market value" means the closing price of the
Common Stock as reported on the Nasdaq National Market on the business day
immediately preceding the date of grant, unless the Committee shall determine
otherwise in a fair and uniform manner. The exercise price of an option may be
paid in cash, by certified or official bank check, by money order, by delivery
of already owned shares of Common Stock having or by the Company's withholding
of shares subject to the option having a fair market value equal to the exercise
price, or by a combination of the foregoing. The Plan also authorizes the
Company to make loans to optionees to enable them to exercise their options. If
the exercise price is paid with the optionee's promissory note, the note 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. Cash payments will be used by
the Company for general corporate purposes.
Options otherwise qualifying as incentive stock options will not be
treated as incentive stock options to the extent that the aggregate fair market
value (determined at the time the option is granted) of the Common Stock, with
respect to which options meeting the requirements of Code Section 422(b) are
exercisable for the first time by any individual during any calendar year (under
all stock option or similar plans of the Company or any subsidiary), exceeds
$100,000.
Options granted under the Plan are generally not assignable or
transferable other than by will or by the laws of descent and distribution,
except that the Committee has discretion to permit transfers of nonqualified
options under certain conditions provided in the Plan. During the lifetime of an
optionee, an option is exercisable only by the optionee. The expiration date of
an option will be determined by the Committee at the time of the grant, but in
no event will an option be exercisable after the expiration of 10 years from the
date of grant. An option may be exercised at any time or from time to time or
only after a period of time or in installments, as the Committee determines. The
Committee may in its sole discretion accelerate the date on which any option may
be exercised. Each outstanding option will automatically become exercisable in
the event of certain transactions, including certain changes in control of the
Company, certain mergers and reorganizations, and certain dispositions of
substantially all the Company's assets.
Unless otherwise provided in an option, the unexercised portion of any
option granted under the Plan shall automatically be terminated (a) one year
after the date on which the optionee's employment or other service to the
Company is terminated for any reason other than (i) cause (as defined in the
Plan), or (ii) death; (b) immediately upon the termination of the optionee's
employment (or other service) for cause; (c) ninety days after the optionee's
voluntary termination of service; or (d) twelve months after the date on which
the optionee's employment is terminated by reason of the optionee's death, or
three months after the date of the optionee's death if death occurs during the
one year period following the termination of the optionee's employment by reason
of mental or physical disability.
To prevent dilution of the rights of a holder of an option, the Plan
provides for appropriate adjustment of the number of shares for which options
may be granted, the number of shares subject to outstanding options and the
exercise price of outstanding options, in the event of any increase or decrease
in the number of issued and outstanding shares of the Company's capital stock
resulting from a stock dividend, recapitalization or other capital adjustment of
the Company. The Committee has discretion to make appropriate anti-dilution
adjustments to outstanding options in the event of a merger, consolidation or
other reorganization of the Company or a sale or other disposition of
substantially all the Company's assets.
20
<PAGE>
The Plan will continue in effect until all options granted thereunder
have expired or been exercised, except that no incentive stock options can be
granted after February 15, 2006. The Committee or the Board may amend the Plan
or any option at any time, provided that such amendment may not adversely affect
the rights of an optionee under an outstanding option without the optionee's
consent. In addition, no such amendment may, without approval of the Company's
shareholders (a) materially increase the benefits accruing to participants under
the Plan, (b) materially increase the number of shares of Common Stock reserved
for issuance under the Plan, or (c) materially modify the requirements for
eligibility to receive options under the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The Plan is not qualified under the provisions of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), nor is it subject to any
of the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
NONQUALIFIED STOCK OPTIONS. An optionee granted a nonqualified stock
option under the Plan will generally recognize, at the date of exercise of such
option, ordinary income equal to the difference between the exercise price and
the fair market value of the shares purchased pursuant to the exercise of the
option. This taxable ordinary income will be subject to Federal income tax
withholding, and the Company will be entitled to a deduction for Federal income
tax purposes equal to the amount of ordinary income recognized by the optionee.
