<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-K/A
                                Amendment No. 1

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                     FOR THE YEAR ENDED DECEMBER 31, 2000

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM ____________ TO ____________.

                                AMERIPATH, INC.
             (Exact Name of Registrant as Specified in Its Charter)

               Delaware                             65-0642485
       (State or Other Jurisdiction              (I.R.S. Employer
      Incorporation or Organization)            Identification No.)

           7289 Garden Road, Suite 200, Riviera Beach, Florida 33404
                   (Address of Principal Executive Offices)

     Registrant's Telephone Number, Including Area Code: (561) 845-1850

     Securities Registered Pursuant to Section 12(B) of the Act:

     Securities Registered Pursuant to Section 12(G) of the Act:

                    Common Stock (Par Value $.01 Per Share)
                               (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 16, 2001 was approximately $430.4 million based on the
$17.44 closing sale price for the Common Stock on the NASDAQ National Market
System on such date. For purposes of this computation, all executive officers
and directors of the Registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such directors and
officers are, in fact, affiliates of the Registrant.

     The number of shares of Common Stock of the Registrant outstanding as of
March 16, 2001 was 24,941,749.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement relating to the
Registrant's 2001 Annual Meeting of Shareholders to be filed with the Securities
and Exchange Commission no later than 120 days after the end of the year covered
by this Report are incorporated by reference into Part III of this Report.
<PAGE>

                                    PART I


ITEM 1.  GENERAL BUSINESS

     AmeriPath, Inc. and its subsidiaries ("AmeriPath" or the "Company") is the
largest physician and laboratory company focused on providing anatomic
pathology, cancer diagnostic, genomics, and healthcare information services.
Since the first quarter of 1996, the Company has completed the acquisition of 49
physician practices (the "Practices") located in 21 states. These practices are
either directly owned by the Company or managed by the Company through one of
its subsidiaries.  This includes the acquisition of Pathology Consultants of
America, Inc., d/b/a Inform DX ("Inform DX").  This transaction was accounted
for as a pooling of interests and therefore all prior year information has been
restated to reflect the acquisition of Inform DX.  As a result of the Inform DX
acquisition, the Company now manages several Practices through which it derives
management fees (each a "Managed Practice"). Although such Managed Practices are
not owned by the Company, the statistical data appearing throughout this report
on form 10-K including the description of such items as the number of
pathologists, hospital contracts, employees and outpatient laboratories
incorporates the statistical data from the Managed Practices as if they were
owned by the Company.  Unless otherwise indicated, the information presented in
the current and previous years includes Inform DX for all periods.  The
Company's 425 pathologists provide medical diagnostic services in outpatient
laboratories owned, operated and managed by the Company, hospitals, and
outpatient ambulatory surgery centers.  Of these pathologists, 419 are board
certified in anatomic and clinical pathology, and 190 are also board certified
in a subspecialty of anatomic pathology, including dermatopathology (study of
diseases of the skin), hematopathology (study of diseases of the blood) and
cytopathology (study of abnormalities of the cells).

     As of December 31, 2000, the Company and the Managed Practices had
contracts with a total of 224 hospitals to manage their clinical pathology and
other laboratories and provide professional pathology services.  The majority of
these hospital contracts are exclusive provider relationships of the Company and
the Managed Practices.  The Company and the Managed Practices also have 42
licensed outpatient laboratories.  The historical information included in this
statistical data chart includes Inform DX changes as if the acquisition had
occurred prior to 1998.

Statistical Data:
<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                       ---------------------------------------------
                                                                         1998               1999              2000
                                                                       --------           --------          --------
<S>                                                                    <C>                <C>               <C>
     .  Pathologists                                                       299                370               425
     .  Hospital Contracts                                                 168                207               224
     .  Employees                                                        1,616              1,865             2,325
     .  Outpatient laboratories                                             28                 36                42
     .  Practices
           Owned                                                            28                 34                38
           Managed                                                           8                  7                 7
     .  Net revenues (in 000's)
           Owned Practices                                            $177,304           $233,269          $308,365
           Managed Practices                                          $ 16,012           $ 24,163          $ 21,729
</TABLE>

     The Company essentially operates as a pathology group practice and is
legally structured so as to comply with the different laws dealing with the
corporate practice of medicine.  Refer to the section entitled "AmeriPath
Corporate Structure" for a more detailed discussion of the Company's legal
structure in the various states.

     AmeriPath manages and controls all of the non-medical functions of the
Practices, including:

     .   recruiting, training, employing and managing the technical and support
         staff of the Practices;
     .   developing, equipping and staffing laboratory facilities;
     .   establishing and maintaining courier services to transport specimens;
     .   negotiating and maintaining contracts with hospitals, national clinical
         laboratories and managed care organizations and other payors;
     .   providing financial reporting and administration, clerical, purchasing,
         payroll, billing and

                                       1
<PAGE>

         collection, information systems, sales and marketing, risk management,
         employee benefits, legal, tax and accounting  services;
     .   maintaining compliance with applicable laws, rules and regulations; and
     .   providing slide preparation and other technical services for the
         Practices.

     During 2000, the Company acquired eight Practices, including Inform DX, in
14 states (adding a total of 128 pathologists): six of these were in states in
which the Company previously operated (Pennsylvania, New York, Georgia, Florida,
Mississippi and Texas) and eight were in additional states (Virginia, Oklahoma,
Missouri, Tennessee, Massachusetts, California, Colorado and West Virginia).

Anatomic Pathology; Industry Overview

     Pathologists are medical doctors who specialize in the science of
pathology, the study of disease.  Following college and medical school,
pathologists typically spend five or more years to become eligible to sit for
certification by the American Board of Pathology in anatomic and clinical
pathology.  Many pathologists spend additional years of training to receive
certification in subspecialty areas of pathology such as dermatopathology (study
of diseases of the skin), hematopathology (study of diseases of the blood and
bone marrow), immunopathology (study of diseases of the immune system), and
cytopathology (study of abnormalities of cells).

     Anatomic pathology involves evaluating tissues (surgical pathology) and
cells (cytopathology) through variable magnifications using a microscope.  In
surgical pathology, the goal of such microscopic evaluations is to make a
definitive diagnosis of a patient's disease.  Virtually all tissues removed from
patients during surgery (hence the term "surgical" pathology) are examined under
the microscope by pathologists in order to determine whether or not a disease is
present; examples of surgical pathology specimens seen by pathologists include
breasts, prostate, skin, and bone marrow biopsies.  Thus, pathologists play an
indispensable role in determining whether a patient's illness is benign,
inflammatory or cancerous.  The surgical patient's subsequent treatment almost
always depends on the diagnosis rendered by the surgical pathologist.  For this
reason, doctors often refer to pathologists as the "physician's physician" a
compliment that acknowledges the fact that the pathologist's diagnosis
represents a critical factor in determining a patient's future care.

     Pathologists receive tissue samples from surgical procedures performed on
both inpatients (patients seen in hospitals) and outpatients (patients seen in
physician offices and in ambulatory surgery centers).  Subspecialties within the
area of surgical pathology include dermatopathology and hematopathology.  The
Company currently employs 419 pathologists who are board certified in anatomic
pathology (6 are board eligible); over 190 of them have additional subspecialty
board certification.

     Cytopathology involves the evaluation of cells under the magnification of a
microscope.  Pathologists examine cells obtained from body fluids, from solid
tissues aspirated through needles and from scrapings of body tissues.  The most
widely known cytopathologic examination is the "Pap" smear, developed by George
Papanicolaou in 1940.  A conventional "Pap" smear consists of a scraping of
cells taken from the cervix, spread on a slide, stained with a dye to color the
cells, and examined by a pathologist using a microscope.  To help reduce the
number of false negatives, another form of cell accumulation was developed.
This mono-layer technology collects a sample from the cervix using a cyto-brush,
which is then rinsed into a vial filled with preserved solution.  The cell
solution is processed at a laboratory by a technician.  The device filters the
blood and mucous and spreads cells in a thin layer, making the slide easier to
read.  Despite the higher cost of mono-layer methods, the technology is rapidly
gaining acceptance in the medical community.  "Pap" smears are considered
screening tests, which provide another physician with information that suggests
whether or not a potentially dangerous condition is present.  If an abnormality
is detected, the pathologist recommends what additional diagnostic procedures
(such as biopsy of the affected tissue) may be necessary.  Other cytopathology
examinations may, in and of themselves, be diagnostic of a specific disease
condition.  As with surgical pathology specimens, cytopathology specimens may
come from hospitalized patients, from patients in ambulatory surgery centers,
from patients being seen in private physician offices, from clinics, or from
pathologists taking aspiration biopsies directly from patients.  Experts in this
subspecialty of pathology are called cytopathologists.  All of the Company's
anatomic pathologists possess board certification that qualifies them to read
cytology cases.  Of these pathologists, 62 are also board certified
cytopathologists.

     Clinical pathology represents the second major category of pathology.
Broadly defined, clinical pathology involves the study of diseases identified by
analyzing blood or other body fluids such as urine or spinal fluid (the liquid
that surrounds the brain and spinal cord).  Frequently, high volume, high
technology automated equipment performs these analyses.

                                       2
<PAGE>

Pathologists' responsibilities related to automated testing revolve around their
roles as medical directors and clinical consultants. Pathologists are legally
responsible for the validity and accuracy of clinical laboratory test results
and for the function of the clinical laboratory under the federal Clinical
Laboratory Improvement Act of 1988 ("CLIA"), for identifying additional
diagnostic and/or therapeutic approaches suggested by the laboratory result; and
for discussing the possible clinical significance of laboratory results with
attending physicians in light of the patient's history and symptoms.

     In other words, pathologists play a critical role in ensuring that
laboratory tests are performed accurately and in a timely fashion.  Once again,
the pathologist's role as a "physician's physician" makes a critical
contribution to the proper diagnosis and efficient management of patients with
virtually every disease.

     Pathologists perform their duties in laboratories within hospitals, within
free-standing local, regional, and national laboratories independent of
hospitals, within ambulatory surgery centers, and within a variety of other
settings.  Because tissue and fluid samples are readily transportable,
pathologists working within one of these settings may actually receive specimens
for evaluation and diagnosis from multiple sources including physician offices,
clinics, other laboratories, and even other hospitals.  This ability to deliver
work to sites having capacity to handle additional volume enhances the
pathologists' productivity and allows a pathology practice to serve a larger
geographic area.  The Company uses this strategy to ensure the growth of "same
practice net revenues," while making its pathologists more productive and
efficient, and enabling the Company to better serve the customer by utilizing
the specialized expertise available within the Company's pathologists.

     The Company expects the market for anatomic pathology services to grow
primarily due to the aging of the United States population, the increasing
incidence of cancer, and accelerating medical advancements that allow for the
earlier diagnosis and treatment of diseases.  The American Cancer Society
estimates that approximately 13 million Americans alive today have had, or still
have, some form of cancer and in 2000, about 1.2 million new cancer cases are
expected to be diagnosed, 47,700 of which will be new melanoma cases.   Studies
published by the American Cancer Society revealed that there were approximately
1.3 million new cases of non-melanoma cases (basal cell carcinoma and squamous
cell carcinoma) diagnosed in 1999.  According to the American Medical
Association, there are approximately 14,000 practicing pathologists in the
United States.

     Current trends within healthcare may accelerate the demand for the
Company's services.  Healthcare cost containment pressures, the increasing
influence of managed care, and medical and technological advancements drive
hospitals to reduce the length of patient stays, decrease the number of
procedures being performed as inpatients, and increase the number of procedures
shifted to the outpatient setting.  The Company expects to capitalize on this
trend by working with hospitals to eliminate the redundancies within the typical
anatomic pathology laboratories that exist within hospitals, thereby reducing
hospitals' costs.  By consolidating and centralizing these functions into more
efficient and cost effective outpatient anatomic pathology laboratories, the
Company will also be able to broaden the range of subspecialty services it
offers and to develop new esoteric testing capabilities.  Because the trend
toward providing medical services in outpatient settings almost certainly will
continue, the Company will be well positioned to capitalize on these
opportunities.

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

     Historically, the anatomic pathology industry has been highly fragmented,
with the majority of the services being provided by relatively small practices.
The Company estimates that there are over 3,300 pathology practices operating in
outpatient laboratories in the United States.  There is an evolving trend among
pathologists to form larger practices to provide a broader range of outpatient
and inpatient services and enhance the utilization of the practice's
pathologists. The Company believes this trend can be attributed to several
factors, including cost containment pressures by government and other third-
party payors, increased competition, managed care and the increased costs and
complexities associated with operating a medical practice. Moreover, given the
current trends of increasing outpatient services, outsourcing and the
consolidation of hospitals, pathologists are seeking to align themselves with
larger practices and physician practice management companies that can assist

                                       3
<PAGE>

providers in the evolving healthcare environment.  Larger practices and
corporate structures can offer physicians certain advantages, such as:

     .   obtaining and negotiating contracts with hospitals, managed care
         providers and national clinical laboratories;
     .   marketing and selling of professional services;
     .   providing continuing education and career advancement opportunities;
     .   making available a broad range of specialists with whom to consult;
     .   providing access to capital and business and management experience;
     .   establishing and implementing more efficient and cost effective billing
         and collection procedures; and
     .   expanding the practice's geographic coverage area.

     Each of the foregoing factors support the pathologists in the efficient
management of the complex and time-consuming non-medical aspects of their
practice.

Business Strategy

     The Company's objective is to enhance its position as the largest provider
of anatomic pathology services through the following strategies:

Focus on Anatomic Pathology. The Company believes that its focus of providing
management services to anatomic pathology practices provides it with a
competitive advantage in the management of such practices. As a result of the
Company's single focus, pathologists are able to form an internal network for
consultations and to offer specialized services and testing to their clients.
The Company also believes that its single specialty focus enhances its expertise
in managing both inpatient and outpatient pathology practices.

     In the fourth quarter of 1998, the Company began the operation of its
Center for Advanced Diagnostics ("CAD") in Fort Myers, Florida.  In the second
quarter of 2000, this operation was moved to an expanded facility in Orlando,
Florida.  CAD focuses on the detection and diagnosis of cancers.  CAD offers a
full array of diagnostics for hematopoietic and solid tissue malignancies,
including molecular genetics, cytogenetics, flow cytometry, specialized
immunohistochemistry, and minimal residual disease detection.  CAD's staff
includes multiple doctoral scientists with extensive experience and reputations
in molecular genetics, cytogenetics, flow cytometry, and pathology.
Pathologists, board certified in anatomic and clinical pathology, with
subspecialty expertise in hematopathology, cytopathology, and solid tumor
diagnosis complete the medical and scientific staff.  In addition to diagnostic
testing for both AmeriPath and non-AmeriPath physicians, hospitals, and other
healthcare providers, CAD will be able to perform developmental work for
diagnostic manufacturers, clinical research organizations ("CROs"), and big
pharmaceutical companies using AmeriPath's unparalleled access to normal,
abnormal, and cancerous tissues.

     During the second quarter of 1999, the Company entered into a services
agreement with A. Bernard Ackerman, M.D., widely regarded as the preeminent
dermatopathologist in the world.  In order to maximize the effectiveness of Dr.
Ackerman's affiliation with the Company, AmeriPath established the "Ackerman
Academy of Dermatopathology" and a diagnostic facility in New York City.  The
Academy has an accredited dermatopathology fellowship training program with
state-of-the-art instrumentation, including a 27-head microscope, and one of the
most technologically advanced audiovisual systems available.  The diagnostic
facility, AmeriPath New York, operates as a licensed independent outpatient
laboratory specializing in dermatopathology and offers adjunctive methods for
diagnosis, including immunoperoxidase, marker studies, gene rearrangement, and
immunofluorescence.

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

                                       4
<PAGE>

upon their long-standing relationships and reputations. The Company is
revisiting its acquisition strategy, particularly its pace of acquisitions, and
will focus on fold-in acquisitions that will densify its operations in
strategically targeted markets and larger pedestal acquisitions.

     Diagnostic Healthcare Provider.  The Company has commenced its transition
to becoming a fully integrated healthcare diagnostic information provider, which
includes the Company's development of new ways to generate additional revenues
through leveraging the Company's personnel, technology and resources.  In
addition to the Company's establishment of its Center for Advanced Diagnostics,
the Company has taken the steps described in the paragraph above in connection
with such transition.  Although the Company believes that such new endeavors are
promising, there can be no assurance that they will be profitable.

     During the second quarter of 2000, the Company formed an alliance with
Genomics Collaborative, Inc. ("GCI") to provide fresh frozen samples from
normal, diseased, and cancerous tissue to GCI for subsequent sale to researchers
in industry and academic laboratories who are working to discover genes
associated with more common disease categories, such as heart disease,
hypertension, diabetes, osteoporosis, depression, dementia, asthma, and cancer,
with a special focus on breast, colon, and prostate tumors.  This alliance
utilizes the Company's national network of hospitals, physicians, and
pathologists and GCI's capabilities in large scale DNA tissue analysis and
handling, all tied together by proprietary information systems and
bioinformatics. The financial results of the alliance with GCI were not material
to the Company's operations during 2000.  The Company is working with GCI to
develop procedures to comply with informed consent requirements and other
regulations regarding the taking and processing of specimens from donors and
related records.  However, failure to comply with such regulations could result
in adverse consequences including potential liability of the Company.  On
September 15, 2000, the Company made a $1.0 million investment in GCI in
exchange for 333,333 shares of Series D Preferred Stock, par value $0.01.

     Expand Sales and Marketing Efforts.  The Company focuses on generating
internal growth for the Practices by augmenting their existing physician and
contractual relationships through a professional sales and marketing program.
The Company's marketing program is designed to: increase relationships with
physicians over a broader geographic region; expand contracts with national
clinical laboratories that subcontract for anatomic pathology services; and
capitalize on existing managed care relationships.  Since specimens are readily
transportable, the Company's sales and marketing efforts focus on expanding the
geographic scope of the Practices.  Ten Practices presently have contracts to
provide outpatient anatomic and cytopathology pathology services with the two
major national clinical laboratories.  These contracts generally are exclusive
to the individual Practice.  The Company is seeking to extend its existing
contracts with the national clinical laboratories to include multiple Practices
that cover broader geographic regions.  The Company believes that its regional
business model offers national clinical laboratories and managed care
organizations a convenient single source for anatomic pathology services.

     Increase Contracts with Hospitals.  The Company seeks to obtain additional
exclusive hospital contracts for each Practice in a region through the
acquisition of other anatomic pathology practices, as well as through the
expansion of the Company's existing relationships with multi-hospital systems.
The Company believes that multi-hospital systems can benefit from contracting
with a single provider of pathology services in a geographic region through the
consolidation of clinical laboratory, histology and other ancillary hospital
support functions, thereby reducing costs, and simplifying and consolidating
contractual relationships with managed care organizations and other third party
payors. In addition, the Company believes that providing inpatient laboratory
services to multiple hospitals within a geographic area facilitates the
development and effectiveness of a successful outpatient services network by
creating market presence and economies of scale offering a broader range of
pathology expertise while maintaining the important physician relationships.

     Achieve Operational Efficiencies.  The Company believes that its Practices
will benefit from the management and administrative support provided by the
Company's corporate staff, which provides oversight and technical and
administrative support services.  The Company has centralized accounting and
financial reporting, payroll, benefits administration, purchasing, managed care
contracting, risk management and corporate compliance.  Furthermore, the Company
has achieved and continues to pursue certain cost and operational efficiencies,
enhancing the Practices' profitability and efficiency by utilizing the Company's
collective buying power to negotiate discounts on laboratory equipment and
medical supplies and reductions in premiums for health, property, casualty and
professional liability insurance. Also, prior to their acquisition, each of the
Practices either managed their billing and collections in-house or outsourced
these functions.  The Company continues to evaluate the billing and collection
systems of the Practices and centralizes such functions to the extent determined
practicable and efficient.

                                       5
<PAGE>

Regional Business Model

     The Company believes that its regional business model offers short and
long-term benefits to the Company, its pathologists, referring physicians, third
party payors and patients.  The Company continues to integrate the Practices'
administrative and technical support functions, including accounting, payroll,
purchasing, risk management, billing and collections, and expects such
integration to result in enhanced operational efficiencies.  The Company's
courier system for transporting specimens enables the Practices to penetrate
areas outside their current markets and enhance the utilization of their
laboratory facilities.  The Company also integrates and coordinates the sales
and marketing personnel of the Practices to promote the Practices to physicians,
hospitals, surgery centers, managed care organizations and national clinical
laboratories.  This marketing effort is based upon promoting the broad
geographic coverage, professional pathologist expertise and the extensive
professional services offered by the Company.  The Company's strategy is to
leverage its size to expand its contracts with national clinical laboratories to
all of the areas covered by its Practices.  The Company markets its services
under the name "AmeriPath" in order to develop brand identification of products
and services to payors and other clients.  The Company plans to integrate the
Practices' management information systems into a single system (or at a minimum
consolidate the information resident on the various lab information systems)
that will expand the financial and diagnostic reporting capabilities of each of
the Practices and the Company.  Based on the foregoing, the Company believes
that implementation of this regional model increases the revenues and
profitability of the Practices in the region, and the Company is applying this
regional business model, in whole or in part, to other states in which it
operates.