If an optionee exercises a nonqualified stock option by delivering
shares of the Company's Common Stock, the optionee will not recognize gain or
loss with respect to the exchange of such shares, even if their then fair market
value is different from the optionee's tax basis. The optionee, however, will be
taxed as described above with respect to the exercise of the nonqualified stock
option as if he had paid the exercise price in cash, and the Company likewise
generally will be entitled to an equivalent tax deduction. Provided a separate
identifiable stock certificate is issued therefor, the optionee's tax basis in
that number of shares received on such exercise which is equal to the number of
shares surrendered on such exercise will be equal to his tax basis in the shares
surrendered, and his holding period for such number of shares received will
include his holding period for the shares surrendered. The optionee's tax basis
and holding period for the additional shares received on exercise of a
nonqualified stock option paid for, in whole or in part, with shares will be the
same as if the optionee had exercised the nonqualified stock option solely for
cash.
INCENTIVE STOCK OPTIONS. The Plan provides for the grant of stock
options that qualify as "incentive stock options" as defined in Section 422 of
the Code. Under the Code, an optionee generally is not subject to ordinary
income tax upon the grant or exercise of an incentive stock option. However, an
employee who exercises an incentive stock option by delivering shares of common
stock previously acquired pursuant to the exercise of an incentive stock option
is treated as making a "Disqualifying Disposition" (as defined below) of such
shares if the employee delivers such shares before the expiration of the holding
period applicable to such shares. The applicable holding period is the longer of
two years from the date of grant or one year from the date of exercise. The
effect of this provision is to prevent "pyramiding" the exercise of an incentive
stock option (i.e., the exercise of the incentive stock option for one share and
the use of that share to make successive exercises of the incentive stock option
until it is completely exercised) without the imposition of current income tax.
If, subsequent to the exercise of an incentive stock option (whether
paid for in cash or in shares), the optionee holds the shares received upon
exercise for a period that exceeds (a) two years from the date such incentive
stock option was granted or, if later, (b) one year from the date of exercise
(the "Required
21
<PAGE>
Holding Period"), the difference (if any) between the amount realized from the
sale of such shares and their tax basis to the holder will be taxed as long-term
capital gain or loss.
In general, if, after exercising an incentive stock option, an employee
disposes of the shares so acquired before the end of the Required Holding Period
(a "Disqualifying Disposition"), such optionee would be deemed in receipt of
ordinary income in the year of the Disqualifying Disposition in an amount equal
to the excess of the fair market value of the shares at the date the incentive
stock option was exercised over the exercise price. If the Disqualifying
Disposition is a sale or exchange that would permit a loss to be recognized
under the Code (were a loss in fact to be sustained), and the sales proceeds are
less than the fair market value of the shares on the date of exercise, the
optionee's ordinary income would be limited to the gain (if any) from the sale.
If the amount realized upon disposition exceeds the fair market value of the
shares on the date of exercise, the excess would be treated as short-term or
long-term capital gain, depending on whether the holding period for such shares
exceeded one year.
The amount by which the fair market value of the shares of Common Stock
acquired pursuant to the exercise of an incentive stock option exceeds the
exercise price of such shares under such option generally will be treated as an
item of adjustment included in the optionee's alternative minimum taxable income
for purposes of the alternative minimum tax for the year in which the option is
exercised. If, however, there is a Disqualifying Disposition of the shares in
the year in which the option is exercised, there will be no item of adjustment
for purposes of the alternative minimum tax as a result of the exercise of the
option with respect to those shares. If there is a Disqualifying Disposition in
a year after the year of exercise, the income on the Disqualifying Disposition
will not be considered income for purposes of the alternative minimum tax in
that subsequent year. The optionee's tax basis for shares acquired pursuant to
the exercise of an incentive stock option will be increased for purposes of
determining his alternative minimum tax by the amount of the item of adjustment
recognized with respect to such shares in the year the option was exercised.
Only employees of the Company or its subsidiaries qualify for the tax
treatment applicable to incentive stock options. Thus, optionees who are
non-employee advisors or consultants to the Company will be taxed solely under
the rules applicable to nonqualified stock options.
An income tax deduction is not allowed to the Company with respect to
the grant or exercise of an incentive stock option or the disposition, after the
Required Holding Period, of shares acquired upon exercise. In the event of a
Disqualifying Disposition, a Federal income tax deduction will be allowed to the
Company in an amount equal to the ordinary income to be recognized by the
optionee.
IMPORTANCE OF CONSULTING TAX ADVISER. The information set forth above
is a summary only and does not purport to be complete. In addition, the
information is based upon current federal income tax rules and therefore is
subject to change when those rules change. Moreover, because the tax
consequences to any optionee may depend on his or her particular situation, each
optionee should consult his or her tax adviser as to the Federal, state, local
and other tax consequences of the grant or exercise of an option or the
disposition of Common Stock acquired on exercise of an option.