     Through the implementation of its operating strategies, the Company
continues to develop integrated networks of anatomic pathology practices on a
regional basis.  These networks consist of a number of practices that together:
(i) have a substantial regional market presence; (ii) offer a broad range of
services; (iii) have extensive physician contacts; and (iv) possess
complementary strengths and opportunities for operational and production
efficiencies.  The Company has developed its regional business model in Florida
and is replicating its model in Texas and the Midwest.  The Company believes
that Florida represents an attractive market due to its population,
demographics, including the growth of the general population and a large elderly
population, as well as the Company's familiarity and understanding of the
anatomic pathology market in Florida.  The Company currently owns, controls and
manages anatomic pathology practices throughout Florida including Miami, Fort
Lauderdale, Jacksonville, Orlando, Daytona, Fort Myers and Tampa.  In addition,
the Company contracts with Quest Diagnostics ("Quest"), a national clinical
laboratory, to provide anatomic pathology services on an exclusive basis in most
of Florida's counties.

     The Florida regional model has been an effective tool in building the
Company's business.  Net revenues for the Florida region have increased 22.2% in
the past two years while adding only one pathologist to the region.  Operating
margins as a percent of net revenue for the region have declined in the past two
years, primarily due to an increase in laboratory staffing costs, including
physicians, and a higher percentage of revenue from national clinical laboratory
contracts which have lower revenue per unit.  However, this lower net revenue
per unit from national lab contracts has been offset in part by increased
efficiencies attributable to the Florida regional business model. The Florida
region's operating margin was 29.2% for the year ended December 31, 2000
compared to the Company's overall operating margin, excluding corporate
expenses, of 26.9% for the same period.

     The Company believes that its improving performance in Florida, as
reflected in the following table, is due in part to the favorable results of its
regional model in Florida:

<TABLE>
<CAPTION>
                                                              December 31,
                                                 ---------------------------------------
                                                  1998           1999              2000
                                                 -----           -----            ------
Florida Statistics                                       (dollars in millions)
<S>                                              <C>             <C>             <C>
Number of Practices                                 11               12              14
Pathologists                                        82               80              83
Hospital contracts                                  31               31              32
Net revenues                                     $85.1            $92.5          $104.0
Operating margin before amortization             $25.6            $27.7          $ 30.4
Operating margin as a percent of net revenues     30.1%            30.0%           29.2%
</TABLE>

                                       6
<PAGE>

AmeriPath Corporate Structure

     AmeriPath is a holding company that, through its subsidiaries, provides
pathology services and management services to other pathology laboratories.  The
Company's revenues are primarily derived from two segments: its Owned Practices
and its Managed Practices, as further described below.  The Owned Practices
consist of subsidiaries (the "Practice Subsidiaries") that directly employ
physicians, and subsidiaries (the "Manager Subsidiaries") that enter into
management services agreements with affiliated practices (each, a "PA
Contractor") which, in turn, employ the physicians.  The Manager Subsidiaries
are typically utilized in states with laws that restrict the corporate practice
of medicine.  As a result of the corporate practice of medicine doctrine, the
affiliated physicians in these states retain ownership of the PA Contractor, but
the Manager Subsidiaries typically enter into contractual arrangements that
generally (i) prohibit the affiliated physicians from transferring their
ownership interests in the PA Contractor, except in very limited circumstances,
and (ii) require the affiliated physicians to transfer their ownership in the PA
Contractor to designees of AmeriPath upon the occurrence of specified events.
The Managed Practices are affiliated practices that are not owned by the
Company, but they contract with the Company to provide management services.  The
manner in which AmeriPath operates a particular Practice is determined primarily
by whether it is an Owned or Managed Practice and the corporate practice of
medicine restrictions of the state in which the Practice is located and other
applicable regulations. The Company believes that it exercises care in its
efforts to structure its practices and arrangements with hospitals and
physicians and its subsidiaries so as to comply with relevant federal and state
laws and believes that such current arrangements and practices comply with all
applicable statutes and regulations.  However, due to uncertainties in the law
there can be no assurance that such arrangements or practices could be deemed to
be in noncompliance in the future, or that such occurrence could not result in a
material adverse effect on the Company.

     Corporate practice of medicine restrictions, which are discussed in further
detail under "Government Regulation" below, generally prohibit corporate
entities from employing or otherwise exercising control over physicians.  In
states that do not prohibit a for-profit corporation from employing physicians
such as Florida, Alabama, Mississippi and Kentucky, AmeriPath operates its Owned
Practices through Practice Subsidiaries, which are subsidiary corporations of
AmeriPath that directly employ the physicians.  In states that prohibit a for-
profit corporation from employing physicians, such as Texas, Indiana, Ohio,
North Carolina, Michigan, Wisconsin, New York and Pennsylvania, AmeriPath
operates each Owned Practice through a Manager Subsidiary, which is a subsidiary
of AmeriPath that has a long-term management agreement with the applicable PA
Contractor, which in turn employs the physicians (see "--Ownership and
Management of the PA Contractor" for explanation of PA Contractor).  In many
cases, several Practices are included within or organized under a single
Practice Subsidiary or PA Contractor, as the case may be.

     Owned Practices.  Owned practices are operated through Manager and Practice
Subsidiaries.  The Manager and Practice Subsidiaries are wholly-owned
subsidiaries of AmeriPath and the officers and directors of such companies are
generally members of AmeriPath's executive management team.  The financial
statements of the Manager and Practice Subsidiaries are included in the
consolidated financial statements of AmeriPath.

     Ownership and Management of the PA Contractors.  The term PA Contractor, is
used throughout this document to refer to an entity which has a contractual
relationship with the Company but is not owned directly by AmeriPath.  These
entities can be a professional corporation or professional association, as
permitted and defined in various state statutes.  The PA Contractors operating
in North Carolina, Wisconsin, New York, Michigan and Pennsylvania are owned by
physicians affiliated with AmeriPath. To the extent permitted by law, the
officers and directors of the PA Contractors are members of AmeriPath's
executive management team.  However, in states where law prohibits such non-
licensed physician personnel from serving as an officer or director of a PA
Contractor, eligible affiliated physicians serve in such positions.  The
affiliated physicians who own PA Contractors have entered into agreements with
AmeriPath that generally (i) prohibit such affiliated physicians from
transferring their ownership interests in the PA Contractor, except in very
limited circumstances and (ii) require such affiliated physicians to transfer
their ownership in the PA Contractor to designees of AmeriPath upon the
occurrence of specified events.

     The PA Contractors in Ohio and Indiana are owned by trusts.  The
beneficiary of such trusts is AmeriPath and the Trustees of such trusts are
affiliated physicians.  The PA Contractors operating in Texas are organized as
not-for-profit 5.01(a) corporations, which are discussed in greater detail under
the caption "Government Regulation" below.  The sole member of the not-for-
profit PA Contractors in Texas is AmeriPath.

     Each PA Contractor is party to a long-term management agreement with one of
the Company's Manager

                                       7
<PAGE>

Subsidiaries. Under the terms of these management agreements, AmeriPath
generally provides all non-medical and administrative support services to the
Practices including accounting and financial reporting, human resources,
payroll, billing, and employee benefits administration. In addition, the
management agreements give the Manager Subsidiaries certain rights with respect
to the management of the non-medical operations of the PA Contractors. The
management agreements require the PA Contractors to pay a management fee to the
applicable Manager Subsidiaries. The fee structure is different for each
Practice based upon various factors, including applicable law, and includes fees
based on a percentage of earnings, performance-based fees, and flat fees that
are adjusted from time to time.

     In accordance with Emerging Issues Task Force 97-2:"Application of FASB
Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Agreements"
("EITF 97-2"), the financial statements of the PA Contractors are included in
the consolidated financial statements of AmeriPath since AmeriPath has a
controlling interest in the PA Contractor.

     Managed Practices.  The term Managed Practices refers to AmeriPath's
operation and management of pathology practices under long-term service
agreements with affiliated physician groups.  Generally, the Company acquires
the practice's assets, and the physician groups maintain their separate
corporate or partnership entities and enter into employment and noncompete
agreements with the practicing physicians.  Costs of obtaining service
agreements are amortized using the straight-line method over 25 years.

     Service agreements represent the exclusive right to operate the Company's
practices in affiliation with the related physician groups during the term of
the agreements.  Pursuant to the service agreements, the Company provides the
physician groups with equipment, supplies, support personnel, and management and
financial advisory services.  Physician groups are responsible for the
recruitment and hiring of physicians and all other personnel who provide
pathological services, and for all issues related to the professional, clinical
and ethical aspects of the practice.  As part of the service agreements,
physician groups are required to maintain medical malpractice insurance which
names the Company as an additional insured.  The Company is also required to
maintain general liability insurance and name the physician groups as additional
insureds.  Upon termination of the service agreements, the respective physician
groups are required to obtain continuing liability insurance coverage under
either a "tail policy" or a "prior acts policy."

     The management services fees charged under the service agreements are based
on a predetermined percentage of net operating income of the Managed Practices.
Management service revenue is recognized by the Company at the time physician
service revenue is recorded by the physician group.  The Company also
participates to varying degrees in non-physician revenues generated from
ancillary services offered through the laboratories.  The Company charges a
capital fee for the use of depreciable assets owned by the Company and
recognizes revenue for all practice expenses that are paid on behalf of the
practices.  Practice expenses exclude the salaries and benefits of the
physicians.

     AmeriPath does not consolidate the financial statements of the Managed
Practices because it does not have a controlling financial interest, as defined
by EITF 97-2.

     Operation of Practices Generally.  AmeriPath manages and controls all of
the non-medical functions of the Practices. AmeriPath is not licensed to
practice medicine. The practice of medicine is conducted solely by the
affiliated physicians.

     In managing the Owned Practices, the Board of Directors and management of
AmeriPath formulate strategies and policies which are implemented locally on a
day-to-day basis by each Owned Practice, without regard to whether such practice
is organized as a Manager or Practice Subsidiary or PA Contractor.  Each Owned
Practice has a pathologist Managing Director who is responsible for overseeing
the day-to-day management of the Owned Practice, who reports to one of four
Regional Managing Directors, three of whom are pathologists, who in turn report
to executive officers of the Company.  AmeriPath's Medical Director and Chief
Operating Officer develop and review standards for the affiliated physicians and
their medical practices and review quality and peer review matters with each
Owned Practice's Medical Director (or a medical review committee).  AmeriPath's
Chief Operating Officer, a physician, oversees all employment matters with
respect to affiliated physicians and staffing decisions at the Owned Practices.

     The Managed Practices, pursuant to their service agreements, manage all
aspects of the affiliated physician groups other than the provision of medical
services, which is controlled solely by the physician groups.  The affiliated
physician

                                       8
<PAGE>

group's joint policy board, equally represented by physicians and employees of
AmeriPath, focus on strategic and operational planning, marketing, managed care
arrangements and other major issues facing the group.

     Hospital Contracts and Laboratories.  The Practices typically contract with
hospitals to exclusively provide pathology services.  The Practices staff each
hospital with at least one pathologist who generally serves as the Medical
Director of the hospital laboratory and who facilitates the hospital's
compliance with licensing requirements.  The Practices are responsible for
recruiting, staffing and scheduling the Practice's affiliated physicians in the
local hospital's inpatient laboratories.  The Medical Director of the laboratory
is responsible for: (i) the overall management of the laboratory, including
quality of care, professional discipline and utilization review; (ii) serving as
a liaison to the hospital administrators and medical staff; and (iii)
maintaining professional and public relations in the hospital and the community.
Several Practices have both outpatient laboratories and hospital contracts,
which allow outpatient specimens to be examined by the hospital pathologists,
enhancing the utilization of pathologists in inpatient facilities.  In the
hospitals, technical personnel are typically employed by the hospital, rather
than by the Practices.  Upon initiation, the hospital contracts typically have
terms of one to five years and contain conditional renewal provisions.  Some of
the contracts also contain clauses that allow for termination by either party
with relatively short notice.  As of December 31, 2000, the Practices had 224
hospital contracts, the terms of which vary, however, substantially all of these
contracts will expire within the next three years, subject, in most cases, to
automatic renewal unless either party notifies the other party of its election
not to renew.  Loss of any particular hospital contract would not only result in
a loss of net revenue to the Company, but also a loss of outpatient net revenue
that may be derived from the relationship with a hospital and its medical staff.
Continuing consolidation in the hospital industry may result in fewer hospitals
or fewer laboratories as hospitals move to combine their operations.

     In the past, the Company provided services at four hospitals and an
ambulatory care facility owned by Primary Health Systems ("PHS"), a regional
hospital network in Cleveland, Ohio.  During the first quarter of 2000, PHS
began implementing a plan of reorganization filed under Chapter 11 with the U.S.
Bankruptcy Court for the District of Delaware, and closed one hospital.  During
the second quarter, the bankruptcy court approved the sale of two hospitals and
the ambulatory care facility to local purchasers in the Cleveland area.  The
purchasers, who elected to employ their own pathologists, did not accept the
Company's contracts with these two hospitals and the ambulatory care facility.
One hospital has not been sold and continues to do business with the Company.
This resulted in asset impairment and related charges of $5.2 million in 2000.
In addition, during the fourth quarter of 2000, a hospital in South Florida
where AmeriPath had the pathology contract, requested proposals for its
pathology services, and AmeriPath was unsuccessful in retaining this contract.
Based upon the remaining projected cash flow from this hospital network, the
Company determined that the intangible assets were impaired and recorded a pre-
tax non-cash charge of approximately $1.0 million.

     As of December 31, 2000, the Practices had contracts with 27 hospitals that
are owned by HCA - The Healthcare Company ("HCA"), the country's largest
publicly owned hospital company formerly known as Columbia/HCA Healthcare
Corporation.  Net revenues generated from contracts with HCA hospitals were
$32.0 million in 1998, $39.4 million in 1999 and $43.5 million in 2000.

     All of AmeriPath's outpatient laboratories are licensed and certified under
the guidelines established by CLIA and applicable state statutes and are managed
by a Medical Director of the laboratory.  AmeriPath's corporate compliance,
quality assurance and quality improvement programs are designed to assure that
all laboratories and other operations are in compliance with applicable laws,
rules and regulations.

Information Technology

     During 2000, the Company reorganized its Information Technology Group
("IT") to better serve the existing and planned model for the information needs
of the Company.  IT focused on three central issues: increasing reliability of
our information systems, conversion to the new billing program, and beginning in
the fourth quarter, a heightened effort of sales and marketing technology
initiatives.  During 2000, the IT staffing was increased, including the hiring
of a Chief Information Officer, Director of IT Operations, Director of Software
Development, and the establishment of a Project Management office.  The new team
established a "Best Practice" approach to managing services to the Company
laboratories. These services have resulted in better performing information
systems, increased focus on centralization of information, and a greater level
of standardization across our businesses.

     The Company recognized the opportunity in the market for enhanced reporting
to our customers and has launched a technology initiative to produce reports
that include organ maps, photomicrographs and patient education.  Enhanced
reports

                                       9
<PAGE>

in GI, Obstetrics and Gynecology, and Urology are available in most of our
markets and the technology initiative is expected to be completed by the end of
the second quarter of 2001. Our programs for acquiring the images and producing
the reports are very efficient and additional programs will be implemented as
customer sales increase.

     Consolidation of data to our data warehouse continues and will be completed
at the end of the first quarter of 2001. The Inform DX acquisition provided
opportunities to reduce the effort and expense in completing this project
because Inform DX had already made a significant amount of investment in program
development and related technology.  The information acquisition process and
repository of our utilization data has been completed.  The sales and marketing
department will be the early adopters of the new program to manage and market
our business.

     The Company believes that its increasing integration and consolidation of
its laboratory information, billing and collections and financial reporting
systems enable it to monitor the operations of the Practices, enhance
utilization of the pathologists, develop practice protocols and archives and
provides the Company with a competitive advantage in negotiating national
clinical laboratory and managed care contracts.  Each of the Company's
laboratories has a laboratory information system that enables laboratory
personnel to track, process, report and archive patient diagnostic information.

     The Company's systems include an outpatient billing software program at its
Fort Lauderdale centralized billing operation, which is being utilized for the
integration of outpatient billing.  In its effort to further increase the
capacity of its centralized billing operations, during 1999 the Company signed
an agreement with a large healthcare software provider for a billing, accounts
receivable and collections system.  In addition to performing services for
outpatient billing, hospital billing is being tested on the new billing system.
Conversion from the current billing systems to the new billing system is
anticipated to be completed by the end of 2002.  The Company has installed a
complete general ledger and financial reporting system to handle accounting for
the Practices and to consolidate all accounting and financial information.  As
of March 2001, all of the Practices have been integrated onto one common
accounting system.


     The company is focused on being federal Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") compliant and an audit will be conducted to
assure compliance.  We are currently in the planning stages of the audit and
have interviewed outside services for engagement.

Sales and Marketing

     Outpatient Market.  The Company's marketing efforts are focused on
physicians, hospital and outpatient surgery center administrators, national
clinical laboratories and managed care organizations. Other than Inform DX,
prior to being acquired by the Company, the Practices' marketing efforts were
primarily based on the professional reputations and the individual efforts of
pathologists.  The Company believes that there is an opportunity to capitalize
on these professional reputations by hiring experienced personnel and utilizing
professional sales and marketing techniques.  Historically, some of the
outpatient practices marketed outpatient services primarily to dermatologists,
over a broad geographic area including neighboring states. The Company continues
to expand its sales force with additional sales personnel and management staff
to accommodate new acquisitions as well as increase same store growth.  These
field representatives are supervised by regional sales managers who coordinate
the implementation of regional contracting efforts, leverage operational
capabilities, support national sales strategies and provide ongoing training and
field sales support.  The Regional Sales Managers report to the Vice President
of Sales and Marketing to ensure the implementation of consistent and effective
sales activities nationwide.  The sales and marketing staff also includes
Directors of Marketing and Managed Care.  In 2000, the Company added one
position to the marketing department, a manager of art and creative design, to
coordinate support efforts for its product managers who report directly to the
Director of Marketing.  The Director of Managed Care directs regional managers
of managed care in negotiating additional contracts.  In 2000, the Company added
one northeast regional manager to its Managed Care Department.  The Director of
Managed Care Sales supervises the department's efforts in securing national
contracts, while the Manager of Contract Administration ensures adherence to
contract terms and conditions.

     National Clinical Laboratory Marketing.  The national clinical laboratories
contract with managed care organizations to provide clinical laboratory
services, as well as anatomic pathology and cytology services.  The clinical
laboratory market is primarily dominated by two laboratories, Quest and
Laboratory Corporation of America Holdings ("LabCorp").  Their contracts with
managed care organizations are typically capitated.  Ten Practices have
subcontracts with these two large national clinical laboratories to provide
anatomic pathology and cytology services.  Under these contracts, which
typically run from one to three years with automatic renewals unless terminated
earlier, the Practices bill the national

                                       10
<PAGE>

clinical laboratories on a discounted fee-for-service basis. The reduced fee is
offset by the national clinical laboratories provision of courier services,
supplies, and reduced billing costs and lower bad debts, since the national
clinical labs bear the capitation risk. The Company is directing its marketing
efforts to national clinical laboratories to expand these contracts on a
regional basis to additional Practices as well as to enter into new contracts.
At the same time, the Company is seeking to secure new contracts and expand
existing provider contracts with managed care organizations for the provision of
anatomic pathology services directly to their members and is prepared to
negotiate flexible arrangements with managed care organizations, including
discounted fee-for-service or capitated contracts. There can be no assurance
that the Company's effort to contract directly with managed care organizations
will not adversely affect the Company's relationship with the national clinical
laboratories.

Client and Payor Relationships

     The Practices also provide services to a wide variety of other healthcare
providers and payors including physicians, government programs, indemnity
insurance companies, managed care organizations and national clinical
laboratories.  Fees for anatomic pathology services rendered to physicians are
billed either to the physicians, to the patient or to the patient's third party
payor.

Contracts and Relationships with Owned Practice Physicians

     For the Owned Practices, the Company employs pathologists, or manages the
PA Contractors who employ pathologists, to provide medical services in hospitals
or in other inpatient and outpatient laboratories.  Pathologist employment
agreements typically have terms of three to five years and generally can be
terminated at any time upon 60 to 180 days notice.  The pathologists generally
receive a base salary, fringe benefits, and may be eligible for an incentive
performance bonus.  In addition to compensation, the Company provides its
pathologists with uniform benefit plans, such as disability, supplemental
retirement, life and group health insurance and medical malpractice insurance.
The pathologists are required to hold a valid license to practice medicine in
the jurisdiction in which they practice and, with respect to inpatient or
hospital services, to become a member of the medical staff at the contracting
hospital with privileges in pathology.  The Company is responsible for billing
patients, physicians and third party payors for services rendered by the
pathologists.  Most of the employment agreements prohibit the physician from
competing with the Company within a defined geographic area and prohibit
solicitation of pathologists, other employees or clients of the Company for a
period of one to two years after termination of employment.

     The Company's business is dependent upon the recruitment and retention of
pathologists, particularly those with subspecialties, such as dermatopathology.
While the Company has been able to recruit (principally through practice
acquisitions) and retain pathologists, no assurance can be given that the
Company will be able to continue to do so successfully or on terms similar to
its current arrangements.  The relationship between the Company's pathologists
and their respective local medical communities is important to the operation and
continued profitability of the Practices. In the event that a significant number
of pathologists terminate their relationships with the Company or become unable
or unwilling to continue their employment, the Company's business could be
materially and adversely affected.

     The experience and specialized certifications of the Company's affiliated
physicians provide opportunities for immediate consultation in complex cases
among the internal network of affiliated physicians.  Pathology is a specialized
field of medicine and is a core requirement in a dermatologist's training.
Through teaching at medical institutions, the Company's affiliated physicians
have an opportunity to develop a reputation and following among residents and
practicing physicians.  Several affiliated physicians have teaching positions
with universities or affiliations with other educational institutions for the
training and continuing medical education of physicians, particularly
dermatologists.

Government Regulations

     The Company's business is subject to many of governmental and regulatory
requirements relating to healthcare matters as well as laws and regulations that
relate to business corporations.  The Company believes that it exercises care to
structure its practices and arrangements with hospitals and physicians to comply
with relevant federal and state law.  It also believes such current arrangements
and practices do comply with applicable statutes and regulations.  However,
there can be no assurance that the Company's current or prior practices or
arrangements will not be found to be in noncompliance with law, or that such
occurrence will not result in a material adverse effect to the Company.

                                       11
<PAGE>

     The Company derived approximately 20% and 19% of its Owned Practices'
collections for the years ended December 31, 1999 and 2000, respectively, from
payments made by government sponsored healthcare programs (principally Medicare
and Medicaid).  The decrease in the percentage of collections attributable to
government sponsored healthcare programs resulted primarily from the acquisition
of practices outside Florida, with smaller Medicare populations.  These programs
are subject to substantial regulation by the federal and state governments.  Any
change in payment regulations, policies, practices, interpretations or statutes
that places limitations on reimbursement amounts, or changes in reimbursement
coding, or practices could materially and adversely affect the Company's
financial condition and results of operations.  Increasing budgetary pressures
at both the federal and state level and concerns over the continued increase of
the costs of healthcare have led, and may continue to lead, to significant
reductions in health care payments.  State concerns over the growth in Medicaid
also could result in payment reductions.  Although governmental payment
reductions have not materially affected the Company in the past, it is possible
that such changes in the future could have a material adverse effect on the
Company's financial condition and results of operations.  In addition, Medicare,
Medicaid and other government sponsored healthcare programs are increasingly
shifting to some form of managed care.  Some states have recently enacted
legislation to require that all Medicaid patients be converted to managed care
organizations, and similar legislation may be enacted in other states, which
could result in reduced payments to the Company for such patients.  In addition,
a state-legislated shift in a Medicaid plan to managed care could cause the loss
of some, or all, Medicaid business for the Company in that state if the Company
were not selected as a participating provider.  Additionally, funds received
under all health care reimbursement programs are subject to audit with respect
to the proper billing for physician services.  Retroactive adjustments of
revenue from these programs could occur.  The Company expects that there will
continue to be proposals to reduce or limit Medicare and Medicaid payment for
services.

     In connection with practice acquisitions, the Company performs certain due
diligence investigations with respect to the potential liabilities of acquired
practices and obtains indemnification with respect to certain liabilities from
the sellers of such practices.  Nevertheless, there can be undiscovered claims
that subsequently arise.  There can be no assurance that any liabilities for
which the Company becomes responsible (despite such indemnification) will not be
material or will not exceed either the limitations of any applicable
indemnification provisions or the financial resources of the indemnifying
parties.  Furthermore, the Company, through its Corporate Compliance Program,
regularly reviews the Practices' compliance with federal and state health care
laws and regulations and revises as appropriate the operations, policies and
procedures of its Practices to conform with the Company's policies and
procedures and applicable law.  While the Company believes that the operations
of the Practices prior to their acquisition were generally in compliance with
such laws and regulations, there can be no assurance that the prior operations
of the Practices were in full compliance with such laws, as such laws may
ultimately be interpreted.  Moreover, although the Company maintains an active
compliance program, it is possible that the government might challenge some of
the current practices of the Company as not being in full compliance with such
laws.  A violation of such laws by a practice or the Company could result in
civil and criminal penalties, exclusion of the physician, the practice or the
Company from participation in Medicare and Medicaid programs and/or loss of a
physician's license to practice medicine.

     Fraud and Abuse.  Federal anti-kickback law and regulations prohibit any
knowing and willful offer, payment, solicitation or receipt of any form of
remuneration, either directly or indirectly, in return for, or to induce: (i)
the referral of an individual for a service for which payment may be made by
Medicare and Medicaid or certain other federal health care programs; or (ii) the
purchasing, leasing, ordering or arranging for, or recommending the purchase,
lease or order of, any service or item for which payment may be made by
Medicare, Medicaid or certain other federal healthcare programs.  Violations of
federal anti-kickback rules are punishable by monetary fines, civil and criminal
penalties and exclusion from participation in Medicare, Medicaid and other
federal health care programs.  Several states have laws that are similar.

     Safe Harbors. The federal government has published regulations that provide
"safe-harbors" that protect from prosecution under federal anti-kickback laws
business transactions that meet certain requirements.  Failure to meet the
requirements of a safe harbor, however, does not necessarily mean a transaction
violates the anti-kickback law.  The Company believes its operations are in
material compliance with applicable Medicare and fraud and abuse laws and seeks
to structure arrangements to comply with applicable safe harbors where
reasonably possible.  There is a risk however, that the federal government might
investigate such arrangements and conclude they violate the anti-kickback
statute.  If the Company's arrangements were found to be illegal, the Company,
the physician groups and/or the individual physicians would be subject to civil
and criminal penalties, including exclusion from the participation in government
reimbursement programs, which could materially adversely affect the Company.

     Advisory Opinions. The Department of Health and Human Services Office of
Inspector General ("OIG") issues advisory opinions that provide advice on
whether proposed business arrangements violate the anti-kickback law.  In
Advisory Opinion 99-13, the OIG opined when prices for laboratory services for
non-governmental patients are discounted below

                                       12
<PAGE>

Medicare reimbursable rate, the anti-kickback law may be implicated. The OIG
found prices discounted below the laboratory supplier's costs to be particularly
problematic. In the same opinion, OIG suggested that a laboratory may be
excluded from federal health care programs if it charges Medicare or Medicaid
amounts substantially in excess of discounted charges to the physician. In the
OIG's opinion, charges are likely excessive if the profit margin for Medicare
business exceeds profit margin for non-federally reimbursed business.

     The OIG also has addressed physician practice management arrangements in an
advisory opinion.  In Advisory Opinion 98-4, the OIG found that management fees
based on a percentage of practice revenues may violate the anti-kickback
statute. These Advisory Opinions suggest that OIG might challenge certain prices
below Medicare reimbursement rates or arrangements based on a percentage of
revenues.  While the Company believes its arrangements comply with applicable
law, OIG's advisory opinions suggest there is a risk of an adverse OIG finding
relating to practices reviewed in the advisory opinions.  Any such finding could
have a material adverse impact on the Company.

     Self-Referral and Financial Inducement Laws. The Company is also subject to
federal and state statutes and regulations banning payments for referral of
patients and referrals by physicians to health care providers with whom the
physicians have a financial relationship.  The federal Stark Law applies to
Medicare and Medicaid and prohibits a physician from referring patients for
certain services, including laboratory services, to an entity with which the
physician has a financial relationship.  Financial relationships include both
investment interests in an entity and compensation arrangements with an entity.
If an arrangement is covered by the Stark Law, all of the requirements of a
Stark Law exception must be satisfied.  Many states also have laws that are
similar to the Stark Law.  These statutes and regulations generally apply to
services reimbursed by both governmental and private payors.  Violations of
these laws may result in prohibition of payment for services rendered, loss of
licenses as well as fines and criminal penalties.  In addition, violation of the
Stark Law may result in exclusion from Medicare and Medicaid.  State statutes
and regulations affecting the referral of patients to health care providers
range from statutes and regulations that are substantially the same as the
federal laws and the safe harbor regulations to a simple requirement that
physicians or other health care professionals disclose to patients any financial
relationship the physicians or health care professionals have with a health care
provider that is being recommended to the patients.  These laws and regulations
vary significantly from state to state, are often vague and, in many cases, have
not been interpreted by courts or regulatory agencies.  Adverse judicial or
administrative interpretations of any of these laws could have a material
adverse effect on the operating results and financial condition of the Company.
In addition, expansion of the Company's operations to new jurisdictions, or new
interpretations of laws in existing jurisdictions, could require structural and
organizational modifications of the Company's relationships with physicians to
comply with that jurisdiction's laws.  Such structural and organizational
modifications could have a material adverse effect on the operating results and
financial condition of the Company.

     Physicians affiliated with the Company may have financial relationships
with the Company, as defined by the federal Stark Law, in the form of
compensation arrangements, ownership of Company shares, contingent promissory
notes with the Company, or a combination of the above.  With respect to
compensation arrangements, the Company believes that existing arrangements are
structured to comply with an applicable Stark Law exception.  With respect to
the ownership of shares, the Company believes that the ownership of Company
shares by physicians should fall within the publicly traded stock exception to
the Stark Law's definition of financial relationship.  However, certain
physician-owned shares do have a transfer restriction and, as a result, the
government could take the position that all of the requirements of this
exception are not met.  The contingent notes held by some physicians do not meet
an exception to the Stark Law's definition of financial relationship.  In either
case, however, the Company believes that its current operations comply with the
Stark Law. Pathologists are exempted from the Stark regulations for work that
they order themselves and perform themselves or in their associated laboratory.
However, physicians affiliated with the Company do make referrals that could be
considered covered under the Stark law. We believe however, that the Company
does meet, at a minimum, one of the applicable exceptions stated in the Stark
Law and regulations, in the event that the government considers these
transactions to covered by the Stark Law. All physicians affiliated with the
Company have been instructed on the Stark Law and regulations and are believed
to be following such instructions.  To the extent physicians affiliated with the
Company may make a referral to the Company and a financial relationship exists
between the Company and the referring physician through either the ownership of
Company shares or contingent notes, the government might take the position that
the arrangement does not comply with the Stark Law.  Any such finding could have
a material adverse impact on the Company.

     Government Investigations of Hospitals and Hospital Laboratories.
Significant media and public attention has been focused on the health care
industry due to ongoing federal and state investigations reportedly related to
certain referral and billing practices, laboratory and home health care services
and physician ownership and joint ventures involving hospitals. Most notably,
HCA is under investigation with respect to such practices. The Company operates
laboratories on behalf of and has

                                       13
<PAGE>

numerous contractual agreements with hospitals, including 27 pathology service
contracts with HCA hospitals as of December 31, 2000. The government's ongoing
investigation of HCA could result in a governmental investigation of one or more
of the Company's operations that have arrangements with HCA. In addition, the
OIG and the Department of Justice have initiated hospital laboratory billing
review projects in certain states and are expected to extend such projects to
additional states, including states in which the Company operates hospital
laboratories. These projects increase the likelihood of governmental
investigations of laboratories owned and operated by the Company. Although the
Company monitors its billing practices and hospital arrangements for compliance
with prevailing industry practices under applicable laws, such laws are complex
and constantly evolving and there can be no assurance that the governmental
investigators will not challenge the Company's or industry practices. The
government's investigations of entities with which the Company contracts may
have other effects which could materially and adversely affect the Company,
including termination or amendment of one or more of the Company's contracts or
the sale of hospitals potentially disrupting the performance of services under
such contracts.

     Corporate Practice of Medicine. The Company is not licensed to practice
medicine. The practice of medicine is conducted solely by its licensed
pathologists. The manner in which licensed physicians can be organized to
perform and bill for medical services is governed by the laws of the state in
which medical services are provided and by the medical boards or other entities
authorized by such states to oversee the practice of medicine. Business
corporations are generally not permitted under certain state laws to exercise
control over the medical judgments or decisions of physicians, or engage in
certain practices such as fee-splitting with physicians. In states where the
Company is not permitted to directly own a medical practice, the Company
performs only non-medical and administrative and support services, does not
represent to the public or its clients that it offers medical services and does
not exercise influence or control over the practice of medicine. See discussion
"AmeriPath Corporate Structure", above.

     The Company believes that it currently is in material compliance with the
corporate practice laws in the states in which it operates.  Nevertheless, there
can be no assurance that regulatory authorities or other parties will not assert
that the Company is engaged in the corporate practice of medicine. If such a
claim were successfully asserted in any jurisdiction, the Company, and its
pathologists could be subject to civil and criminal penalties under such
jurisdiction's laws and could be required to restructure their contractual and
other arrangements. Alternatively, some of the Company's existing contracts
could be found to be illegal and unenforceable.  In addition, expansion of the
operations of the Company to other "corporate practice" states may require
structural and organizational modification of the Company's form of relationship
with physicians, PA Contractors or hospitals. Such results or the inability to
successfully restructure contractual arrangements could have a material adverse
effect on the Company's financial condition and results of operations.

     Medicare Fee Schedule Payment for Clinical Diagnostic Laboratory Testing.
Medicare reimburses hospitals based on locality-specific fee schedules on the
basis of a reimbursement methodology with Consumer Price Index ("CPI") related
adjustments.  Medicare includes payment for services performed for clinical
diagnostic laboratory inpatients within the prospectively determined Diagnosis
Related Group rate paid to the hospital. Additionally, state Medicaid programs
may pay no more than the Medicare fee schedule amount.  Congress also has
implemented a national cap on Medicare clinical diagnostic laboratory fee
schedules. This national cap has been lowered several times and is now at
approximately 74% of the national median. In addition, Congress frequently has
either limited or eliminated the annual CPI adjustments of the Medicare clinical
diagnostic laboratory fee schedules. The Omnibus Budget Reconciliation Act of
1993 eliminated the adjustment for the years 1994 and 1995. In 1996 and 1997,
however, the fee schedule adjustments were 3.2% and 2.7%, respectively. Even
these modest increases were reduced in some areas due to a recalculation of
national medians and by conversion in some carrier areas to a single statewide
fee schedule. In the Balanced Budget Act of 1997 ("BBA"), Congress again
eliminated the annual adjustments, this time for the years 1998 through 2002.
The adjustment limitations and changes in the national cap made to date have not
had, and are not expected by the Company to have, a material adverse effect on
the Company's results of operations. Any further significant decrease in such
fee schedules could have a material adverse effect on the Company.

     Due to uncertainty regarding the implementation of the above-described
Medicare developments, the Company currently is unable to predict their ultimate
impact on the laboratory industry generally or on the Company in particular.
Reforms may also occur at the state level (and other reforms may occur at the
federal level) and, as a result of market pressures, changes are occurring in
the marketplace as the number of patients covered by some form of managed care
continues to increase. In the past, the Company has offset a substantial portion
of the impact of price decreases and coverage changes through the achievement of
economies of scale, more favorable purchase contracts and greater operational
efficiencies. However, if further substantial price decreases or coverage
changes were to occur, or if the government were to seek any substantial
repayments or penalties from the Company, such developments would likely have an
adverse impact on gross profits from the Company's testing services unless
management had an opportunity to mitigate such impact.

                                       14
<PAGE>

     Reevaluations and Examination of Billing. Payors periodically reevaluate
the services they cover.  In some cases, government payors such as Medicare also
may seek to recoup payments previously made for services determined not to be
covered. Any such action by payors would have an adverse affect on the Company's
revenues and earnings.

     Moreover, in recent months the federal government has become more
aggressive in examining laboratory billing and seeking repayments and penalties
as the result of improper billing for services (e.g., the billing codes used),
regardless of whether carriers had furnished clear guidance on this subject. The
primary focus of this initiative has been on hospital laboratories and on
routine clinical chemistry tests which comprise only a small part of the
Company's revenues. Although the scope of this initiative could expand, it is
not possible to predict whether or in what direction the expansion might occur.
The Company believes its practices are proper and do not include any allegedly
improper practices now being examined. However, no assurance can be given that
the government will not broaden its initiative to focus on the type of services
furnished by the Company or, if this were to happen, on how much money, if any,
the Company might be required to repay.

     Furthermore, HIPAA and Operation Restore Trust have strengthened the powers
of the OIG and increased the funding for Medicare and Medicaid audits and
investigations. As a result, the OIG has expanded and continues to expand the
scope of its health care audits and investigations.  State enforcement actions
are similarly expanding.  Federal and state audits and inspections, whether on a
scheduled or unannounced basis, are conducted from time to time at the Company's
facilities.

     Due to the uncertain nature of coding for pathology services, the Company
cannot assure that issues such as those addressed in the 1997 Operation Restore
Trust investigation will not arise again.  If a negative finding is made as a
result of such an investigation, the Company could be required to change coding
practices or repay amounts paid for incorrect practices either of which could
have a materially adverse effect on the operating results and financial
condition of the Company.

     BBA Additions to Coverage. The BBA added coverage for an annual screening
pap smear for Medicare beneficiaries who are at high risk of developing cervical
or vaginal cancer and for beneficiaries of childbearing age effective January 1,
1998, as well as coverage for annual prostate cancer screening, including a
prostate-specific antigen blood test, for beneficiaries over age 50, effective
January 1, 2000. Although most women of childbearing age and men under age 65
are not Medicare beneficiaries, the addition of Medicare coverage for these
tests could provide additional revenues for the Company. With the BBA, Congress
merged the three existing conversion factors into one for all types of services
provided resulting in a single conversion factor for 2000 of $36.61.  The
physician fee schedule conversion factor has increased from $36.61 to $38.26 in
2001.

     Laboratory Compliance Plan. In February 1997, OIG released a model
compliance plan for laboratories that is based largely on the corporate
integrity agreements negotiated with the laboratories which settled a number of
government enforcement actions against laboratories under Operation Restore
Trust, initiated in 1995. The Company adopted and maintains a compliance plan,
which includes components of OIG's model compliance plan, as the Company deemed
appropriate to the conduct of its business.  The Company's Senior Vice President
of Operations serves as the Company's Compliance Officer and reports directly to
the Chief Executive Officer and the Board of Directors. One key aspect of the
corporate integrity agreements and the model compliance plan is an emphasis on
the responsibilities of laboratories to notify physicians that Medicare covers
only medically necessary services. Although these requirements focus on
chemistry tests, especially routine tests, rather  than on anatomic pathology
services or the non-automated tests which make up the  majority of the Company's
business, they could affect physician test ordering  habits more broadly. The
Company is unable to predict whether or to what extent these developments may
have an impact on the utilization of the Company's services.

     Antitrust Laws. In connection with state corporate practice of medicine
laws discussed above, the physician practices with which the Company is
affiliated in some states are organized as separate legal entities. As such, the
physician practice entities may be deemed to be persons separate both from the
Company and from each other under the antitrust laws and, accordingly, subject
to a wide range of federal and state laws that prohibit anti-competitive conduct
among separate legal entities. In addition, the Company also is seeking to
acquire or affiliate with established and reputable practices in its target
geographic markets. The Company believes it is in compliance with federal and
state antitrust laws and intends to comply with any state and federal laws that
may affect its development of integrated health care delivery networks. There
can be no assurance, however, that a review of the Company's business by courts
or regulatory authorities would not adversely affect the operations of the
Company and it's affiliated physician groups.

                                       15
<PAGE>

     HIPAA Criminal Penalties. HIPAA created criminal provisions, which impose
criminal penalties for fraud against any health care benefit program for theft
or embezzlement involving health care and for false statements in connection
with the payment of any health benefits. HIPAA also provided broad prosecutorial
subpoena authority and authorized property forfeiture upon conviction of a
federal health care offense.  Significantly, the HIPAA provisions apply not only
to federal programs, but also to private health benefit programs as well. HIPAA
also broadened the authority of the OIG to exclude participants from federal
health care programs. Because of the uncertainties as to how the HIPAA
provisions will be enforced, the Company currently is unable to predict their
ultimate impact on the Company. If the government were to seek any substantial
penalties against the Company, this could have a material adverse effect on the
Company.