SECURITIES ACT REGISTRATION
The Company has previously registered the shares of Common Stock
available for issuance under the Plan pursuant to a Registration Statement on
Form S-8 filed with the SEC.
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VOTE REQUIRED AND RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting will be
required for approval of the Plan at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
COMPANY'S AMENDED AND RESTATED 1996 STOCK OPTION PLAN.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP, independent public accountants,
served as the Company's independent public accountants for the year ended
December 31, 1998. One or more representatives of Deloitte & Touche LLP, who are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they desire to do so and are expected to be available to respond
to appropriate questions from stockholders. The Company has not yet selected its
independent public accountants for fiscal 1999, because the Company is in the
process of reviewing its current accountants and other firms and their
respective services and costs.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a stockholder intending to present a proposal to be included in the
Company's proxy statement for the Company's Annual Meeting of Stockholders to be
held in 2000 must deliver a proposal in writing to the Company's principal
executive offices no later December 1, 1999. Such proposals also will need to
comply with Securities and Exchange Commission regulations regarding the
inclusion of stockholder proposals in company sponsored proxy materials.
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In addition, in order for a stockholder's proposal or director
nomination to be raised from the floor during next year's annual meeting,
written notice must be received by the Company after October 31, 1999 but no
later than December 1, 1999 and must contain all such information as required
under the Company's Bylaws. A copy of such Bylaw requirements for stockholder
proposals and nominations is available upon request from the Company's Investor
Relations Department, 7289 Garden Road, Suite 200, Riviera Beach, Florida,
33404.
By Order of the Board of Directors,
JAMES C. NEW
Chairman of the Board, President and
Chief Executive Officer
Riviera Beach, Florida
March 31, 1999
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EXHIBIT A
AMERIPATH, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
(AS OF NOVEMBER 21, 1996)
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1. PURPOSE. The purpose of this Plan is to advance the interests of
AmeriPath, Inc., a Delaware corporation (the "Company"), and its Subsidiaries by
providing an additional incentive to attract and retain qualified and competent
persons who are key to the Company or its Subsidiaries, including key employees
of and consultants or advisors to the Company or its Subsidiaries, whose efforts
and judgment the success of the Company and its Subsidiaries is largely
dependent, through the encouragement of stock ownership in the Company by such
persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean any of the following:
(i) a determination by the Company that there has been a willful
or grossly negligent failure by the Optionee to perform his duties as an
employee or Non-Employee Eligible Individual of the Company;
(ii) any conduct by the Optionee that either results in the
conviction of a felony under the laws of the United States of America or
any state thereof, or of an equivalent crime under the laws of any other
jurisdiction;
(iii) any act by the Optionee that the Company determines to be
in willful or wanton disregard of the Company's best interest, or which
results, or is intended to result, directly or indirectly, in improper
gain or personal enrichment of the Optionee at the expense of the
Company;
(iv) a determination by the Company that the Optionee has
willfully or materially failed to comply with any rules, regulations,
policies or procedures of the Company, or that the Optionee has engaged
in any act, behavior or conduct showing such willful or wanton disregard
of the interests of the Company or occasioned by a deliberate violation
or disregard of standards of behavior that the Company has a right to
expect of its employees or of Non-Employee Eligible Individuals; or
(v) if the Optionee, while employed by the Company and for two
years thereafter, fails to safeguard, and divulges, communicates, uses
to the detriment of the Company or for the benefit of any person or
persons, or misuses in any way, any Confidential Information.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
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(d) "Committee" shall mean the committee appointed pursuant to
Section 13 hereof to administer the Plan.
(e) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(f) "Confidential Information" shall mean any and all information
pertaining to the Company (including information relating to its services,
marketing practices, management agreements, clients, customers, prospects,
sources of prospects, suppliers, financial condition, results of operations,
costs and methods of doing business, owners and ownership structure) that is not
generally available to the public.
(g) "Covered Employee" shall mean any individual who, at the time of
the grant of an Option, is (i) the Chief Executive Officer of the Company or is
acting in such capacity ("CEO"), (ii) among the four highest compensated
officers of the Company (other than the CEO), or (iii) otherwise considered to
be a "Covered Employee" within the meaning of Section 162(m) of the Code.
(h) "Effective Date" shall mean February 15, 1996.
(i) "Fair Market Value" of a Share on any date of reference shall be
the "Closing Price" (as defined below) of the Common Stock on the business day
immediately preceding such date, unless the Committee in its sole discretion
shall determine otherwise in a fair and uniform manner. For this purpose, the
"Closing Price" of the Common Stock on any business day shall be (i) if the
Common Stock is listed or admitted for trading on any United States national
securities exchange, or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of the
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (ii) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), or any
similar system of automated dissemination of quotations of securities prices in
common use, the mean between the closing high bid and low asked quotations for
such day of the Common Stock on such system, or (iii) if neither clause (i) or
(ii) is applicable, the mean between the high bid and low asked quotations for
the Common Stock as reported by the National Quotation Bureau, Incorporated if
at least two securities dealers have inserted both bid and asked quotations for
the Common Stock on at least 5 of the 10 preceding days. If the information set
forth in clauses (i) through (iii) above is unavailable or inapplicable to the
Company (E.G., if the Company's Common Stock is not then publicly traded), then
the "Fair Market Value" of a Share shall be the fair market value (I.E., the
price at which a willing seller would sell a Share to a willing buyer when
neither is acting under compulsion and when both have reasonable knowledge of
all relevant facts) of a share of the Common Stock on the business day
immediately preceding such date as the Committee in its sole and absolute
discretion shall determine in a fair and uniform manner.
(j) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Code.
(k) "Non-Employee Eligible Individual" shall refer to an advisor or
consultant to the Company who contributes or has an opportunity to contribute to
the success of the Company or any Subsidiary.
(l) "Non-Statutory Stock Option" shall mean an Option which is not an
Incentive Stock Option.
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(m) "Option" (when capitalized) shall mean any option granted under
this Plan.
(n) "Optionee" shall mean a person to whom a stock option is granted
under this Plan or any person who succeeds to the rights of such person under
this Plan by reason of the death of such person or otherwise.
(o) "Outside Director" shall mean a member of the Board who (i) is
not a current employee of the Company or any Affiliate, (ii) is not a former
employee of the Company or any Affiliate who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
taxable year; (iii) has not been an officer of the Company or any Affiliate;
(iv) does not receive remuneration either directly or indirectly, in any
capacity other than as a director; and (v) satisfies any other conditions that
shall from time to time be required to qualify as an "outside director" under
Section 162(m) of the Code and the regulations thereunder and as a "Non-Employee
Director" under Rule 16b-3 promulgated under the Securities Exchange Act. For
this purpose, "Remuneration" shall have the meaning afforded that term pursuant
to Treasury Regulations issued under Section 162(m) of the Code, and shall
exclude any de minimis remuneration excluded under those Treasury Regulations.
(p) "Plan" shall mean this Stock Option Plan of the Company.
(q) "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(r) "Share" shall mean a share of the Common Stock.
(s) "Subsidiary" shall mean any corporation (other than the Company)
in any unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AND OPTIONS. The Company may grant to Optionees from time to
time Options to purchase an aggregate of up to Two Million Two Hundred Thousand
(2,200,000) Shares, first, from Shares held in the Company's treasury and, if no
such treasury Shares are available (including treasury Shares called by the
Company pursuant to applicable shareholder agreements, if any), from authorized
and unissued Shares. Upon the grant of any Option hereunder, such treasury or
authorized and unissued Shares shall be reserved for issuance to permit exercise
under this Plan. If any Option granted under the Plan shall terminate, expire,
or be canceled or surrendered as to any Shares, new Options may thereafter be
granted covering such Shares. An Option granted hereunder shall be either an
Incentive Stock Option or a Non-Statutory Stock Option as determined by the
Committee at the time of grant of such Option and shall clearly state whether it
is an Incentive Stock Option or Non-Statutory Stock Option. All Incentive Stock
Options shall be granted within 10 years from the effective date of this Plan.
4. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options to the extent
that the aggregate Fair Market Value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Code Section 422(b) are exercisable for the first time by any individual
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during any calendar year (under all stock option or similar plans of the Company
and any Subsidiary), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee, provided such
terms are not inconsistent with this Plan or any applicable law. Optionees shall
be those persons selected by the Committee who are employees of the Company or
any subsidiary (including employees who are directors or officers of the Company
or any Subsidiary) or who are Non-Employee Eligible Individuals. Any person who
files with the Committee, in a form satisfactory to the Committee, a written
waiver of eligibility to receive any Option under this Plan shall not be
eligible to receive any Option under this Plan for the duration of such waiver.