     Licensing. CLIA extends federal oversight to virtually all clinical
laboratories by requiring that laboratories be certified by the government. Many
laboratories must also meet governmental quality and personnel standards,
undergo proficiency testing and be subject to biennial inspection. Rather than
focusing on location, size or type of laboratory, this extended oversight is
based on the complexity of the test performed by the laboratory.  The CLIA
quality standards regulations divide all tests into three categories (waived,
moderate complexity and high complexity) and establish varying requirements
depending upon the complexity of the test performed.  The Company's outpatient
laboratories are licensed by Health and Human Services ("HHS") under CLIA to
perform high complexity testing. Generally, the HHS regulations require
laboratories that perform high complexity or moderate complexity tests to
implement systems that ensure the accurate performance and reporting of tests
results, establish quality control systems, have proficiency testing conducted
by approved agencies and have biennial inspections.  The Company is also subject
to state regulation.  CLIA provides that a state may adopt more stringent
regulations than federal law.  For example, some state laws require that
laboratory personnel meet certain qualifications, specify certain quality
controls, maintain certain records and undergo proficiency testing.

     Other Regulations. In addition, the Company is subject to licensing and
regulation under federal, state and local laws relating to the collecting,
storing, handling and disposal of medical specimens, infectious and hazardous
waste and radioactive materials as well as the safety and health of laboratory
employees.  All Company laboratories are operated in a manner designed to comply
with applicable federal and state laws and regulations relating to the
generation, storage, treatment and disposal of all laboratory specimens and
other biohazardous waste. The Company utilizes licensed vendors for the disposal
of such specimen and waste.

     In addition to its comprehensive regulation of safety in the workplace, the
federal Occupational Safety and Health Administration ("OSHA") has established
extensive requirements relating to workplace safety for healthcare employees,
including clinical laboratories, whose workers may be exposed to blood-borne
pathogens, such as HIV and the hepatitis B virus. These regulations require work
practice controls, protective clothing and equipment, training, medical follow-
up, vaccinations and other measures designed to minimize exposure to, and
transmission of, blood-borne pathogens. Regulations of the Department of
Transportation, the Public Health Services and the U.S. Postal Service also
apply to the transportation of laboratory specimens.

     HIPAA Medical Information Confidentiality, Security and Financial
Transaction Requirements.  Among other things, HIPAA established several
requirements regarding the confidentiality, security and transmission of medical
information.  HCFA has published proposed and final regulations that explain the
application of such requirements.  The final confidentiality regulations have
been reopened for comment by the Bush Administration.  The security regulations
are proposed and the transaction standards are final.  It is unclear whether
these requirements will result in additional financial obligations for the
Company or pose increased regulatory risk.

Insurance

     The Company's business entails an inherent risk of claims of physician
professional liability for acts or omissions of its physicians and laboratory
personnel.  The Company and its physicians periodically become involved as
defendants in medical malpractice lawsuits, some of which are currently ongoing,
and are subject to the attendant risk of substantial damage awards. The Company
has consolidated its physician professional liability insurance coverages with
the St. Paul Fire and Marine Insurance Company, whereby each of the pathologists
is insured under claims-made policies with primary limits of $1.0 million per
occurrence and $5.0 million in the annual aggregate, and share with the Company
in surplus coverage of up to $20.0 million in the aggregate. The Company's
coverage until July 1999 was with Steadfast Insurance Company (Zurich-American).
The policy also provides "prior acts" coverage for each of the  physicians with
respect to the practices prior to their acquisition by the Company.  Further,
the Company has provided reserves for incurred but not reported claims in
connection with its claims-made policies.  The terms of the purchase agreements
relating to each practice acquisition contain certain limited rights of

                                       16
<PAGE>

indemnification from the sellers of the practices. The Company also maintains
property and umbrella liability insurance policies. While the Company believes
it has adequate professional liability insurance coverage for itself, and
physicians, there can be no assurance that a future claim or claims will not be
successful and, if successful, will not exceed the limits of available insurance
coverage or that such coverage will continue to be available at acceptable costs
or on favorable terms. In addition, the Company's insurance does not cover all
potential liabilities arising from governmental fines and penalties,
indemnification agreements and certain other uninsurable losses. A malpractice
claim asserted against the Company, an Owned or Managed Practice, or an
affiliated physician could, in the event of an adverse outcome exceeding limits
of available insurance coverage, have a material adverse effect on the Company's
financial condition and results of operations.

Competition

     The markets for the services provided by the Company, its Practices and
pathologists are in the provision of physician practice management services to
pathology practices and the provision of pathology and cytology diagnostic
services.  Competition may result from other anatomic pathology practices,
companies in other healthcare industry segments, such as other hospital-based
specialties, national clinical laboratories, large physician group practices or
pathology physician practice management companies that may enter the Company's
markets, some of which may have greater financial and other resources than the
Company.

     With respect to physician practice management services, the Company
believes that the principal competitive factors are the Company's pathologist
leadership, and single specialty focus, sales and marketing expertise, its
administrative support capabilities (billing, collections, accounting and
financial reporting, information systems, and human resources).  The Company
believes that the infrastructure it is building provides a competitive advantage
in such markets.   To date, the Company has not experienced significant
competition in its primary market areas.  However, it does compete with several
other companies, and such competition can reasonably be expected to increase.
In addition, companies in other healthcare segments, such as hospitals, national
clinical laboratories, third party payors, and HMO's, many of which have greater
financial resources may become competition in the employment and managers of
pathology practices.  The Company competes for acquisitions and affiliations on
the basis of its reputation, management experience, status and resources as a
public company and its single focus on anatomic pathology. There can be no
assurance that the Company will be able to compete effectively or that
additional competitors will not enter the Company's markets or make it more
difficult for the Company to acquire or affiliate with practices on favorable
terms.

Service Marks

     The Company has registered the service marks "AmeriPath", "CAD - The Center
for Advanced Diagnostics" and the AmeriPath logo with the United States Patent
and Trademark Office.

Employees

     At December 31, 2000, the Company's Owned and Managed Practices employ
2,325 people, including 425 physicians.  In addition to physicians, the
employees of the Company and the Managed Practices include 676 laboratory
technicians, 151 couriers and 1,073 billing, marketing, transcription and
administrative staff, of which 98 personnel are located at the Company's
executive offices.  None of the Company's employees or prospective employees is
subject to collective bargaining agreements.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA; INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS

     The Company's consolidated financial statements and financial statement
schedule and independent auditors' report thereon appear beginning on page F-2.
See index to such consolidated financial statements and schedules and reports on
page F-1.

                                       17
<PAGE>

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1.      Financial Statements:

             Reference is made to the index set forth on page F-1 of this Annual
             Report on Form 10-K.

     2.      Financial Statement Schedules:

             Reference is made to the index set forth on page F-1 of this Annual
             Report on Form 10-K.

     3.      Exhibits:

Exhibit No.                          Description
-----------                          -----------

2.1          Asset Purchase Agreement, dated February 13, 1998, by and among
             AmeriPath, Inc., Anatomic Pathology Associates, LLP, Robert P.
             Hooker, M.D., Ralph F. Winkler, M.D., Steven A. Clark, M.D., Edward
             R. Wills, M.D. Robin A. Helmuth, M.D., Garry A. Bolinger, M.D., T.
             Max Warner II, M.D., F. Donald McGovern Jr., M.D., Richard O.
             McClure, M.D., Ann Moriarty, M.D., Janis K. Fitzharris, M.D., Ph.
             D., James E. McDermott III, M.D., Robert A. Quirey, M.D., Isabelle
             A. Buehl, M.D.(1)

2.2          Agreement and Plan of Merger by and among Ameripath, Inc. AMP
             Merger Corp., and Pathology Consultants of America, Inc. (D/B/A
             Inform DX), dated as of November 7, 2000 (11)

3.1          AmeriPath's Amended and Restated Bylaws (2)

3.2          Certificate of Designations of Series A Junior Participating
             Preferred Stock (8)

3.3          AmeriPath's Certificate of Amendment to the Amended and Restated
             Certificate of Incorporation (2)

4.1          Rights Agreement, dated as of April 8, 1999, between the Registrant
             and American Stock Transfer & Trust Company, as Rights Agent
             including the form of Certificate of Designations of Series A
             Junior Participating Preferred Stock, the form of Rights
             Certificate, and the form of Summary of Rights (8)

10.1         Amended and Restated 1996 Stock Option Plan (5)

10.2         Employment Agreement, dated as of October 24, 1995, between
             AmeriPath and James C. New (2)

10.5         Employment Agreement, dated June 30, 1996, between AmeriPath and
             Alan Levin, M.D. (2)

10.6         Employment Agreement, dated as of September 30, 1996, between
             AmeriPath Florida and Alan Levin, M.D., as amended (2)

10.7         Employment Agreement, dated as of June 30, 1996, between AmeriPath
             Florida and Timothy Kilpatrick, M.D. (2)

10.8         Employment Agreement, dated as of June 30, 1996, between AmeriPath
             Florida and Les Rosen, M.D. (2)

                                       18
<PAGE>

10.9      Credit Agreement originally dated as of May 29, 1996 and amended and
          restated as of June 27, 1997, among AmeriPath, Inc., the subsidiaries
          of AmeriPath, Inc. from time to time party thereto, the lenders from
          time to time party thereto and Bank of Boston, N.A. (2)

10.11     Management Agreement by and between AmeriPath APA, L.L.C. and
          AmeriPath Indiana, Inc., dated February 1, 1998 (1)

10.12     Stock Purchase Agreement, dated as of May 23, 1996, among AmeriPath,
          Inc., Derrick & Associates and the shareholders of Derrick &
          Associates (2)

10.13     Stock Purchase Agreement, dated as of September 30, 1996, by and
          among AmeriPath, Inc., David R. Barron, M.D., Inc., Ruth S. Kleier,
          M.D. and David R. Barron, M.D. (2)

10.14     Stock Purchase Agreement, dated as of October 31, 1996 among
          AmeriPath, Inc., Gulf Coast Pathology Associates, Inc., Richard
          Fernandez, M.D., and George Kalemeris, M.D. (2)

10.15     Form of Stock Rights Surrender & Restricted Stock Grant Agreement.
          (2)

10.16     1996 Director Stock Option Plan (2)

10.17     American Laboratory Associates, Inc. Series A Preferred Stock,
          Common Stock and Junior Subordinated Note Purchase Agreement, dated as
          of January 1, 1994 (2)

10.18     Letter Agreement, dated September 18, 1996, between Acquisition
          Management Services, Inc. and AmeriPath, Inc. (2)

10.19     AmeriPath Management Agreement by and between AmeriPath Cincinnati,
          Inc. and AmeriPath Ohio, Inc., dated September 30, 1996 (2)

10.20     Management Agreement by and between Beno Michel, M.D., Inc. and
          AmeriPath, Inc., dated October 15, 1996 (2)

10.21     Management Agreement by and between Clay J. Cockerell, M.D., P.A.
          and AmeriPath Texas, Inc., dated September 30, 1996, as amended
          January 16, 1997 (2)

10.22     Agreement for Professional Pathology Services between SmithKline
          Beecham Clinical Laboratories, Inc. and Derrick and Associates
          Pathology, P.A., dated April 1, 1992 (2)

10.23     Agreement for Medical Directorship between SmithKline Beecham
          Clinical Laboratories, Inc. and Derrick and Associates Pathology,
          P.A., dated April 1, 1992 (2)

10.24     Agreement for Professional Pathology Services between SmithKline
          Beecham Clinical Laboratories, Inc. and AmeriPath Florida, Inc., dated
          November 1, 1996 (2)

10.25     Share Exchange Agreement, dated as of February 15, 1996, by and
          among American Laboratory Associates, Inc., AmeriPath, Inc. and the
          holders of common and convertible preferred stock of American
          Laboratory Associates, Inc. (2)

10.26     Trust Agreement, dated as of October 15, 1996, between AmeriPath,
          Inc. and Beno Michel, as trustee (2)

10.27     Trust Agreement, dated as of September 30, 1996, between AmeriPath,
          Inc. and David R. Barron, M.D. as trustee (2)

10.28     Form of Nonqualified Stock Option Agreement (2)

                                       19
<PAGE>

10.29     Stock Purchase Agreement, dated as of October 15, 1996, by and among
          AmeriPath, Inc., Beno Michel, M.D., Inc. and Beno Michel, M.D. (2)

10.30     Stock Purchase Agreement, dated as of October 10, 1996, by and among
          AmeriPath, Inc., Drs. Seidenstein, Levine and Associates, Inc.,
          Seidenstein, Levine Real Estate Partnership, Lawrence Seidenstein,
          M.D., Steven E. Levine, M.D. and David M. Reardon, M.D. (2)

10.31     Stock Issuance Agreement, dated as of June 26, 1996, among
          AmeriPath, Inc., The First National Bank of Boston, FSC Corp.,
          NationsBank, N.A. (South) and Atlantic Equity Corporation (2)

10.32     Stock Issuance Agreement, dated as of August 29, 1996, among
          AmeriPath, Inc., The First National Bank of Boston, FSC Corp.,
          NationsBank, N.A. (South) and Atlantic Equity Corporation (2)

10.33     Stock Issuance Agreement, dated as of November 4, 1996, among
          AmeriPath, Inc., The First National Bank of Boston and FSC Corp. (2)

10.34     Stock Purchase Agreement, dated August 21, 1997, by and among
          AmeriPath, Inc., J. Sloan Leonard, M.D., Joseph A. Sonnier, M.D., Van
          Q. Telford, M.D., William C. Burton, M.D., James Scot Milvenan, M.D.,
          Leslie L. Walters, M.D., Thomas M. James, M.D., Stephen W. Aldred,
          M.D., John E. McDonald, M.D. and Barbara A. Shinn, M.D. (2)

10.35     Stock Purchase Agreement, dated August 15, 1997, by and among
          AmeriPath, Inc., Colab Incorporated Professional Corporation,
          Anatomical Pathology Services, P.C., Microdiagnostics, P.C. and the
          sellers set forth therein (2)

10.36     Lease effective June 1, 1995 by and between Dallas Pathology Leasing
          and Unipath, Ltd. (2)

10.37     Trust Agreement, dated August 29, 1997, between AmeriPath, Inc. and
          Jeffery A. Mossler, M.D. (2)

10.38     Management Agreement, by and between Colab, Inc. and AmeriPath
          Indianapolis, L.L.C., effective September 1, 1997 (2)

10.39     Management Agreement by and between AmeriPath Texas, Inc. and DFW
          5.01, effective September 1, 1997 (2)

10.40     Form of Executive Retention Agreement dated August 12, 1999, between
          AmeriPath and each of James C. New, Alan Levin, M.D. and Robert P.
          Wynn. (6)

10.41     Letter Agreement dated November 1, 1999 between AmeriPath, Inc. and
          James C. New. (7)

10.42     Consulting and Non-competition Agreement dated November 1, 1999
          between AmeriPath, Inc. and James C. New. (7)

10.43     Amended and Restated Credit Agreement dated as of December 16,1999,
          among AmeriPath, Inc., certain of its subsidiaries, BankBoston N.A.
          and certain other lenders (9)

10.44     Amendment No. 1, dated July 21, 2000, to the Amended and Restated
          Credit Agreement dated as of December 16, 1999, among AmeriPath, Inc.,
          certain of its subsidiaries, Fleet National Bank (formerly BankBoston
          N.A.) and certain other lenders (10)

10.45     Amendment No. 2, dated November 29, 2000, to the Amended and Restated
          Credit Agreement dated as of December 16, 1999, among AmeriPath, Inc.,
          certain of its

                                       20
<PAGE>

          subsidiaries, Fleet National Bank (formerly BankBoston N.A.) and
          certain other lenders (11)

10.46     Registration Rights Agreement, dated November 30, 2000, among the
          Company and PCA's Shareholders and Warrant Holders (11)

21.1      Subsidiaries of AmeriPath (11)

23.1      Independent Auditors' Consent of Deloitte & Touche LLP (3)

23.2      Independent Auditors' Consent of Ernst & Young LLP (3)

----------------------------
(1)  Incorporated by reference and filed with the AmeriPath Form 8-K, dated
     February 13, 1998.

(2)  Incorporated by reference to the exhibit referenced and filed with the
     AmeriPath Form S-1 (File No. 333-34265), effective October 21, 1997, and
     the AmeriPath Form 8-A (File No. 000-22313), filed September 8, 1997.

(3)  Filed herewith.

(4)  Incorporated by reference to the exhibit referenced and filed with
     AmeriPath Form 10-Q for the quarter ended June 30, 1998 dated August 14,
     1998.

(5)  Incorporated by reference to the Company's Proxy Statement for its 1999
     Annual Meeting of Shareholders.

(6)  Incorporated by reference to the exhibit referenced and filed with
     AmeriPath Form 10-Q for the quarter ended June 30, 1999 dated August 16,
     1999.

(7)  Incorporated by reference to the exhibit referenced and filed with
     AmeriPath Form 10-Q for the quarter ended September 30, 1999 dated November
     15, 1999.

(8)  Incorporated by reference to the exhibit referenced and filed with
     AmeriPath Form 8-K, dated April 8, 1999.

(9)  Incorporated by reference to the exhibit referenced and filed with
     AmeriPath Annual Report on Form 10-K for the year ended December 31, 1999,
     dated March 27, 2000.

(10) Incorporated by reference to the exhibit referenced and filed with
     AmeriPath Form 8-K, dated July 21, 2000, filed on August 2, 2000.

(11) Previously filed.


(b)  Reports on Form 8-K

       A Current Report on Form 8-K, dated November 30, 2000, was filed by the
       Company with the Securities and Exchange Commission on December 8, 2000,
       reporting that on November 30, 2000, the Company completed and
       consummated the previously announced acquisition of Inform DX.  In
       connection with the acquisition, the Company issued approximately 2.6
       million shares of common stock in exchange for all the outstanding common
       stock of Inform DX.  In addition, the Company assumed certain obligations
       to issue shares of common stock pursuant to outstanding Inform DX stock
       option plans.  This transaction will be accounted for as a pooling of
       interests.

                                       21
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amended Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Riviera Beach,
Florida, on August 8, 2001.


                               AMERIPATH, INC.

                               /s/ Gregory A. Marsh
                               --------------------
                                   Gregory A. Marsh,
                                   VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
                                   SECRETARY

                                       22
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

                                                                   Page
                                                                -----------

Independent Auditors' Reports                                   F-2 to F-3

Consolidated Balance Sheets as of December 31, 1999 and 2000    F-4 to F-5

Consolidated Statements of Operations for the years ended
  December 31, 1998, 1999 and 2000                                  F-6

Consolidated Statements of Redeemable Preferred Stock and
  Common Stockholders' Equity for the years ended
  December 31, 1998, 1999 and 2000                                  F-7

Consolidated Statements of Cash Flows for the years ended
  December 31, 1998, 1999 and 2000                                  F-8

Notes to Consolidated Financial Statements                      F-9 to F-31

All schedules called for by Regulation S-X have been omitted because they are
not applicable or because the required information is included in the financial
statements or the notes thereto.

                                      F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of AmeriPath, Inc. and
subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related
consolidated statements of operations, redeemable preferred stock and common
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on the
financial statements based on our audits.  The consolidated financial statements
give retroactive effect to the merger of AmeriPath, Inc. and subsidiaries and
Pathology Consultants of America, Inc. (d/b/a "Inform DX"), which has been
accounted for as a pooling of interests as described in Note 3 to the
consolidated financial statements.  We did not audit the balance sheet of Inform
DX as of December 31, 1999, or the related statements of operations,
stockholders' equity, and cash flows of Inform DX for the years ended December
31, 1999 and 1998, which statements reflect total assets of $28,786,000 as of
December 31, 1999, and total revenues of $24,652,000 and $16,012,000 for the
years ended December 31, 1999 and 1998, respectively.  Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Inform DX for 1999
and 1998, is based solely on the report of such other auditors.

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

In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2000
and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.



/s/ DELOITTE & TOUCHE LLP
Miami, Florida

March 29, 2001

                                      F-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Pathology Consultants of America, Inc. and Subsidiaries

We have audited the consolidated balance sheets of Pathology Consultants of
America, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended (not presented separately herein). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Pathology Consultants of America, Inc. and subsidiaries at December 31, 1999 and
1998, and the consolidated results of their operations and their cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States.