(b) In granting Options, the Committee shall take into consideration
the contribution the person has made or has the opportunity to make with respect
to the success of the Company or its Subsidiaries and such other factors as the
Committee shall determine. The Committee shall also have the authority to
consult with and receive recommendations from officers and other personnel of
the Company and its Subsidiaries with regard to these matters. The Committee may
from time to time in granting Options under the Plan prescribe such other terms
and conditions concerning such Options as it deems appropriate, including,
without limitation, (i) prescribing the date or dates on which the Option
becomes exercisable, (ii) providing that the Option rights accrue or become
exercisable in installments over a period of years, or upon the attainment of
stated goals, or both, or (iii) relating an Option to the continued employment
of the Optionee for a specified period of time, provided that such terms and
conditions are not more favorable to an Optionee than those expressly permitted
herein.
(c) The Options granted to employees or Non-Employee Eligible
Individuals under this Plan shall be in addition to regular salaries, pension,
life insurance or other benefits related to their employment with or service as
a Non-Employee Eligible Individual to the Company or its Subsidiaries. Neither
the Plan nor any Option granted under the Plan shall confer upon any person any
right to employment or continuance of employment by or service as a Non-Employee
Eligible Individual the Company or its Subsidiaries.
(d) Notwithstanding any other provisions of the Plan to the contrary,
an Incentive Stock Option shall not be granted to any person owning directly or
indirectly (through attribution under Section 424(d) of the Code) at the date of
grant, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company (or of its parent or subsidiary, as those terms
are defined in Section 424 of the Code, at the date of grant) unless the option
price of such Option is at least 110% of the Fair Market Value of the Shares
subject to such Option on the date the Option is granted, and such Option by its
terms is not exercisable after the expiration of five years from the date such
Option is granted.
(e) Notwithstanding any other provision of this Plan, and in addition
to any other requirements of this Plan, the maximum number of Shares with
respect to which Options may be granted to any one Optionee in any calendar year
may not exceed 2,200,000, subject to adjustment as provided in Section 10(a)
hereof.
(f) Notwithstanding any other provision of this Plan, and in addition
to any other requirements of this Plan, Options may not be granted to a Covered
Employee unless the grant of
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such Option is authorized by, and all of the terms of such Options are
determined by, a Committee that is appointed in accordance with Section 13 of
this Plan and all of whose members are Outside Directors.
(g) Incentive Stock Options may not be granted to any Non-Employee
Eligible Individual.
6. EXERCISE PRICE. The exercise price per Share of any Option shall be
any price determined by the Committee; PROVIDED, HOWEVER, that the exercise
price of any Incentive Stock Option shall not be less than the Fair Market Value
of the Shares underlying the Option (as determined in the sole and absolute
discretion of the Committee in a fair and uniform manner) on the date such
Incentive Stock Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee in its sole discretion have been made for
the Optionee's payment to the Company of the amount that is necessary for the
Company or Subsidiary employing the Optionee to withhold in accordance with
applicable Federal or state tax withholding requirements. Unless further limited
by the Committee in any Option, the option price of any Shares purchased
pursuant to the exercise of such Option shall be paid in cash, by certified or
official bank check, by money order, with Shares owned by the Optionee that have
been owned by the Optionee for more than 6 months on the date of surrender or
such other period as may be required to avoid a charge to the Company's earnings
for financial accounting purposes, by authorization for the Company to withhold
Shares issuable upon exercise of the Option, by arrangement with a broker that
is acceptable to the Committee where payment of the Option price is made
pursuant to an irrevocable direction to the broker to deliver all or a part of
the proceeds from the sale of the Option Shares to the Company in payment of the
Option price, or by a combination of the above. The Committee in its sole
discretion may accept a personal check in full or partial payment for any Shares
so purchased. If the exercise price is paid in whole or in part with Shares, the
value of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established in connection with this Plan,
lend money to an Optionee, guarantee a loan to an Optionee, or otherwise assist
an Optionee to obtain the cash necessary to exercise all or a portion of an
Option granted hereunder or to pay any tax liability of the Optionee
attributable to such exercise. If the exercise price is paid in whole or part
with the Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at the
prime rate of the Company's principal lender, and (iv) contain such other terms
as the Board or Committee in its sole discretion shall reasonably require. No
Optionee shall be deemed to be a holder of any Shares subject to an Option
unless and until a stock certificate or certificates for such Shares are issued
to such person(s) under the terms of this Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals, upon such events or occurrences and upon such
other terms and conditions as shall be provided in the individual option
agreement evidencing such Option (sometimes referred to herein as the "Option"),
except as otherwise provided in this Section 8:
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(a) The expiration date of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Option be exercisable
after the expiration of 10 years from the date of grant of the Option.
(b) Unless otherwise provided in any Option, each outstanding Option
shall become immediately fully exercisable:
(i) if there occurs any transaction (which shall include a series
of transactions occurring within 60 days or occurring pursuant to a
plan), that has the result that stockholders of the Company
immediately before such transaction cease to own at least 51% of the
voting stock of the Company or of any entity that results from the
participation of the Company in a reorganization, consolidation,
merger, liquidation or any other form of corporate transaction;
(ii) if the stockholders of the Company shall approve a plan of
merger, consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger,
consolidation, reorganization, liquidation or dissolution is
subsequently abandoned); or
(iii) if the stockholders of the Company shall approve a plan for
the sale, lease, exchange or other disposition of all or
substantially all the property and assets of the Company (unless such
plan is subsequently abandoned).
(c) The Committee may in its sole discretion accelerate the date on
which any Option may be exercised and may accelerate the vesting of any Shares
subject to any Option or previously acquired by the exercise of any Option.
9. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise expressly provided in any Option, the
unexercised portion of any Option shall automatically and without notice
terminate and become null and void at the time of the earliest to occur of the
following:
(i) one year after the date on which the Optionee's employment or
service as a Non-Employee Eligible Individual is terminated by the
Company for any reason, including, but not limited to, a total and
permanent (mental or physical) disability within the meaning of Code
Section 22(e)(3)) as determined by a medical doctor satisfactory to the
Committee, other than by reason of (A) Cause, or (B) the Optionee's
death;
(ii) immediately upon the termination by the Company of the
Optionee's employment or service as a Non-Employee Eligible Individual
for Cause;
(iii) ninety days after the voluntary termination of employment
or service as a Non-Employee Eligible Individual by the Optionee;
(iv) the later of (A) one year after the date of termination of
the Optionee's employment or service as a Non-Employee Eligible
Individual by reason of death of the Optionee (other than an Optionee
who terminated employment by reason of total and permanent disability),
or (B) three months after the date of death of the Optionee (who
terminated
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employment or service as a Non-Employee Eligible Individual by reason of
total and permanent disability) if the death shall occur during the one
year period specified in Subsection 9(a)(i) hereof.
(b) The Committee in its sole discretion may, by giving written
notice ("cancellation notice") to the Optionee, cancel, effective upon the date
of the consummation of any corporate transaction described in Subsection
8(b)(ii) or (iii) hereof, any Option that remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
approval of such corporate transaction.
(c) Upon termination of an Option pursuant to the foregoing
provisions of this Section 9, any Option not exercisable pursuant to Section 8
of this Plan shall be canceled.
10. ADJUSTMENT OF SHARES.
(a) If, at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
or nature of issued and outstanding Shares through the declaration of a stock
dividend, through any recapitalization, reclassification, stock split,
combination or Company exchange of Shares (other than any such exchange or
issuance of Shares through which Shares are issued to effect an acquisition of
another business or entity), then and in such event:
(i) appropriate adjustment shall be made by the Committee in the
maximum number of Shares available for grant under the Plan, so that
the same percentage of the Company's issued and outstanding Shares
shall continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made by the Committee in the
number of Shares and the exercise price per Share thereof then
subject to any outstanding Option, so that the same percentage of the
Company's issued and outstanding Shares shall remain subject to
purchase at the same aggregate exercise price.
(b) Subject to the specific terms of any Option, the Committee may
change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole judgement and discretion, such adjustments become
appropriate by reason of a corporate transaction described in Subsection
8(b)(ii) or (iii) hereof.