/s/ Ernst & Young LLP
Nashville, Tennessee

March 24, 2000

                                      F-3
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                     December 31,
                                                  ------------------
                                                    1999      2000
                                                  --------  --------

ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                        $  1,713  $  2,418
 Accounts receivable, net                           57,788    70,939
 Inventories                                           995     1,406
 Deferred tax asset                                  5,405     8,593
 Other current assets                                2,468     2,853
                                                  --------  --------

       Total current assets                         68,369    86,209
                                                  --------  --------

PROPERTY AND EQUIPMENT, NET                         16,540    23,580
                                                  --------  --------

OTHER ASSETS:
 Goodwill, net                                     143,383   177,263
 Identifiable intangibles, net                     246,394   268,627
 Other                                               4,210     6,487
                                                  --------  --------
       Total other assets                          393,987   452,377
                                                  --------  --------

TOTAL ASSETS                                      $478,896  $562,166
                                                  ========  ========

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                            December 31,
                                                         ------------------
                                                             1999      2000
                                                         --------  --------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Accounts payable and accrued expenses                   $ 21,337  $ 35,712
 Due to managed practices                                   2,853     4,055
 Current portion of long-term debt                            698       808
 Current portion of capital lease obligations                 232       247
 Accrued merger-related charges                               275     3,165
 Other current liabilities                                    518     1,407
                                                         --------  --------
       Total current liabilities                           25,913    45,394
                                                         --------  --------

LONG-TERM LIABILITIES:
 Revolving loan                                           165,800   197,216
 Other notes payable, less current portion                     73       197
 Subordinated notes, less current portion                   1,206     2,843
 Capital lease obligations, less current portion              605       436
 Accrued merger-related charges, less current portion         912     2,369
 Other liabilities                                            148        --
 Deferred tax liability                                    62,521    64,046
                                                         --------  --------
       Total long-term liabilities                        231,265   267,107
                                                         --------  --------

REDEEMABLE PREFERRED STOCK                                 15,504        --
                                                         --------  --------

COMMITMENTS AND CONTINGENCIES (Notes 3, 14 and 18)

COMMON STOCKHOLDERS' EQUITY
 Common stock, $.01 par value, 30,000 shares
  authorized, 22,271 and 24,734 shares issued and
  outstanding at December 31, 1999 and 2000,
  respectively                                                223       247
 Additional paid-in capital                               156,111   188,050
 Retained earnings                                         49,880    61,368
                                                         --------  --------
       Total common stockholders' equity                  206,214   249,665
                                                         --------  --------

TOTAL LIABILITIES AND COMMON STOCKHOLDERS' EQUITY        $478,896  $562,166
                                                         ========  ========

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                                                     Years Ended December 31,
                                                                  ------------------------------
                                                                      1998       1999       2000
                                                                  --------   --------   --------
<S>                                                               <C>        <C>        <C>
NET REVENUE:
 Net patient service revenues                                     $177,304   $233,269   $308,365
 Net management service revenues                                    16,012     24,163     21,729
                                                                  --------   --------   --------
   Net revenue                                                     193,316    257,432    330,094
                                                                  --------   --------   --------

OPERATING COSTS AND EXPENSES:
 COST OF SERVICES:
 Cost of services - patient service revenues                        78,568    108,408    146,426
 Cost of services - management service revenues                      9,132     14,277     16,964
                                                                  --------   --------   --------
   Cost of services                                                 87,700    122,685    163,390
 Selling, general and administrative expense                        36,709     47,159     58,411
 Provision for doubtful accounts                                    18,698     25,289     34,040
 Amortization expense                                                9,615     12,827     16,172
 Merger-related charges                                                 --         --      6,209
 Asset impairment and related charges                                   --         --      9,562
                                                                  --------   --------   --------

   Total operating costs and expenses                              152,722    207,960    287,784
                                                                  --------   --------   --------

INCOME FROM OPERATIONS                                              40,594     49,472     42,310
Interest expense                                                    (8,560)    (9,573)   (15,376)
Other income, net                                                      150        286        226
                                                                  --------   --------   --------

Income before income taxes                                          32,184     40,185     27,160
Provision for income taxes                                          13,941     17,474     14,068
                                                                  --------   --------   --------

NET INCOME                                                          18,243     22,711     13,092

Induced conversion and accretion of redeemable preferred stock         (75)      (131)    (1,604)
                                                                  --------   --------   --------

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS                    $ 18,168   $ 22,580   $ 11,488
                                                                  ========   ========   ========


Basic Earnings Per Common Share:
      Basic weighted average shares outstanding                     20,911     21,984     23,473
                                                                  ========   ========   ========

      Basic earnings per common share                             $   0.87   $   1.03   $   0.49
                                                                  ========   ========   ========

Diluted Earnings Per Common Share:
      Diluted weighted average shares outstanding                   21,610     22,516     24,237
                                                                  ========   ========   ========

      Diluted earnings per common share                           $   0.84   $   1.00   $   0.47
                                                                  ========   ========   ========
</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

                                                                             Redeemable
                                                                           Preferred Stock         Common Stockholders' Equity
                                                                         -----------------     -----------------------------------
                                                                                                  Additional
                                                                           Common Stock            Paid - in     Retained
                                                                         Shares    Amount       Shares   Amount  Capital  Earnings
                                                                         ------    ------      -------   ------ --------- --------
<S>                                                                    <C>          <C>       <C>        <C>    <C>         <C>
BALANCE, DECEMBER 31, 1997                                                   --     $     --   19,931     $199  $136,272     $ 9,132
 Stock issued in connection with
  acquisitions                                                               --           --    1,788       18    16,208          --
 Advance stock subscription issued to
  Affiliated Practices                                                       --           --        2       --         9          --
 Exercise of options and warrants                                            --           --       27       --       263          --
 Tax benefit from stock options                                              --           --       --       --       109          --
 Issuance of Series A redeemable
  preferred stock                                                           395       15,298       --       --        --          --
 Accretion of redeemable preferred
  stock                                                                      --           75       --       --        --          --
 Net income                                                                  --           --       --       --        --      18,168
                                                                           ----     --------   ------     ----  --------     -------
BALANCE, DECEMBER 31, 1998                                                  395       15,373   21,748      217   152,861      27,300
 Stock issued in connection with
  acquisitions                                                               --           --      511        5     3,144          --
 Exercise of options and warrants                                            --           --       12        1        15          --
 Tax benefit from stock options                                              --           --       --       --        91          --
 Accretion of redeemable preferred
  stock                                                                      --          131       --       --        --          --
 Net income                                                                  --           --       --       --        --      22,580
                                                                           ----     --------   ------     ----  --------     -------
BALANCE, DECEMBER 31, 1999                                                  395       15,504   22,271      223   156,111      49,880
 Stock issued in connection with
  acquisitions                                                               --           --    1,532       15    12,165          --
 Exercise of options and warrants                                            --           --      288        3     1,584          --
 Tax benefit from stock options                                              --           --       --       --       858          --
 Accretion of redeemable preferred
  stock                                                                      --           65       --       --        --          --
 Redemption of preferred stock                                            (395)      (15,569)     643        6    17,102          --
 Lapse of warrant put option                                                 --           --       --       --       230          --
 Net income                                                                  --           --       --       --        --      11,488
                                                                           ----     --------   ------     ----  --------     -------
BALANCE, DECEMBER 31, 2000                                                   --     $     --   24,734     $247  $188,050     $61,368
                                                                           ====     ========   ======     ====  ========     =======
</TABLE>



See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                    Years Ended December 31,
                                                                                ------------------------------
                                                                                  1998       1999       2000
                                                                                --------   --------   --------
<S>                                                                             <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                                     $ 18,243   $ 22,711   $ 13,092
 Adjustments to reconcile net income to net
  cash flows provided by operating activities:
   Depreciation and amortization                                                  12,601     16,758     21,291
   Miscellaneous amortization and other                                              220         49         22
   Deferred income taxes                                                          (3,607)    (2,006)    (9,117)
   Provision for doubtful accounts                                                18,698     25,289     34,040
   Asset impairment and related charges                                               --         --      9,562
   Accretion of put warrants                                                          54         92         --
   Merger-related charges                                                             --         --      6,209
   Changes in assets and liabilities (net of effects of acquisitions):
    Increase in accounts receivable                                              (27,577)   (31,756)   (40,008)
    Increase in inventories                                                         (417)       (39)      (411)
    (Increase) decrease in other current assets                                   (4,321)     2,382       (265)
    Decrease (increase) in other assets                                              296       (731)    (1,638)
    Increase (decrease) in due to/from managed practices                           2,744     (1,717)     1,202
    Increase in accounts payable and accrued expenses                              3,545      1,661      1,756
 Pooling merger-related charges paid                                                  --         --     (3,800)
                                                                                --------   --------   --------
     Net cash flows provided by operating activities                              20,479     32,693     31,935
                                                                                --------   --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of property and equipment                                            (4,393)    (8,716)    (9,235)
 Cash paid for acquisitions and acquisition costs, net of cash acquired          (60,472)   (51,643)   (24,929)
 Other merger-related charges paid                                                (1,779)    (1,741)    (2,396)
 Investment in Genomics Collaborative, Inc.                                           --         --     (1,000)
 Decrease in restricted cash                                                          21        229         --
 Payments of contingent notes                                                     (7,789)   (17,440)   (26,645)
                                                                                --------   --------   --------
     Net cash flows used in investing activities                                 (74,412)   (79,311)   (64,205)
                                                                                --------   --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net borrowings under revolving loan                                              53,069     44,713     31,416
 Principal payments on long-term debt and capital leases                          (9,966)    (1,701)      (818)
 Debt issuance costs                                                                (496)    (1,171)       (82)
 Net proceeds from sale of redeemable preferred stock                             15,298         --         --
 Tax benefit from stock options                                                      109         91        858
 Other                                                                                --         --         14
 Proceed from issuance of common stock under stock option plans and warrants         272         16      1,587
                                                                                --------   --------   --------
     Net cash flows provided by financing activities                              58,286     41,948     32,975
                                                                                --------   --------   --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   4,353     (4,670)       705
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                     2,030      6,383      1,713
                                                                                --------   --------   --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                        $  6,383   $  1,713   $  2,418
                                                                                ========   ========   ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
 Interest                                                                       $  8,034   $  8,924   $ 14,645
 Income taxes                                                                   $ 17,833   $ 15,890   $ 23,798

</TABLE>
See accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

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

1.   Business and Organization

AmeriPath, Inc. ("AmeriPath" or the "Company") was incorporated in February 1996
to be the largest integrated physician group practice focused on anatomic
pathology diagnostic services, based on an analysis of geographic breadth,
number of physicians, number of hospital contracts, number of practices and net
revenues.  Since the first quarter of 1996, the Company has completed the
acquisition of 49 physician practices located in twenty-one states.  The
Company's 425 pathologists provide medical diagnostic services in 42 outpatient
laboratories owned and operated by the Company, and in 224 hospitals and
associated outpatient surgery centers.

On November 30, 2000, the Company acquired Pathology Consultants of America,
Inc., d/b/a Inform DX ("Inform DX").  In connection with the acquisition, the
Company issued approximately 2.6 million shares of common stock in exchange for
all the outstanding common stock of Inform DX.  In addition, the Company assumed
certain obligations to issue shares of common stock pursuant to outstanding
Inform DX stock option plans. This transaction was accounted for as a pooling of
interests.  All prior years information has been restated to reflect the
acquisition of Inform DX.

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

The Company operates using either an ownership or employment model or a
management or equity model.  Under management or equity model, the Company
acquires certain assets of and operates pathology practices under long-term
service agreements with affiliated physician groups (the "Managed Practices").
The Company provides facilities and equipment as well as administrative and
technical support for the affiliated physician groups under service agreements.
Through its ownership or employment model, the Company acquires a controlling
equity (voting) interest or has a controlling financial interest in the
pathology practice (the "Owned Practices").

Corporate practice of medicine restrictions generally prohibit corporate
entities from employing or otherwise exercising control over physicians.  In
states that do not prohibit a for-profit corporation from employing physicians
such as Florida, Alabama, Mississippi and Kentucky, AmeriPath operates its Owned
Practices through Practice Subsidiaries, which are subsidiary corporations of
AmeriPath that directly employ the physicians.  In states that prohibit a for-
profit corporation from employing physicians, such as Texas, Indiana, Ohio,
North Carolina, Michigan, Wisconsin, New York and Pennsylvania, AmeriPath
operates each Owned Practice through a Manager Subsidiary, which is a subsidiary
of AmeriPath that has a long-term management agreement with the applicable PA
Contractor, which in turn employs the physicians.  In many cases, several
Practices are included within or organized under a single Practice Subsidiary or
PA Contractor, as the case may be.

Owned Practices.  Owned practices are operated through Manager and Practice
Subsidiaries.  The Manager and Practice Subsidiaries are wholly-owned
subsidiaries of AmeriPath and the officers and directors of such companies are
generally members of AmeriPath's executive management team.  The financial
statements of the Manager and Practice Subsidiaries are included in the
consolidated financial statements of AmeriPath.

Ownership and Management of the PA Contractors.  The PA Contractors are entities
which have contractual relationships with the Company but are not owned directly
by AmeriPath.  These entities can be a professional corporation or professional
association, as permitted and defined in various state statutes.  The PA
Contractors operating in North Carolina, Wisconsin, New York, Michigan and
Pennsylvania are owned by physicians affiliated with AmeriPath. To the extent
permitted by law, the officers and directors of the PA Contractors are members
of AmeriPath's executive management team.  However, in

                                      F-9
<PAGE>

states where law prohibits such non-licensed physician personnel from serving as
an officer or director of a PA Contractor, eligible affiliated physicians serve
in such positions. The affiliated physicians who own PA Contractors have entered
into agreements with AmeriPath that generally (i) prohibit such affiliated
physicians from transferring their ownership interests in the PA Contractor,
except in very limited circumstances and (ii) require such affiliated physicians
to transfer their ownership in the PA Contractor to designees of AmeriPath upon
the occurrence of specified events.

The PA Contractors in Ohio and Indiana are owned by trusts.  The beneficiary of
such trusts is AmeriPath and the Trustees of such trusts are affiliated
physicians.  The PA Contractors operating in Texas are organized as not-for-
profit 5.01(a) corporations.  The sole member of the not-for-profit PA
Contractors in Texas is AmeriPath.

Each PA Contractor is party to a long-term management agreement with one of the
Company's Manager Subsidiaries.  Under the terms of these management agreements,
AmeriPath generally provides all non-medical and administrative support services
to the practices including accounting and financial reporting, human resources,
payroll, billing, and employee benefits administration.   In addition, the
management agreements give the Manager Subsidiaries certain rights with respect
to the management of the non-medical operations of the PA Contractors.  The
management agreements require the PA Contractors to pay a management fee to the
applicable Manager Subsidiaries.  The fee structure is different for each
Practice based upon various factors, including applicable law, and includes fees
based on a percentage of earnings, performance-based fees, and flat fees that
are adjusted from time to time.

In accordance with Emerging Issues Task Force 97-2:"Application of FASB
Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Agreements"
("EITF 97-2"), the financial statements of the PA Contractors are included in
the consolidated financial statements of AmeriPath since AmeriPath has a
controlling interest in the PA Contractor.

Managed Practices.  The term Managed Practices refers to AmeriPath's operation
and management of pathology practices under long-term service agreements with
affiliated physician groups.  Generally, the Company acquires the practice's
assets, and the physician groups maintain their separate corporate or
partnership entities and enter into employment and noncompete agreements with
the practicing physicians.  Costs of obtaining service agreements are amortized
using the straight-line method over 25 years.

Service agreements represent the exclusive right to operate the Company's
practices in affiliation with the related physician groups during the term of
the agreements.  Pursuant to the service agreements, the Company provides the
physician groups with equipment, supplies, support personnel, and management and
financial advisory services.  Physician groups are responsible for the
recruitment and hiring of physicians and all other personnel who provide
pathological services, and for all issues related to the professional, clinical
and ethical aspects of the practice.  As part of the service agreements,
physician groups are required to maintain medical malpractice insurance which
names the Company as an additional insured.  The Company is also required to
maintain general liability insurance and name the physician groups as additional
insureds.  Upon termination of the service agreements, the respective physician
groups are required to obtain continuing liability insurance coverage under
either a "tail policy" or a "prior acts policy."

The management services fees charged under the service agreements are based on a
predetermined percentage of net operating income of the Managed Practices.
Management service revenue is recognized by the Company at the time physician
service revenue is recorded by the physician group.  The Company also
participates to varying degrees in non-physician revenues generated from
ancillary services offered through the laboratories.  The Company charges a
capital fee for the use of depreciable assets owned by the Company and
recognizes revenue for all practice expenses that are paid on behalf of the
practices.  Practice expenses exclude the salaries and benefits of the
physicians.

2.  Summary of Significant Accounting Policies

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

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of
AmeriPath, Inc., its wholly-owned subsidiaries, and companies in which the
Company has the controlling financial interest by means other than the direct
record ownership of

                                      F-10
<PAGE>

voting stock, as discussed in Note 1. Intercompany accounts and transactions
have been eliminated. The Company does not consolidate the affiliated physician
groups it manages as it does not have operating control as defined in EITF 97-2.

Accounting Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States ("generally
accepted accounting principles") requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses. Because of the inherent uncertainties in this process, actual results
could differ from those estimates.  Such estimates include the recoverability of
intangible assets and the collectibility of receivables.

Fair Value of Financial Instruments

The Company's financial instruments consist mainly of cash and cash equivalents,
accounts receivable, due to/from physician groups, accounts payable and the
credit facility.  The carrying amounts of the Company's cash and cash
equivalents, accounts receivable and accounts payable approximate fair value due
to the short-term nature of these instruments.  Approximately $92,000 of the
credit facility bears interest at a variable market rate, and thus has a
carrying amount that approximates fair value.  The remaining $105,000 of the
credit facility was subject to interest rate swaps as described in Note 13.  The
estimated fair value of the interest rate swaps, which is the amount necessary
to unwind the swap, was approximately $1,100 and ($4,968) as of December 31,
1999 and 2000, respectively.  The estimated fair value of the Company's interest
rate swaps was obtained from outside sources.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid instruments with maturities at the
time of purchase of three months or less.  Included in cash and cash equivalents
at December 31, 2000 was $818 of restricted cash used as collateral under
certain letters of credit.

Inventories

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

Property and Equipment

Property and equipment are stated at cost. Routine maintenance and repairs are
charged to expense as incurred, while cost of betterments and renewals are
capitalized.

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

Intangible Assets

The allocation of the purchase price of the 2000 acquisitions is preliminary,
while the Company continues to obtain the information necessary to determine the
fair value of the assets acquired and liabilities assumed.  When the Company
obtains final information, management believes that adjustments, if any, will
not be material in relation to the consolidated financial statements.

Identifiable intangible assets include hospital contracts, physician referral
lists and laboratory contracts acquired in connection with acquisitions. Such
assets are recorded at fair value on the date of acquisition as determined by
management and are being amortized over the estimated periods to be benefited,
ranging from 10 to 40 years. In determining these lives the Company considered
each practice's operating history, contract renewals, stability of physician
referral lists and industry statistics.

Goodwill relates to the excess of cost over the fair value of net assets of the
businesses acquired. The amortization periods for goodwill were determined by
the Company with consideration given to the lives assigned to the identifiable
intangibles, the

                                      F-11
<PAGE>

reputation of the practice, the length of the practice's operating history, and
the potential of the market in which the acquired practice is located.
Amortization is calculated on a straight line basis over periods ranging from 10
to 35 years.

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

The Company has entered into a management service agreement with each of the
physician groups of the Managed Practices for a period up to 40 years.  Upon the
Company's acquisition of the practice's assets, the physician groups maintain
their separate corporate or partnership entities and enter into employment and
noncompete agreements with the practicing physicians.  Costs of obtaining these
management service agreements are amortized using the straight-line method over
25 years.

Deferred Debt Issuance Costs

The Company incurred costs in connection with bank financing.  These costs have
been capitalized and are being amortized on a straight-line basis, which
approximates the interest method, over the five year term.  Such amounts are
included in other assets in the consolidated balance sheet.

Revenue Recognition

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

Unbilled receivables for the Owned Practices, net of allowances, as of December
31, 1999 and 2000 amounted to approximately $5,200 and $8,600, respectively.

Net management service revenue reported by the Company represents net physician
group revenue less amounts retained by physician groups.  The amounts retained
by physician groups represent amounts paid to the physicians pursuant to the
management service agreements between the Company and the physician groups.  Net
physician group revenue is equal to billed charges reduced by provisions for bad
debt and contractual adjustments.  Contractual adjustments represent the
difference between amounts billed and amounts reimbursable by commercial
insurers and other third-party payors pursuant to their respective contracts
with the physician groups.  The provision for bad debts represents management's
estimate of potential credit issues associated with amounts due from patients,
commercial insurers, and other third-party payors.

Income Taxes

The Company's provision for income taxes includes federal and state income taxes
currently payable and changes in deferred tax assets and liabilities, excluding
the establishment of deferred tax assets and liabilities related to
acquisitions. Deferred income taxes are accounted for in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes and represent the estimated future tax effects resulting from
temporary differences between financial and tax reporting bases of assets and
liabilities. In addition, future tax  benefits,  such as net  operating loss
("NOL")  carryforwards,  are required to be  recognized  to the extent that
realization  of such benefits is more likely than not.  A valuation allowance is
established for those benefits that do not meet the more likely than not
criteria. A valuation allowance has been established for $3,548 of the net
deferred tax assets at December 31, 2000 due to the uncertainty regarding the
Company's ability to utilize the acquired net operating loss carryforwards of
Inform DX due to Internal Revenue Code limitations.