(c) Except as otherwise expressly provided herein or determined by
the Committee, the issuance by the Company of shares of its capital stock of any
class, or securities convertible into or exchangeable for shares of capital
stock of any class, either in connection with a direct or underwritten sale or
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or exercise price of Shares then subject
to outstanding Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence
of outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reclassifications, reorganizations or other
changes in the Company's capital structure or its business; (ii) any merger or
consolidation of the Company or to which the Company is a party; (iii) any
issuance by the
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Company of debt securities, or preferred or preference stock, that would rank
senior to or above the Shares subject to outstanding Options; (iv) the
dissolution or liquidation of the Company; (v) any sale, transfer, encumbrance,
pledge or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
11. TRANSFERABILITY OF OPTIONS.
(a) No Incentive Stock Option, and unless the Committee's prior
written consent is obtained (which consent may be obtained at the time an Option
is granted) and the transaction does not violate the requirements of Rule 16b-3
promulgated under the Securities Exchange Act no Non-Qualified Stock Option,
shall be subject to alienation, assignment, pledge, charge or other transfer
other than by the Optionee by will or the laws of descent and distribution, and
any attempt to make any such prohibited transfer shall be void. Each Option
shall be exercisable during the Optionee's lifetime only by the Optionee, or in
the case of a Non-Qualified Stock Option that has been assigned or otherwise
transferred with the Committee's prior written consent, only by the assignee
consented to by the Committee.
(b) Unless the Committee's prior written consent is obtained (which
consent may be obtained at the time an Option is granted) and the transaction
does not violate the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act, no Shares acquired by an Officer, as that term is defined under
Rule 16b-3, of the Company or Director pursuant to the exercise of an Option may
be sold, assigned, pledged or otherwise transferred prior to the expiration of
the six-month period following the date on which the Option was granted.
12. ISSUANCE OF SHARES.
(a) Notwithstanding any other provision of this Plan, the Company
shall not be obligated to issue any Shares unless it is advised by counsel of
its selection that it may do so without violation of the applicable Federal and
State laws pertaining to the issuance of securities, and may require any stock
so issued to bear a legend, may give its transfer agent instructions, and may
take such other steps, as in its judgment are reasonably required to prevent any
such violation.
(b) As a condition of any sale or issuance of Shares upon exercise of
any Option, the Committee may require such agreements or undertakings, if any,
as the Committee may deem necessary or advisable to assure compliance with any
such law or regulation including, but not limited to, the following:
(i) a representation and warranty by the Optionee to the Company,
at the time any Option is exercised, that he is acquiring the Shares
to be issued to him for investment and not with a view to, or for
sale in connection with, the distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to be bound by
any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law
deemed by the Committee to be applicable to the issuance of the
Shares and are endorsed upon the Share certificates.
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13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, which shall
consist of not less than two Directors, each of whom shall be Outside Directors.
The Committee shall have all of the powers of the Board with respect to the
Plan. Any member of the Committee may be removed at any time, with or without
cause, by resolution of the Board and any vacancy occurring in the membership of
the Committee may be filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and regulations
for carrying out the purposes of the Plan. The Committee's determinations and
its interpretation and construction of any provision of the Plan shall be final
and conclusive.
(c) Any and all decisions or determinations of the Committee shall be
made either (i) by a majority vote of the members of the Committee at a meeting
or (ii) without a meeting by the unanimous written approval of the members of
the Committee.
(d) The Board may reserve to itself the power to grant Options to
employees or Directors of the Company or any Subsidiary who are not Covered
Employees. If and to the extent that the Board reserves such powers, then all
references herein to the Committee shall refer to the Board with respect to the
Options granted by the Board.
(e) The Committee shall certify in writing prior to the delivery of
Shares upon exercise an Option in which its rights accrue or become exercisable
upon the attainment of stated goals that such goals and any other material terms
of such Option are satisfied pursuant to the criteria established by the
Committee as well as the requirements of Section 162(m) of the Code.
14. WITHHOLDING OR DEDUCTION FOR TAXES. If at any time specified herein
for the making of any issuance or delivery of any Option or Common Stock to any
Optionee, any law or regulation of any governmental authority having
jurisdiction in the premises shall require the Company to withhold, or to make
any deduction for, any taxes or take any other action in connection with the
issuance or delivery then to be made, such issuance or delivery shall be
deferred until such withholding or deduction shall have been provided for by the
Optionee or beneficiary, or other appropriate action shall have been taken.
15. INTERPRETATION.
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under Section 422 of the Code. If any provision of the Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof, and
the Plan shall be construed and enforced as if such provision had never been
included in the Plan.
(b) This Plan shall be governed by the internal laws of the State of
Delaware.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan or affect the meaning or
interpretation of any part of the Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
A-9
<PAGE>
(e) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under the Securities Exchange Act ("Rule
16b-3"), any ambiguities or inconsistencies in construction of the Plan shall be
interpreted to give effect to such intention, and if any provision of the Plan
is found not to be in compliance with Rule 16b-3, such provision shall be deemed
null and void to the extent required to permit the Plan to comply with Rule
16b-3. The Board and the Committee each may from time to time adopt rules and
regulations under, and amend, the Plan in furtherance of the intent of the
foregoing.
16. AMENDMENT AND DISCONTINUATION OF THE PLAN. Either the Board or the
Committee may from time to time amend the Plan or any Option; provided, however,
that, except to the extent provided in Section 10, no such amendment may,
without approval by the stockholders of the Company, (a) materially increase the
benefits accruing to participants under the Plan, (b) materially increase the
number of securities which may be issued under the Plan, or (c) materially
modify the requirements as to eligibility for participation in the Plan; and
provided further, that, except to the extent provided in Section 9, no amendment
or suspension of the Plan or any Option issued hereunder shall substantially
impair any Option previously granted to any Optionee without the consent of such
Optionee. Shareholder approval also shall be required for any amendment to the
Plan if and to the extent such approval is required by any federal or state law
or regulation or the rules of any stock exchange or automated quotation system
on which the Common Stock may then be listed or quoted.
17. EFFECTIVE DATE. The Plan became effective on February 15, 1996 and is
hereby amended and restated effective as of November 21, 1996. No Options shall
be granted and the Plan shall terminate if the Plan is not approved by the
affirmative votes of the holders of a majority of the total votes eligible to be
cast at a legal meeting of the Company shareholders, or any adjournment thereof
or by written consent of the holders of a majority of the Shares entitled to
vote, at or before the first meeting of Company shareholders in 2001 at which
directors are to be elected (the "Reliance Period Expiration Date"). Any Options
granted prior to the Reliance Period Expiration Date shall be effective when
granted (unless with respect to any Option, the Committee specifies otherwise at
the time of grant) and may be exercisable after the Reliance Period Expiration
Date.
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<PAGE>
AMERIPATH, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a stockholder of AMERIPATH, INC., a Delaware
corporation (the "Company"), hereby appoints James C. New and Robert P. Wynn,
and each of them, as proxies for the undersigned, each with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all of the shares of common stock of the Company that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
on May 5, 1999 at 11:00 a.m., local time, and at any adjournments or past
postponements thereof.
(COMPLETE AND SIGN ON REVERSE SIDE)
<PAGE>
A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
The Board of Directors unanimously recommends a vote FOR each proposal
below.
1. ELECTION OF DIRECTORS
[ ] VOTE FOR all nominees listed, [ ] WITHHOLD AUTHORITY TO VOTE
except as marked to the for all nominees
contrary below (if any)
NOMINEES: THOMAS S. ROBERTS
TIMOTHY M. KILPATRICK, M.D.
INSTRUCTION: To withhold authority to vote for any nominee(s), write that
nominee's name in the space provited below.
--------------------------------------------------------------
2. Proposal to Approve the Company's Amended and Restated 1996 Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Upon such other matters as may properly come before such Annual Meeting or
any adjournments or postponements thereof. In their direction, the proxies
are authorized to vote in their discretion upon such other business as may
properly come before the Annual Meeting and any adjournments or postponements
thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES IN PROPOSAL 1 ABOVE AND "FOR"
APPROVAL OF PROPOSAL 2.
The undersigned hereby acknowledges receipt of (1) the Notice of Annual
Meeting and Proxy Statement for the 1999 Annual Meeting and (2) the Company's
1998 Annual Report to Stockholders.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
(Signature) (Signature if held jointly)
---------------------- --------------------
Dated: 1999
------------------------
IMPORTANT: Please sign exactly as your name appears hereon and mail it promptly
even though you now plan to attend the meeting. When signing as
attorney, executor, administrator, trustee or guardian, please give
full title as such. When shares are held by joint tenants, both
should sign. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