                                      F-12
<PAGE>

Segment Reporting

The Financial Accounting Standards Board ("FASB") issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information effective
for fiscal years beginning after December 15, 1997.  The Company has two
reportable segments, Owned Practices and Managed Practices, based upon
management reporting and the consolidated reporting structure.

Recent Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements, which
provided the staff's views in applying generally accepted accounting principles
to selected revenue recognition issues.  In June 2000, SAB 101 was amended by
SAB 101B, which delayed the implementation of SAB 101 until no later than the
fourth fiscal quarter of fiscal years beginning after December 15, 1999.  The
Company adopted SAB 101 in the fourth quarter of 2000.  The adoption of the
provisions of SAB 101 did not have a material impact on the Company's financial
position or results of operations.

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS
133") and in June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137 "Accounting for Derivative Instruments and Hedging Activities
- Deferral of the Effective Date of FASB Statement No. 133," which delayed the
effective date the Company is required to adopt SFAS 133 until its fiscal year
2001. In June 2000, the FASB issued Statement of Financial Accounting Standards
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an Amendment to FASB Statement No. 133." This statement amended
certain provisions of SFAS 133. SFAS 133 requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company does not enter into derivative financial
instruments for trading purposes.  Upon adoption of SFAS 133 in the first fiscal
quarter of 2001, these activities will be recognized on the Consolidated Balance
Sheet. The Company's adoption of SFAS 133 will not have a material effect on the
Company's earnings.  The adoption of SFAS 133 will result in the reduction of
other comprehensive income of approximately $5,000.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2000
presentation and/or to reflect the merger with Inform DX accounted for as a
pooling-of-interests.

3.  Merger and Acquisitions

Acquired Practices: Pooling method

On November 30, 2000, the Company completed a merger transaction with Inform DX
that was accounted for as a pooling-of-interests transaction.  The Company
issued 2.6 million Common Shares to Inform DX stockholders and Inform DX's
outstanding stock options were converted into options to purchase approximately
170,000 common shares of AmeriPath.  The historical consolidated financial
statements for periods prior to the consummation of the combination are restated
as though the companies had been combined during such periods.

The table below presents a reconciliation of total revenue and net income
available for Common Shares as reported in the accompanying consolidated
financial statements with those previously reported by the Company.

                                      F-13
<PAGE>

<TABLE>
<CAPTION>


                                                                                             Combining
                                                    AmeriPath             Inform DX         Adjustments (A)     Combined
                                                    ---------             ---------         ---------------     ---------
<S>                                                 <C>                  <C>               <C>                  <C>
Eleven months ended November 30, 2000
-------------------------------------
   Total revenue                                      $269,865              $34,329                --            $304,194
                                                      ========              =======             =====            ========
   Net income (loss)                                  $ 20,514              $(6,250)               --            $ 14,264
                                                      ========              =======             =====            ========

Year ended December 31, 1999
----------------------------
   Total revenue                                      $232,753              $24,652             $  27            $257,432
                                                      ========              =======             =====            ========
   Net income (loss)                                  $ 22,969              $   (31)            $(358)           $ 22,580
                                                      ========              =======             =====            ========

Year ended December 31, 1998
----------------------------
   Total revenue                                      $177,304              $16,012                --            $193,316
                                                      ========              =======             =====            ========
   Net income (loss)                                  $ 18,639              $  (683)            $ 212            $ 18,168
                                                      ========              =======             =====            ========
</TABLE>

(A)  The provision for income taxes has been adjusted by $357 and $(212) in 1999
     and 1998, respectively, to reflect the recordation of acquired net
     operating loss carry forwards, related valuation allowances and other
     various timing differences of Inform DX in accordance with SFAS No. 109.
     In addition, certain reclassifications totaling $27 were made to conform to
     the current year presentation.

Acquired Practices: Purchase method

During 2000, the Company acquired nine anatomic pathology practices, including
the two practices acquired by Inform DX.  The total consideration paid by the
Company in connection with these acquisitions included cash of $32,457,
1,532,000 shares of common stock (aggregate value of $12,180 based upon amounts
recorded on the Company's consolidated financial statements) and subordinated
debt of $2,794.  In addition, the Company issued additional purchase price
consideration in the form of contingent notes.  During 1999, the Company
acquired eleven anatomic pathology practices, including one by Inform DX.  The
total consideration paid by the Company in connection with these acquisitions
included cash of $51,746, 486,796 shares of common stock (aggregate value of
$2,954 based upon amounts recorded on the Company's consolidated financial
statements) and subordinated debt of $848.  In addition, the Company issued
additional purchase price consideration in the form of contingent notes. During
the year ended December 31, 2000, the Company made contingent note payments of
$26,645 and other purchase price adjustments of approximately $2,876 in
connection with certain post-closing adjustments and acquisition costs. During
the year ended December 31, 1999, the Company issued an additional 23,930 shares
of common stock, valued at $195, and made contingent note payments of $17,440
and other purchase price adjustments of $2,965 in connection with certain post-
closing adjustments and acquisition costs.

The following table sets forth the aggregate purchase price allocation for the
1999 and 2000 acquisitions, including the amortization periods for identifiable
intangible assets and goodwill ($ in 000's):

<TABLE>
<CAPTION>
                                                                       1999                   2000
                                                    ----------------------------------------------
<S>                                                                <C>                    <C>
     Number of acquisitions                                              11                      9
                                                    ----------------------------------------------
     Cash paid                                                     $ 51,746               $ 32,457
     Common Stock issued                                              3,149                 12,180
     Sub-debt                                                           848                  2,794
                                                    ----------------------------------------------
     Total consideration                                           $ 55,743               $ 47,431
                                                    ----------------------------------------------

     Allocation of purchase price:
     Tangible assets                                               $  7,468               $ 17,019
     Goodwill (10-25 years)                                          20,860                 12,043
     Hospital contracts (25 years)                                   39,710                 21,337
     Physician referral lists (18-25 years)                           3,603                 14,234
     Laboratory contracts (10 years)                                  3,104                     --
                                                    ----------------------------------------------
     Total assets acquired                                         $ 74,745               $ 64,633
                                                    ----------------------------------------------
     Liabilities assumed less sub-debt                             $(19,002)              $(17,202)
                                                    ----------------------------------------------
     Total purchase price                                          $ 55,743               $ 47,431
                                                    ----------------------------------------------
</TABLE>

                                      F-14
<PAGE>

The acquisitions have been accounted for using the purchase method of
accounting, except for the Inform DX acquisition.  The aggregate consideration
paid, and to be paid, is based on a number of factors, including each practice's
demographics, size, local prominence, position in the marketplace and historical
cash flows from operations. Assessment of these and other factors, including
uncertainties regarding the health care environment, resulted in the sellers of
each of the practices and the Company being unable to reach agreement on the
final purchase price. The Company agreed to pay a minimum purchase price and to
pay additional purchase price consideration to the sellers of the practices in
proportion to their respective ownership interest in each practice. The
additional payments are contingent upon the achievement of stipulated levels of
operating earnings  (as defined) by each of the practices over periods of three
to five years from the date of the acquisition as set forth in the respective
agreements, and are not contingent on the continued employment of the sellers of
the practices.   In certain cases, the payments are contingent upon other
factors such as the retention of certain hospital contracts for periods ranging
from three to five years.  The amount of the payments cannot be determined until
the achievement of the operating earnings levels or other factors during the
terms of the respective agreements. If the maximum specified levels of operating
earnings for each practice are achieved, the Company would make aggregate
maximum payments, including principal and interest, of approximately $198,359
over the next three to five years. At the mid-point level, the aggregate
principal and interest would be approximately $89,695 over the next three to
five years.  A lesser amount or no payments at all would be made if the mid-
point levels of operating earnings specified in each agreement are not met.
Through December 31, 2000, the Company made contingent note payments aggregating
$53,398, which represent 63% of the maximum contingent payments that were
available for payment under these contingent note agreements. Additional
payments are accounted for as additional purchase price, which increases the
recorded goodwill.

The accompanying consolidated financial statements include the results of
operations of the acquisitions from the date acquired through December 31, 2000.
The following unaudited pro forma information presents the consolidated results
of the Company's operations and the results of operations of the 1999 and 2000
acquisitions for the years ended December 31, 1999 and 2000 after giving effect
to amortization of goodwill and identifiable intangible assets, interest expense
on long-term debt incurred in connection with these acquisitions, and the
reduced level of certain specific operating expenses (primarily compensation and
related expenses attributable to former owners) as if the acquisitions had been
consummated on January 1, 1999.  Such unaudited pro forma information is based
on historical financial information with respect to the 1999 and 2000
acquisitions and does not include operational or other changes which might have
been effected by the Company.

The unaudited pro forma information for the years ended December 31, 1999 and
2000 presented below is for illustrative information purposes only and is not
necessarily indicative of results which would have been achieved or results
which may be achieved in the future:

                                               Pro Forma
                                              December 31,
                                           ------------------
                                             1999      2000
                                           --------  --------

Net revenue                                $321,703  $357,638
                                           ========  ========
Net income attributable to common stock    $ 27,900  $ 15,849
                                           ========  ========
Net income per share (diluted)             $   1.09  $   0.62
                                           ========  ========

4.   Accounts Receivable

Accounts receivable are recorded at net realizable value. The allowance for
contractual and other adjustments and uncollectible accounts is based on
historical experience and judgments about future events. Accordingly, the actual
amounts experienced could vary significantly from the recorded allowances.  For
Managed Practices, terms of the service agreements require the Company to
purchase receivables generated by the physician groups on a monthly basis.  Such
amounts are recorded net of contractual allowances and estimated bad debts.  For
Managed Practices, accounts receivable are a function of the net physician group
revenue rather than the net revenue of the Company.

                                      F-15
<PAGE>

<TABLE>
<CAPTION>

                                                                       December 31,
                                                                    -------------------
Accounts receivable consisted of the following:                       1999       2000
                                                                    --------   --------
<S>                                                                <C>         <C>
Gross accounts receivable                                           $130,791   $166,873
Less:   Allowance for contractual
          and other adjustments                                      (47,047)   (54,840)
        Allowance for uncollectible accounts                         (25,956)   (41,094)
                                                                    --------   --------
Accounts receivable, net                                            $ 57,788   $ 70,939
                                                                    ========   ========
</TABLE>

The following table represents the rollforward of the allowances for contractual
adjustments and uncollectible accounts:

<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,
                                                                    -------------------------------------------------------
                                                                      1998                    1999                   2000
                                                                    --------               ---------              ---------
<S>                                                                 <C>                    <C>                    <C>
Beginning allowances for contractual adjustments
   and uncollectible accounts                                       $ 26,522               $  62,512              $  73,003
Provision for contractual adjustments                                 80,664                 128,585                178,873
Provision for doubtful accounts                                       18,698                  25,289                 34,040
Managed Practice contractual adjustments
   and bad debt expense                                               31,429                  41,712                 44,849
Write-offs and other adjustments                                     (94,801)               (185,095)              (229,831)
                                                                    --------               ---------              ---------
Ending allowance for contractual adjustments
   and uncollectible accounts                                       $ 62,512               $  73,003              $  95,934
                                                                    ========               =========              =========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                              ---------------------
                                                                                 1999        2000
                                                                              ---------   ---------
<S>                                                                         <C>         <C>
Government programs                                                              18.8%       17.8%
Third-party payors                                                               53.7        53.3
Private pay patients                                                             22.5        23.8
Other                                                                             5.0         5.1
                                                                            ---------   ---------
                                                                                100.0%      100.0%
                                                                            =========   =========
</TABLE>

5.  Net Revenue
<TABLE>
<CAPTION>

                                                                    Years Ended December 31,
                                                                 --------------------------------
Net patient service revenue consisted of the following:            1998        1999        2000
                                                                 --------   ---------   ---------
<S>                                                              <C>        <C>         <C>
Gross revenue                                                    $257,968   $ 361,854   $ 482,238
Less contractual and other adjustments                            (80,664)   (128,585)   (173,873)
                                                                 --------   ---------   ---------

 Net patient service revenue                                     $177,304   $ 233,269   $ 308,365
                                                                 ========   =========   =========

</TABLE>

Net management service revenue consisted of the following:
<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                                                 --------------------------------
                                                                   1998        1999        2000
                                                                 --------   ---------   ---------
<S>                                                              <C>        <C>         <C>
Gross physician group revenue                                    $ 61,694   $  85,379   $  86,203
Contractual adjustments and bad debt expense                      (31,429)    (41,712)    (44,849)
                                                                 --------   ---------   ---------
Net physician group revenue                                        30,265      43,667      41,354
Less amounts retained by physician groups                         (14,253)    (19,504)    (19,625)
                                                                 --------               ---------
Net management service revenue                                   $ 16,012   $  24,163   $  21,729
                                                                 ========   =========   =========
</TABLE>

A significant portion of the Company's net revenue is generated by the hospital-
based practices through contracts with 168, 207 and 224 hospitals as of December
31, 1998, 1999 and 2000, respectively. HCA - The Healthcare Company ("HCA")
owned 29,

                                      F-16
<PAGE>

27 and 27 of these hospitals as of December 31, 1998, 1999 and 2000,
respectively. For the years ended December 31, 1998, 1999 and 2000,
approximately 17%, 15%, and 13%, respectively of net patient service revenue was
generated directly from contracts with hospitals owned by HCA. Generally, these
contracts and other hospital contracts have remaining terms of less than five
years and contain renewal provisions. Some of the contracts also contain clauses
that allow for termination by either party with relatively short notice. HCA has
been under government investigation for some time and is evaluating its
operating strategies; including the sale, spin-off or closure of certain
hospitals. Although the Company, through its acquisitions, has had relationships
with these hospitals and national labs for extended periods of time, the
termination of one or more of these contracts could have a material adverse
effect on the Company's financial position and results of operations. The
Company from time to time evaluates the carrying values of identified
intangibles and goodwill and the related useful lives assigned to such assets.
See Note 8 for additional information related to the impairment of certain
hospital contracts.

6.  Property and Equipment

<TABLE>
<CAPTION>

                                                                     Estimated         December 31,
                                                                     Useful Life    -------------------
Property and equipment consisted of the following:                     (Years)        1999       2000
                                                                  --------------    --------   --------
<S>                                                               <C>               <C>        <C>
Laboratory, office and data processing equipment                         3-7        $ 19,336   $ 27,668
Construction in progress                                                               2,693      1,511
Leasehold improvements                                                  5-10           3,510      7,984
Furniture and fixtures                                                   3-7           2,070      2,590
Mobile laboratory units                                                    3             175        175
Automotive vehicles                                                      3-5           1,058      1,380
                                                                                    --------   --------
                                                                                      28,842     41,308
Less accumulated depreciation                                                        (12,302)   (17,728)
                                                                                    --------   --------
Property and equipment, net                                                         $ 16,540   $ 23,580
                                                                                    ========   ========
</TABLE>

Depreciation expense was $2,669, $3,554 and $4,748 for the years ended December
31, 1998, 1999 and 2000, respectively.

7.  Intangible assets

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

                                                  Amortization Periods
                                                         (Years)
                                December 31,      --------------------
                            -------------------              Weighted
                              1999       2000      Range      Average
                            --------   --------   --------   --------
Hospital contracts          $193,899   $211,738      25-40     32.3
Physician client lists        54,893     71,447      10-30     20.7
Laboratory contracts           7,317      4,543         10     10.0
Management agreements         11,022     11,214         25     25.0
                            --------   --------
                             267,131    298,942
Accumulated amortization     (20,737)   (30,315)
                            --------   --------
Balance, net                $246,394   $268,627
                            ========   ========

Goodwill                    $153,749   $193,231      10-35     30.5
Accumulated amortization     (10,366)   (15,968)
                            --------   --------
Balance, net                $143,383   $177,263
                            ========   ========

In determining the useful lives of the identifiable intangible assets, the
Company considered each practice's operating history, contract renewals,
stability of physician referral lists and industry statistics.

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

                                      F-17
<PAGE>

The weighted average amortization period for identifiable intangible assets and
goodwill is 29.6 years.

8.   Asset Impairments and Related Charges

During the second quarter ended June 30, 2000, the Company recorded a pre-tax
non-cash charge of approximately $4,700, and related cash charges of
approximately $545 in connection with the impairment of intangible assets at an
acquired practice in Cleveland, Ohio.  The Company had provided services at four
hospitals and an ambulatory care facility owned by Primary Health Systems
("PHS"), a regional hospital network in Cleveland, Ohio.  During the first
quarter of 2000, PHS began implementing a plan of reorganization filed under
Chapter 11 with the U.S. Bankruptcy Court for the District of Delaware, and
closed one hospital.  During the second quarter, the bankruptcy court approved
the sale of two hospitals and the ambulatory care facility to local purchasers
in the Cleveland area.  The Company's contracts with these two hospitals and the
ambulatory care facility were not accepted by the purchasers, who have elected
to employ their own pathologists.  One hospital has not been sold and continues
to do business with the Company.  As a result, the Company determined, using the
discounted cash flow method, that the intangible assets, including goodwill, had
no remaining fair value.  Therefore, the Company wrote off the unamortized
intangible asset balance.  In addition, the Company recorded approximately $545
of related charges for potentially uncollectible accounts receivable, employee
termination costs and legal fees.

During the fourth quarter of 2000, the Company recorded a pre-tax non-cash
charge of approximately $4,300 related to the impairment of certain intangible
assets.  Of this charge, $3,300 related to Quest Diagnostics' ("Quest")
termination of its contract with the Company in South Florida, effective
December 31, 2000.  The Company believes that some portion of this work may be
transferred by Quest to other practices owned by the Company and the Company is
implementing a marketing strategy to retain and provide services directly to
these customers in South Florida.  In addition, during the fourth quarter, a
hospital in South Florida where the Company had the pathology contract,
requested proposals for its pathology services, and the Company was unsuccessful
in retaining this contract.  Based upon the remaining projected cash flow from
this hospital network, the Company determined that the intangible assets were
impaired and recorded a pre-tax non-cash charge of approximately $1,000.

9.   Investment Securities

The Company accounts for investments in certain debt and equity securities under
the provisions of Statement of Financial Accounting Standards No. 115 ("SFAS No.
115"), "Accounting for Certain Debt and Equity Securities". Under SFAS No. 115,
the Company must classify its debt and marketable equity securities in one of
three categories: trading, available-for-sale, or held-to-maturity.

In September 2000, the Company made a $1,000 investment in Genomics
Collaborative, Inc ("GCI") for which it received 333,333 shares of Series D
Preferred Stock, par value $0.01.  The GCI Series D Preferred Stock is
convertible into one share of common stock and redeemable after 2005 at $3.00
per share at the option of the holder.  GCI is a privately held, start-up,
company which has a history of operating losses.  As of December 31, 2000, it
appears that GCI has sufficient cash to fund operations for the next twelve
months.  In the event that they are unable to become profitable and/or raise
additional funding, it could result in an impairment of our investment.  This
available for sale security is recorded at its estimated fair value, which
approximates cost, and is classified as other assets on the Company's balance
sheet.  At December 31, 2000, there were no unrealized gains or losses
associated with this investment.

10.  Due to Managed Practices

In accordance with the terms of the management service agreements, the owners of
the managed practices are entitled to a predetermined percentage of the net
operating income of their managed practice ("physician group retainage").  The
amount of the liability is calculated monthly and is to be paid by the fifteenth
day of the following month.  The monthly payment amount is comprised of either
the net revenues or the cash collected from revenues during the month less any
practice expenses and management fees charged by the Company.  The amounts owed
to the owners of the Managed Practices were $4,055 and $2,853 as of December 31,
2000 and 1999, respectively.

                                      F-18
<PAGE>

11.  Accounts Payable and Accrued Expenses

<TABLE>
<CAPTION>

                                                                                     December 31,
                                                                                   -----------------
Accounts payable and accrued expenses consisted of the following:                    1999     2000
                                                                                   -------  -------
<S>                                                                                 <C>      <C>
Accounts payable                                                                    $ 4,830  $12,034
Accrued compensation                                                                  7,978   12,604
Accrued acquisition costs                                                             1,739    2,332
Accrued interest                                                                        828    1,283
Income taxes payable                                                                    942    1,822
Other accrued expenses                                                                5,020    5,637
                                                                                    -------  -------
                                                                                    $21,337  $35,712
                                                                                    =======  =======
</TABLE>

12.  Merger-related charges

In connection with the Inform DX merger and other previous acquisitions, the
Company has recorded reserves for transaction costs, employee-related costs
(including severance agreement payouts) and various exit costs associated with
the consolidation of certain operations, including the elimination of duplicate
facilities and certain exit and restructuring costs. During the fourth quarter
of 2000, the Company recorded merger-related costs totaling $6,200 ($5,102, net
of tax). As part of the business restructuring, the Company is closing certain
facilities. In 1999, the Company paid $1,741 of costs in connection with the May
1998 American Pathology Resource, Inc. ("APR") acquisition. Payments were for
various exit costs associated with the disposal of certain operations of APR and
the shutdown of the APR corporate office.

The following is a reconciliation of the activity for the years ended December
31, 2000 and 1999 with respect to the merger-related reserves.  The balance
sheet charges relate to acquisitions accounted for under the purchase method of
accounting, with the offset resulting in additional goodwill.  Statement of
operations charges relate to the acquisition of Inform DX, which was accounted
for under the pooling of interests method of accounting.

<TABLE>
<CAPTION>

                                     Balance            Balance         Statement of                                Balance
                                   December 31,          Sheet           Operations                              December 31,
                                       1999             Charges            Charges            Payments               2000
                                   -----------          -------         ------------          -------            ------------
<S>                                <C>                  <C>             <C>                   <C>                <C>
Transaction costs                        --              $1,160             $4,348            $(3,782)            $ 1,726
Employee termination costs               78               1,200              1,861             (1,722)              1,417

Lease commitments                       394               1,974                 --               (240)              2,128
Other exit costs                        715                  --                 --               (452)                263
                                     ------              ------             ------            -------             -------
Total                                 1,187              $4,334             $6,209            $(6,196)              5,534
                                                         ======             ======            =======
Less: portion included
 in current liabilities                (275)                                                                       (3,165)
                                     ------                                                                       -------
Total included in other
 liabilities                         $  912                                                                       $ 2,369
                                     ======                                                                       =======
</TABLE>

                                      F-19
<PAGE>

<TABLE>
<CAPTION>
                                   Balance               Balance          Statement of                              Balance
                                 December 31,             Sheet            Operations                             December 31,
                                     1998                Charges             Charges            Payments              1999
                                 ------------            -------          ------------          --------          ------------
<S>                              <C>                     <C>              <C>                  <C>                <C>
Employee termination
 costs                               $  414               $  (8)                 --            $  (328)             $   78

Lease Commitments                     1,851                (740)                 --               (717)                394
Other exit costs                      1,518                (107)                 --               (696)                715
                                     ------               -----                 ---            -------              ------
Total                                 3,783               $(855)                 --            $(1,741)              1,187
                                                          =====                 ===            =======
Less: portion included
 in current liabilities                (860)                                                                          (275)
                                     ------                                                                         ------
Total included in other
 liabilities                         $2,923                                                                         $  912
                                     ======                                                                         ======
</TABLE>

In addition, the Company plans to continue its consolidation efforts related to
its acquisition of Inform DX during the first half of 2001.  As a result, the
Company expects to incur additional costs of $7,300 during this period.  Of this
amount, approximately $5,400 is for employee-related costs, $1,100 is for the
consolidation of the Company's facilities in New York and eastern Pennsylvania,
and $800 is for other transaction costs related to the Inform DX acquisition.

13.  Long-term Debt

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                            -------------------
Long-term debt consisted of the following:                                    1999       2000
                                                                            --------   --------
<S>                                                                         <C>        <C>
Revolving loan                                                              $163,300   $197,216
Revolving line of credit                                                       2,500         --
Note payable                                                                      73        210
Capital leases                                                                   837        683
Subordinated notes issued and assumed in connection with
  acquisitions, payable in varying amounts through 2005,
  with interest at rates of 6.5% and 9.5%                                      1,904      3,638
                                                                            --------   --------
                                                                            $168,614   $201,747
Less current portion                                                            (930)    (1,055)
                                                                            --------   --------
Long-term debt, net of current portion                                      $167,684   $200,692
                                                                            ========   ========

</TABLE>

At December 31, 2000 maturities of long-term debt were as follows:

<TABLE>


<S>                                                                                    <C>
2001                                                                                   $  1,055
2002                                                                                        430
2003                                                                                        355
2004                                                                                    197,488
2005                                                                                      2,419
                                                                                       --------
Total                                                                                  $201,747
                                                                                       ========
</TABLE>

The Company has a revolving line of credit (the "Credit Facility") with a
syndicate of banks led by Fleet National Bank, formerly Bank Boston, N.A. as
lender and agent.  On April 28, 1998, the Company amended its Credit Facility.
The amended facility provided for borrowings of up to $200,000 in the form of a
revolving loan that may be used for working capital purposes (in an amount
limited to 75% of the Company's net accounts receivable, as reflected on the
Company's quarterly consolidated balance sheet) and to fund acquisitions to the
extent not otherwise used for working capital purposes.

On December 16, 1999, the Company amended its Credit Facility.  The amended
facility provides for borrowings of up to $230,000 in the form of a revolving
loan that may be used for working capital purposes and to fund acquisitions to
the extent

                                      F-20
<PAGE>

not otherwise used for working capital purposes. The Company must comply with
certain requirements as defined in the credit agreement to utilize the Credit
Facility to fund acquisitions.

On July 21, 2000, the Company amended its Credit Facility dated December 16,
1999 ("Amendment No. 1").  Amendment No. 1 allowed for the Company to be in
compliance with the Credit Facility by excluding non-cash charges totaling
approximately $5,200 from the calculation of the Company's consolidated
operating cash flow covenant through March 31, 2001.  These charges relate to
the impairment of assets and related charges at an acquired practice in
Cleveland, Ohio as more fully discussed in Note 8 to the financial statements.
The amendment was obtained to cure a potential default that otherwise would
likely have occurred under the operating cash flow covenant contained in the
Credit Facility.  In addition, Amendment No. 2 (i) increased the Company's
operating cash flow requirements under the facility for the trailing twelve
months ending December 31, 2002 and thereafter; (ii) requires that a minimum of
10% of the purchase price of future acquisitions greater than $5,000 be in the
form of the Company's capital stock, and (iii) allowed for an investment of up
to $3,000 in Genomics Collaborative, Inc.  The amendment is not expected to have
a material adverse effect on the Company's operations or strategies.

On November 29, 2000, the Company amended its Credit Facility dated December 16,
1999 ("Amendment No. 2").  Amendment No. 2 allowed for the Company to be in
compliance with the Credit Facility by excluding from the covenant calculations
cash and non-cash charges totaling approximately $17,500.  These exclusions were
comprised of a one time cash transaction and restructuring charges of up to
$7,500 in connection with the acquisition of Inform DX, and nonrecurring non-
cash charges of up to $10,000, including charges resulting from an increase in
the accounts receivable reserve in connection with the acquisition of Inform DX,
and potential asset impairment charges relating to good will and other
intangibles of not more than $5,000. In addition, Amendment No. 2 (i) decreased
the Company's operating cash flow requirements under the facility for the
trailing twelve months ending December 31, 2001, and increased them thereafter;
(ii) increased the amount of allowable Capital Lease Obligations to $3,000; and
(iii) decreased the levels of acquisition purchase price used in the
documentation requirements of the lenders.  The amendment was obtained to cure a
potential default for the year ended December 31, 2000 that otherwise would
likely have occurred under the operating cash flow covenant contained in the
Credit Facility.

There is the potential of $5,400 of charges in excess of the $17,500 allowed in
Amendment No. 2 which results from the formalization of the Inform DX
integration plans, and are expected to result in further synergies. These
additional charges could have caused the Company to be in technical default of
one or more of its covenants under its Credit Facility at the end of the first
quarter of 2001.  On March 29, 2001, the Company and its lenders executed an
amendment ("Amendment No. 3") which excludes an additional $5,400, or $28,300,
in total, of charges from its covenant calculations.  In addition, Amendment No.
3 (i) increased the Company's borrowing rate by 37.5 basis points; (ii) requires
the Company to use a minimum of 30% equity for all acquisitions; (iii) requires
the Company to use no more than 20% of consideration for acquisitions in the
form of contingent notes and; (iv) requires lender approval of all acquisitions
with a purchase price greater than $10,000.  The Company will also be required
to pay an amendment fee of up to 30 basis points to those lenders which
consented to the amendment.  The maximum amount of the amendment fee would be
$700.

All outstanding advances under the Credit Facility are due and payable on
December 16, 2004.  Interest is payable monthly at variable rates which are
based, at the Company's option, on the Agents' base rate (9.5% at December 31,
2000) or the Eurodollar rate plus a premium that is based on the Company's
quarterly ratio of total debt to cash flow.  The amended Credit Facility also
requires a commitment fee to be paid quarterly equal to 0.50% of the annualized
unused portion of the total commitment.  The Company has used a portion of the
funds available under the amended Credit Facility to refinance previously
outstanding indebtedness, to fund acquisitions and for working capital purposes.
The Company intends to use the remaining availability for its acquisition
program and working capital.

In May 2000, the Company entered into three interest rate swaps transactions
with an effective date of October 5, 2000, variable maturity dates, and a
combined notional amount of $105 million.  These interest rate swap transactions
involve the exchange of floating for fixed rate interest payments over the life
of the agreement without the exchange of the underlying principal amounts.  The
differential to be paid or received is accrued and is recognized as an
adjustment to interest expense.  These agreements are indexed to 30 day LIBOR.
The following table summarizes the terms of the swaps:

                                      F-21
<PAGE>

<TABLE>
<CAPTION>

  Notional Amount(in millions)      Fixed Rate             Term in Months       Maturity
<S>                                 <C>                    <C>                  <C>
             $45.0                   7.604%                    24               10/07/02
             $30.0                   7.612%                    36               10/06/03
             $30.0                   7.626%                    48               10/05/04
</TABLE>

The amended Credit Facility contains covenants which, among other things,
require the Company to maintain certain financial operating ratios and impose
certain limitations or prohibitions on the Company with respect to the
incidence, guaranty or assumption of indebtedness, the payment of dividends,
cash distributions, new debt issuance, sale of assets, leasing commitments and
annual capital expenditures, and contains provisions which preclude mergers and
acquisitions under certain circumstances. All of the Company's assets are
pledged as collateral under the Credit Facility. The Company believes that it is
in compliance with all of the covenants at December 31, 2000.

On February 2, 1998, the Company entered into a revolving line of credit
agreement with Nations Bank providing available borrowings up to $5,000 that may
be used for general corporate purposes including working capital and the funding
of cash for acquisitions or affiliations with pathology practices.  This
revolving line of credit was increased to $9,000 in September 2000.  The balance
of this revolving line of credit was paid in full on December 1, 2000.

Note Payable to Bank

In October 1999, the Company assumed a long-term obligation pursuant to a
promissory note agreement with a bank in connection with the Columbus Pathology
Associates acquisition.  The obligation is evidenced by an installment note
bearing interest at fixed rate of 9.75% and maturing in 2004.  The note is
secured by certain assets of the acquired practice.

Letters of Credit

As of December 31, 2000, the Company had letters of credit outstanding totaling
$1,186.  The letters of credit secure payments under certain operating leases
and expire at various dates in 2001 and 2002.  Some of the letters of credit
automatically decline in value over various lease terms.  The letters of credit
have annual fees averaging 1.7%.

14.  Lease Commitments

The Company leases various office and laboratory space, and certain equipment
pursuant to operating lease agreements. The following information includes the
related party leases discussed in Note 19. Future minimum lease commitments
consisted of the following at December 31, 2000:

     2001                                                      $ 4,203
     2002                                                        3,915
     2003                                                        3,265
     2004                                                        2,121
     2005                                                        2,003
     Thereafter                                                  4,690
                                                               -------
                                                               $20,197
                                                               =======

In addition, certain owners of the Managed Practices are lessees of various
equipment, auto and facility operating leases that are used in the operations of
the business.  Future payments under these leases are $4,412 of which the
Company is responsible for their corresponding share as defined in the
management service agreements.  The Company's obligations, based upon their
management fee percentage, are $705.  In the event of termination of a
management service agreement, any related lease obligations are also terminated
or assumed by the Managed Practice.

The Company has entered into certain noncancelable subleases that reduce its
total commitments under operating leases by $186.

Owned Practices' rent expense under operating leases for the years ended
December 31, 1998, 1999 and 2000 was $1,687, $2,228 and $4,104 respectively.

                                      F-22
<PAGE>

15.  Option Plan

The Company's 1996 Stock Option Plan (the "Option Plan") provides for the grant
of options to purchase shares of common stock to key employees and others.  The
plan provides that the option price shall not be less than the fair market value
of the shares on the date of the grant.  All options granted under the Option
Plan have 10 year terms and vest and become exercisable at the rate of 20% a
year, following the date of grant.  As part of the Inform DX acquisition, the
Company assumed additional two option plans ("Additional Plans"). Options
granted under the Additional Plans have varying exercisable rates.

The Company's Director Option Plan provides for the grant of options to purchase
shares of common stock to Directors who are not employees of the Company. All
options granted under the Director Option Plan have 10 year terms and are
exercisable during the period specified in the agreement evidencing the grant of
such Director Option. At December 31, 2000, 35,000 options have been granted
under the Director Option Plan.

At December 31, 2000, 2,232,000 shares of common stock are reserved for issuance
pursuant to options granted under the Option Plan, the Director Option Plan and
the Additional Plans.

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

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the Black-
Scholes Option Pricing Model with the following weighted-average assumptions for
1998, 1999 and 2000:

                                                        1998    1999    2000
                                                       -----   -----   -----
Risk free interest rate                                  6.5%    6.5%    6.5%
Dividend yield                                            --      --      --
Volatility factors                                      107.0%  120.0%  137.0%
Weighted average life (years)                             4.1     4.1     4.2

Using the Black-Scholes Option Pricing Model, the estimated weighted-average
fair value per option granted in 1998, 1999 and 2000 were $10.65, $6.28 and
$6.92 respectively

The pro forma net income per common share assuming the amortization of the
estimated fair values over the option vesting period and diluted earnings per
common share, had the fair value method of accounting for stock options been
used, would have been as follows:

<TABLE>
<CAPTION>

                                                              1998     1999    2000
                                                            -------  -------  ------
<S>                                                         <C>      <C>      <C>

Pro forma net income attributable to common shareholders    $16,754  $19,612  $8,018
Pro forma diluted earnings per common share                 $  0.78  $  0.87  $ 0.33

</TABLE>

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

                                      F-23
<PAGE>

A summary of the status of the option plans as of and for the changes during
each of the three years in the period ended December 31, 2000 is presented
below:
<TABLE>
<CAPTION>

                                                             Option Price Per Share
                                          Number         --------------------------------
                                         of Shares        Low           High     Weighted
                                         ---------       ------        -------   --------
<S>                                      <C>             <C>           <C>       <C>
Outstanding December 31, 1997            1,215,142       $ 1.11        $16.75    $ 5.78
Granted in 1998                            254,050        14.06         14.06     14.06
Granted in 1998                              2,000        16.13         16.13     16.13
Granted in 1998                              1,000        11.38         11.38     11.38
Granted in 1998                              8,971         3.74          3.74      3.74
Granted in 1998                              1,461         6.22          6.22      6.22
Granted in 1998                              4,017        11.20         11.20     11.20
Granted in 1998                                201        18.67         18.67     18.67
Granted in 1998                             12,974        40.46         40.46     40.46
Cancelled in 1998                          (12,900)        8.33         16.75     11.45
Exercised in 1998                          (27,560)        8.33         10.00      8.98
                                         ---------
Outstanding December 31, 1998            1,459,356         1.11         40.46      7.46
Granted in 1999                             26,000         9.31          9.31      9.31
Granted in 1999                            259,500         7.63          7.63      7.63
Granted in 1999                              5,000         9.56          9.56      9.56
Granted in 1999                              2,000         9.16          9.16      9.16
Granted in 1999                              2,000         9.06          9.06      9.06
Granted in 1999                              9,000         7.75          7.75      7.75
Granted in 1999                             49,727        15.56         15.56     15.56
Granted in 1999                              3,736        40.46         40.46     40.46
Cancelled in 1999                          (41,800)       10.00         16.75     10.58
Exercised in 1999                           (8,000)        1.11          1.11      1.11
                                         --------
Outstanding December 31, 1999            1,766,519         1.11         40.46      7.76
Granted in 2000                             50,000         8.13          8.13      8.13
Granted in 2000                            356,000         7.63          7.63      7.63
Granted in 2000                             17,000        16.88         16.88     16.88
Granted in 2000                             73,703        41.58         41.58     41.58
Cancelled in 2000                          (42,250)        7.63         14.06      9.64
Exercised in 2000                         (260,521)        1.11         15.56      5.96
                                         ---------
Outstanding December 31, 2000            1,960,451       $ 1.11        $41.58    $ 9.30
                                         =========
</TABLE>

                                      F-24
<PAGE>

The following table summarizes the information about options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>

                          Options Outstanding                             Options Exercisable
-----------------------------------------------------------------------  ---------------------
                                                Weighted
                                                 Average       Weighted               Weighted
                                                Remaining      Average                Average
          Range of               Number     Contractual Life   Exercise    Number     Exercise
       Exercise Prices         Outstanding     (in years)       Price    Exercisable   Price
-----------------------------  -----------  -----------------  --------  -----------  --------
<S>                            <C>          <C>                <C>       <C>          <C>

           $ 1.11                  123,600          3.6          $ 1.11      123,600    $ 1.11
           $ 1.67                  360,011          5.1          $ 1.67      288,009    $ 1.67
           $ 3.74                   11,702          7.1          $ 3.74        9,891    $ 3.74
           $ 6.22                    1,461          7.3          $ 6.22        1,461    $ 6.22
           $ 7.63                  583,500          8.9          $ 7.63       40,800    $ 7.63
           $ 7.75                    9,000          8.9          $ 7.75        1,800    $ 7.75
           $ 8.13                   50,000          9.0          $ 8.13           --        --
           $ 8.33                  111,720          5.5          $ 8.33       69,600    $ 8.33
           $ 9.06                    2,000          8.9          $ 9.06          400    $ 9.06
           $ 9.31                   26,000          8.2          $ 9.31        5,200    $ 9.31
           $ 9.56                    4,000          8.6          $ 9.56           --        --
           $10.00                  236,200          6.5          $10.00      128,800    $10.00
           $11.20                    4,017          7.4          $11.20        2,411    $11.20
           $11.65                      600          7.5          $11.65           --        --
           $14.06                  228,280          7.4          $14.06       91,000    $14.06
           $15.56                   49,246          8.9          $15.56       23,420    $15.56
           $16.13                    2,000          7.4          $16.13          800    $16.13
           $16.63                    6,000          6.9          $16.63        3,600    $16.63
           $16.75                   43,500          6.9          $16.63       26,100    $16.63
           $16.88                   17,000          9.8          $16.88           --        --
           $18.68                      201          7.5          $18.68          201    $18.68
           $40.46                   16,710          7.8          $40.46       11,658    $40.46
           $41.58                   73,703          8.5          $41.58       73,703    $41.58
                                 ---------                                   -------
       $1.11 - $41.58            1,960,451          7.1          $ 9.30      902,454    $ 9.56
                                 =========                                   =======
</TABLE>

As of December 31, 1998 and 1999 exercisable options were 499,845 and 860,366,
respectively.

Warrants to purchase 38,867 and 16,226 shares of common stock were outstanding
at December 31, 1999 and 2000, respectively, at exercise prices ranging from
$0.01 to $0.30 per share.  These warrants were issued in conjunction with
certain indebtedness incurred by the Company.  Holders of warrants do not have
voting rights or any other rights as a shareholder of the Company.

In connection with indebtedness issued by the Company in 1997 (the "Junior
Notes"), the Company issued warrants to purchase 16,066 shares of the Company's
common stock to the holders of the Junior Notes.  For each $10 Junior Note, the
holder was issued a warrant to purchase 161 shares of common stock at $0.01 per
share (the "Junior Warrants").  The Junior Warrants expire on December 24, 2002.
A value of approximately $58 was allocated to these warrants which was included
in deferred financing costs and additional paid-in capital in the accompanying
consolidated financial statements.

                                      F-25
<PAGE>

16.  Redeemable Preferred Stock

This footnote describes the transactions regarding Inform DX's Series A
Redeemable Preferred Stock (the "Preferred Stock").  All share amounts have been
converted using the conversion ratio for the pooling transaction.

In 1998, Inform DX issued 395,471 shares of Preferred Stock at $40.46 per share.
The Preferred Stock was convertible into common stock at the option of the
holder.  The conversion rate for the Preferred Stock was one share of common
stock per share of  Preferred Stock.  The Preferred Stock was redeemable after
May 20, 2003 at $40.46 per share.  Net proceeds from the Preferred Stock sale
were approximately $15,298 and were used to repay long-term obligations of the
Inform DX and certain indebtedness assumed, including accrued interest.
Proceeds received in excess of retired indebtedness were used to provide general
working capital and funding for Company acquisitions.

Offering costs and expenses of approximately $702 were recorded against the
aggregate preference value of the Preferred Stock and were being accreted over
five years.  Accretion for the period ended December 31, 2000 and 1999 was
approximately $65 and $131 respectively.

The Preferred Stock voted on an as converted basis with the holders of Inform
DX's common stock.  The Preferred Stock contained a liquidation preference over
all other classes of Inform DX's capital stock.  Furthermore, holders of the
Preferred Stock may have elected to treat certain transactions as liquidation
events.  Subject to certain conditions, the Preferred Stock also contained anti-
dilution and preemptive rights.  Each holder of shares of the Preferred Stock
was entitled to receive, when and as declared by the Board of Directors, if at
all, dividends on a parity with each holder of shares of common stock.

On June 30, 2000, Inform DX acquired Pathsource, Inc. in a stock for stock
transaction accounted for as a purchase business combination.  In connection
with this acquisition, Inform DX provided for an induced conversion of the
Preferred Stock.  The induced conversion resulted in the issuance of 642,640
shares of common stock.  Inform DX estimated, based on a third party valuation,
the fair market value of its common stock at June 30, 2000 to be $6.22 per
share.  Based on this valuation, Inform DX recorded a charge for the induced
conversion of approximately $1,500, or $6.22 per share times the additional
common shares issued of 247,169.

17.  Employee Benefit Plans

Effective July 1, 1997, the Company consolidated its previous 401(k) plans into
a new qualified 401(k) retirement plan (the "401(k) Plan") covering
substantially all eligible employees as defined in the 401(k) plan. The new 401
(k) Plan requires employer matching contributions equal to 50% (25% prior to
July 1, 2000) of the employees' contributions up to a maximum of one thousand
dollars per employee. The Company expensed matching contributions aggregating
$379, $451 and $648 to the new plan in 1998, 1999 and 2000, respectively. Also,
in connection with acquisitions, the Company assumes the obligations under
certain defined contribution plans which cover substantially all eligible
employees of the acquired practices.  The Company has not made any contributions
from the dates of acquisition through December 31, 2000.

During 1999, the Company introduced a Supplemental Employee Retirement Plan
("SERP") which covers only selected employees.  The SERP is a non-qualified
deferred compensation plan which was established to aid in the retention of the
non-selling physicians and other key employees.  In 1999, the eligible
participants were allowed to defer up to ten thousand dollars of compensation
and/or eligible bonuses.  If the subscription to the plan fell below an
established deferral range, the participating individuals were allowed to defer
additional funds.  The Company may also make discretionary contributions to the
SERP.  Employee and employer contributions to the SERP for the years ended
December 31, 1999 and 2000, were $428 and $20, and $484 and $76, respectively.

The Company also sponsors certain defined contribution plans for substantially
all employees of the former Inform DX who are at least 21 years old, have been
employed by the Company for at least one year and have completed 1,000 hours of
service.  These plans include a 401(k)/profit sharing plan and a money purchase
pension plan.  Under the 401(k)/profit sharing plan, employees may contribute up
to 15% of their qualifying salary on a pre-tax basis, subject to Federal income
tax limitations.  In 1998, the Company matched 100% of the employee
contributions up to 3% of employee contributions.  In addition, the Company
contributed 0.5% of qualifying compensation as a profit sharing distribution and
3% of qualifying compensation to the money purchase pension plan.

                                      F-26
<PAGE>

In 1999, the Company matched 100% of the first 3% of employee contributions and
50% of employee contributions between 3% and 5%.  The amount expensed under all
plans for Company contributions was approximately $536 and $765 in 1999 and
2000, respectively.

18.  Commitments and Contingencies

During the ordinary course of business, the Company has become and may in the
future become subject to pending and threatened legal actions and proceedings.
The Company may have liability with respect to its employees and its
pathologists as well as with respect to hospital employees who are under the
supervision of the hospital based pathologists. The majority of the pending
legal proceedings involve claims of medical malpractice.  Most of these relate
to cytology services.  These claims are generally covered by insurance. Based
upon investigations conducted to date, the Company believes the outcome of such
pending legal actions and proceedings, individually or in the aggregate, will
not have a material adverse effect on the Company's financial condition, results
of operations or liquidity. If the Company is ultimately found liable under
these medical malpractice claims, there can be no assurance that the Company's
medical malpractice insurance coverage will be adequate to cover any such
liability. The Company may also, from time to time, be involved with legal
actions related to the acquisition of and affiliation with physician practices,
the prior conduct of such practices, or the employment (and restriction on
competition of) physicians. There can be no assurance any costs or liabilities
for which the Company becomes responsible in connection with such claims or
actions will not be material or will not exceed the limitations of any
applicable indemnification provisions or the financial resources of the
indemnifying parties.

Liability Insurance -- The Company is insured with respect to general liability
on an occurrence basis and medical malpractice risks on a claims made basis. The
Company records an estimate of its liabilities for claims incurred but not
reported. Such liabilities are not discounted.  Effective July 1, 1999, the
Company changed its medical malpractice carrier and the Company is currently in
a dispute with its former insurance carrier on an issue related to the
applicability of surplus insurance coverage.  The Company believes that an
unfavorable resolution, if any, of such dispute will not have a material adverse
effect on the Company's financial position or results of operations.

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

Internal Revenue Service Examination  -- The Internal Revenue Service (the
"IRS") conducted an examination of the Company's federal income tax returns for
the tax years ended December 31, 1996 and 1997 and concluded during 2000 that no
changes to the tax reported needed to be made.  Although the Company believes it
is in compliance with all applicable IRS rules and regulations, if the IRS
should determine the Company is not in compliance in any other years, it could
have a material adverse effect on the Company's financial position and results
of operations.

Employment Agreements -  The Company has entered into employment agreements with
certain of its management employees, which include, among other terms,
noncompetitive provisions and salary benefits continuation.

19.  Related Party Transactions

Operating Leases -- The Company leases laboratory and administrative facilities
used in the operations of eight practices from entities beneficially owned by
some of the Company's common stockholders. The terms of the leases expire from
2000 to 2003 and some contain options to renew for additional periods. Lease
payments made under leases with related parties were $478, $644 and $1,140 in
1998, 1999 and 2000, respectively.

20.  Income Taxes

The provision for income taxes for the years ended December 31, 1998, 1999 and
2000 consists of the following:

                                      F-27
<PAGE>

<TABLE>
<CAPTION>

                                                            Year ended December 31,
                                                     -------------------------------------
                                                       1998         1999             2000
                                                     --------     --------         -------
<S>                                                  <C>          <C>              <C>
Current:
 Federal                                              $15,177      $17,465         $20,958
 State                                                  2,371        2,015           2,227
                                                      -------      -------         -------
    Total current provision                            17,548       19,480          23,185
                                                      -------      -------         -------
Deferred:
 Federal                                               (3,234)      (1,799)        (8,242)
 State                                                   (373)        (207)           (85)
                                                      -------      -------         -------
    Total deferred benefit                             (3,607)      (2,006)        (9,117)
                                                      -------      -------         -------
    Total provision for income taxes                  $13,941      $17,474         $14,068
                                                      =======      =======         =======

</TABLE>

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

<TABLE>
<CAPTION>



                                                           Year ended December 31,
                                                         -----------------------------
                                                         1998       1999       2000
                                                         ----       ----       ----
<S>                                                      <C>        <C>        <C>
Statutory federal rate                                   35.0%      35.0%      35.0%
State income taxes, net of federal
 income tax benefit                                       4.0        4.0        3.7
Non-deductible items, primarily amortization
 of goodwill                                              2.8        3.3        8.6
Non-deductible items, merger-related charges              0.0        0.0        4.8
Other                                                     1.5        1.2       (0.3)
                                                         ----       ----       ----
                                                         43.3%      43.5%      51.8%
                                                         ====       ====       ====
</TABLE>

The following is a summary of the deferred income tax assets and liabilities as
of December 31, 1999 and 2000:

                                                          December 31,
                                                     -------------------
                                                       1999       2000
                                                     --------   --------
Deferred tax assets (short term):
 Allowance for doubtful accounts                     $  6,093   $  8,479
 Accrued liabilities                                      884      1,499
                                                     --------   --------
   Deferred tax assets (short term)                     6,977      9,978
                                                     --------   --------
Deferred tax liabilities (short term):
 481 (a) adjustment                                    (1,571)    (1,385)
 Other                                                     (1)        --
                                                     --------   --------
Deferred tax liabilities (short term)                  (1,572)    (1,385)
                                                     --------   --------
    Net short term deferred tax assets                  5,405      8,593
                                                     --------   --------
Deferred tax assets (long-term):
 Net operating loss                                     5,105      6,955
 Other                                                     --      1,255
                                                     --------   --------
 Deferred tax assets (long-term)                        5,105      8,210
   Less: valuation allowance                           (3,004)    (3,548)
                                                     --------   --------
   Net deferred tax assets (long-term)                  2,101      4,662
                                                     --------   --------
Deferred tax liabilities (long-term):
 Change from cash to accrual basis of accounting
  by the acquisitions                                  (1,355)    (1,178)
 Intangible assets acquired                           (62,837)   (67,059)
 Property and equipment                                  (430)      (471)
                                                     --------   --------
   Deferred tax liabilities (long-term)               (64,622)   (68,708)
                                                     --------   --------
    Net long-term deferred tax liability              (62,521)   (64,046)
                                                     --------   --------
Net deferred tax assets / (liabilities)              $(57,116)  $(55,453)
                                                     ========   ========

                                      F-28
<PAGE>

21.  Earnings Per Share

Earnings per share are computed and presented in accordance with SFAS No. 128,
Earnings Per Share. Basic earnings per share excludes dilution and is computed
by dividing income or loss attributable to common stockholders by the weighted-
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. The effects of Redeemable Preferred Stock are calculated using the as if
converted method and the effects of stock options are calculated using the
treasury stock method.

<TABLE>
<CAPTION>
                                                                                         Years ended December 31,
                                                                                 --------------------------------------
                                                                                  1998           1999            2000
                                                                                 -------        -------         -------
<S>                                                                              <C>            <C>             <C>
Earnings Per Common Share:
   Net income attributable to common shareholders                                $18,168        $22,580         $11,488
                                                                                 =======        =======         =======

   Basic earnings per common share                                               $  0.87        $  1.03         $  0.49
                                                                                 =======        =======         =======
   Diluted earnings per common share                                             $  0.84        $  1.00         $  0.47
                                                                                 =======        =======         =======

   Basic weighted average shares outstanding                                      20,911         21,984          23,473
   Effect of dilutive stock options and contingent shares                            699            532             764
                                                                                 -------        -------         -------
   Diluted weighted average shares outstanding                                    21,610         22,516          24,237
                                                                                 =======        =======         =======
</TABLE>

Options to purchase 333,405 shares, 774,590 shares and 453,818 shares of common
stock which were outstanding at December 31, 1998, 1999 and 2000, respectively,
have been excluded from the calculation of diluted earnings per share for the
respective years because their effect would be anti-dilutive.  In addition,
395,471 shares of Preferred Stock were excluded from the calculation of diluted
earnings per share for the years ended December 31, 1998 and 1999 because their
effect would be anti-dilutive.  Warrants to purchase shares of 41,116 and 38,867
for the years December 31, 1998 and 1999, respectively, were excluded from the
calculation of diluted earnings per share because their effect would be anti-
dilutive.

22.  Supplemental Cash Flow Information

The following supplemental information presents the non-cash impact on the
balance sheet of assets acquired and liabilities assumed in connection with
acquisitions consummated during the years ended December 31, 1998, 1999 and
2000:

<TABLE>
<CAPTION>

                                                                             Years Ended December 31,
                                                                          ------------------------------
                                                                            1998       1999       2000
                                                                          --------   --------   --------
<S>                                                                       <C>        <C>        <C>
Assets acquired                                                           $ 98,263   $ 74,745   $ 64,633
Liabilities assumed                                                        (24,543)   (19,850)   (19,996)
Common stock issued                                                        (16,226)    (3,149)   (12,180)
                                                                          --------   --------   --------
Cash paid for acquisitions                                                  57,494     51,746     32,457
Less cash acquired                                                            (789)    (1,541)    (6,955)
                                                                          --------   --------   --------
  Net cash paid for acquisitions                                            56,705     50,205     25,502
Costs related to completed and pending acquisitions                          3,767      1,438       (573)
                                                                          --------   --------   --------
Cash paid for acquisitions and acquisition costs, net of cash acquired    $ 60,472   $ 51,643   $ 24,929
                                                                          ========   ========   ========
</TABLE>

As more fully discussed in Note 16 to the consolidated financial statements, in
connection with the PathSource, Inc. acquisition, Inform DX provided for an
induced conversion of the Preferred Stock.  The induced conversion resulted in
the issuance of 642,640 shares of common stock.  Inform DX estimated, based on a
third party valuation, the fair market value of its common stock at June 30,
2000 to be $6.22 per share.  Based on this valuation, Inform DX recorded a non-
cash charge for the induced conversion of approximately $1,500, or $6.22 per
share times the additional common shares issued of 247,169.

                                      F-29
<PAGE>

23.  Preferred Share Purchase Rights Plan

On April 8, 1999, the Board of Directors of the Company adopted a Preferred
Share Purchase Rights Plan (the "Rights Plan") and, in connection therewith,
declared a dividend distribution of one preferred share purchase right ("Right")
on each outstanding share of the Company's common stock to shareholders of
record at the close of business on April 19, 1999.  The Rights will expire on
April 8, 2009.  The adoption of the Rights Plan and the distribution of the
Rights is not dilutive, does not affect reported earnings per share, and is not
taxable to shareholders.

Subject to the terms of the Rights Plan, each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of the
Company's Series A Junior Participating Preferred Stock (the "Preferred
Shares").  Each Right has an initial exercise price of $45.00 for one one-
thousandth of a Preferred Share (subject to adjustment).  The Rights will be
exercisable only if a person or group acquires 15% or more of the Company's
common stock or announces a tender or exchange offer the consummation of which
would result in ownership by a person or group of 15% or more of the common
stock.  Upon any such occurrence, each Right will entitle its holder (other than
such person or group of affiliated or associated persons) to purchase, at the
Right's then current exercise price, a number of the Company's common shares
having a market value of twice such price.

24.  Segment Reporting

The Company has two reportable segments, Owned and Managed practices.  The
segments were determined based on the type of service and customer.  Owned
practices provide anatomic pathology services to hospitals and referring
physicians, while under the management relationships, the Company provides
management services to the affiliated physician groups.  The accounting policies
of the segments are the same as those described in the summary of accounting
policies.  The Company evaluates performance based on revenue and income before
amortization of intangible, merger-related charges, asset impairment and related
charges, interest expense, other income and expense and income taxes ("Operating
Income").  In addition to the business segments above the Company evaluates
certain corporate expenses which are not allocated to the business segments.

The following is a summary of the financial information for the business
segments and corporate.

<TABLE>
<CAPTION>

Owned                                                   1998                1999                  2000
-----                                                 --------            --------              --------
<S>                                                   <C>                 <C>                    <C>
Net patient service revenue                           $177,304            $233,269              $308,365
Operating income                                        60,282              73,676                94,346
Segment assets                                         108,941             139,791               250,814

Managed
-------
Net management service revenue                        $ 16,012            $ 24,163              $ 21,729
Operating income (loss)                                  2,731               4,299                  (304)
Segment assets                                          14,622              15,533                18,723

Corporate
---------
Operating (expense)                                   $(12,804)           $(15,676)             $(19,789)
Segment assets                                         292,763             351,138               330,143
Elimination of Intercompany Accounts                   (25,913)            (27,566)              (37,514)
</TABLE>

25.  Subsequent Events

Contingent Note Payments -- Subsequent to December 31, 2000, the Company paid
approximately $17,590 on contingent notes issued in connection with
acquisitions.

26.  Quarterly Results of Operations (unaudited)

The following table presents certain unaudited quarterly financial data for each
of the quarters in the years ended December 31, 1999 and 2000. This information
has been prepared on the same basis as the Consolidated Financial Statements and
includes, in the opinion of the Company, all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the quarterly results
when read in conjunction with the Consolidated Financial Statements and related
Notes thereto. The operating results for any quarter are not necessarily
indicative of results for any future period or for the full year.  Adjustments
have been

                                      F-30
<PAGE>

made to the quarterly financial statements to reflect the acquisition of Inform
DX, which was accounted for as a pooling of interest, as more further described
in Note 3, Mergers and Acquisitions. These adjustments are reflected in all line
items below and for all quarters presented except the fourth quarter of 2000.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                 1999 Calendar Quarters                        2000 Calendar Quarters
                                                ------------------------                      ------------------------
                                       First      Second        Third      Fourth    First      Second        Third      Fourth
                                      --------  -----------  -----------  --------  --------  -----------  -----------  --------
<S>                                   <C>       <C>          <C>          <C>       <C>       <C>          <C>          <C>
Net patient service revenue           $52,336      $55,406      $59,866   $65,661   $68,888      $74,372      $79,650   $85,455
Management service revenue              5,581        6,053        6,209     6,320     6,155        6,562        6,871     2,141
                                      -------      -------      -------   -------   -------      -------      -------   -------
     Net revenue                       57,917       61,459       66,075    71,981    75,043       80,934       86,521    87,596
                                      -------      -------      -------   -------   -------      -------      -------   -------
Operating costs and expenses:
 Cost of services                      26,950       28,377       31,638    35,720    36,950       38,826       42,415    45,199
 Selling, general and
  administrative expense               11,140       11,295       12,190    12,534    13,141       14,285       15,234    15,751
 Provision for doubtful accounts        5,963        6,578        6,005     6,743     7,103        8,349        8,868     9,720
 Amortization expense                   2,757        2,947        3,420     3,703     3,837        3,897        4,043     4,395
 Merger-related charges (1)                --           --           --        --        --           --           --     6,209
 Asset impairment and
  related charges (2)                      --           --           --        --        --        5,245           --     4,317
                                      -------      -------      -------   -------   -------      -------      -------   -------
    Total                              46,810       49,197       53,253    58,700    61,031       70,602       70,560    85,591
                                      -------      -------      -------   -------   -------      -------      -------   -------
Income from operations                 11,107       12,262       12,822    13,281    14,012       10,332       15,961     2,005
Interest expense                       (1,973)      (2,175)      (2,580)   (2,845)   (3,418)      (3,558)      (3,657)   (4,743)
Other income (expense), net                55           47           95        89        63           50           91        22
                                      -------      -------      -------   -------   -------      -------      -------   -------
Income (loss) before income taxes       9,189       10,134       10,337    10,525    10,657        6,824       12,395    (2,716)
Provision for income taxes              4,057        4,394        4,540     4,483     4,559        3,852        5,159       498
                                      -------      -------      -------   -------   -------      -------      -------   -------
Net income                              5,132        5,740        5,797     6,042     6,098        2,972        7,236    (3,214)
Induced conversion and accretion
 of redeemable preferred stock            (33)         (33)         (33)      (32)      (34)      (1,570)          --        --
                                      -------      -------      -------   -------   -------      -------      -------   -------
Net income attributable to common
  stockholders                        $ 5,099      $ 5,707      $ 5,764   $ 6,010   $ 6,064      $ 1,402      $ 7,236   $(3,214)
                                      =======      =======      =======   =======   =======      =======      =======   =======
Per share data:
 Basic earnings per common share      $   .23      $   .26      $   .26   $   .27   $  . 27      $   .06      $   .30   $  (.13)
                                      =======      =======      =======   =======   =======      =======      =======   =======
 Diluted earnings per common share    $   .23      $   .26      $   .25   $   .26   $  . 27      $   .06      $   .29   $  (.13)
                                      =======      =======      =======   =======   =======      =======      =======   =======

</TABLE>
(1)  In connection with the Inform DX merger, the Company recorded $6,209 of
     costs as they related to transaction fees, change in control payments and
     various exit costs associated with the consolidation of certain operations.

(2)  In connection with the loss of two hospital contracts and an ambulatory
     care facility contract in Cleveland, Ohio, the Company recorded a non-
     recurring charge of $5,245 in the second quarter of 2000.  In connection
     with Quest Diagnostics termination of its contract in South Florida and the
     loss of a renewable contract with a hospital in South Florida, the Company
     recorded a non-recurring charge of $4,317 in the fourth quarter of 2000.
     The charge was based upon the remaining projected cash flows from these
     contracts in which the Company determined that the intangible assets that
     were recorded from acquisitions in these areas had been impaired.

Certain reclassifications have been made to the quarterly consolidated
statements of operations to conform to the annual presentations.

                                      F-31
<PAGE>

                                 Exhibit Index
                                 -------------

Exhibit No.                              Description
----------                               -----------

   23.1              Independent Auditors' Consent of Deloitte & Touche LLP
   23.2              Independent Auditors' Consent of Ernst & Young LLP