-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14A
(RULE 14A-101)
----------------
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant[_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMERIPATH, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
----------------
AMERIPATH, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2002
To the Stockholders of AmeriPath, Inc.:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders (the
"Annual Meeting") of AmeriPath, Inc., a Delaware corporation (the "Company" or
"AmeriPath"), will be held at the Sheraton Oceanfront North Palm Beach, 3200
North Ocean Drive, Singer Island, Florida, at 11:00 a.m., local time, on
Thursday, May 2, 2002, for the following purposes:
(1) To elect three (3) members to the Company's Board of Directors to serve
until the 2005 annual meeting of stockholders of the Company and until
their successors are elected and qualified; and
(2) To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 25, 2002 as
the record date for determining those stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and return the
enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
Gregory A. Marsh
Secretary
Riviera Beach, Florida
April 4, 2002
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE ENCOURAGED TO ATTEND
THE MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE
RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY
AS POSSIBLE. STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE
MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON AT THE MEETING.
2002 ANNUAL MEETING OF STOCKHOLDERS
OF
AMERIPATH, INC.
----------------
PROXY STATEMENT
----------------
TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of AmeriPath, Inc., a Delaware corporation (the "Company"
or "AmeriPath"), of proxies from the holders of the Company's common stock,
par value $.01 per share (the "Common Stock"), for use at the 2002 Annual
Meeting of Stockholders of the Company to be held at the Sheraton Oceanfront
North Palm Beach, 3200 North Ocean Drive, Singer Island, Florida, at 11:00
a.m., local time, on Thursday, May 2, 2002, and at any adjournments or
postponements thereof (the "Annual Meeting").
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is April 4, 2002. Stockholders
should review the information in this Proxy Statement together with the
Company's Annual Report to Stockholders for the year ended December 31, 2001
which accompanies this Proxy Statement. The Company's principal executive
offices are located at 7289 Garden Road, Suite 200, Riviera Beach, Florida
33404, and its telephone number is (561) 845-1850.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the
Company's Secretary at the Company's headquarters a written revocation or duly
executed proxy bearing a later date; however, no such revocation will be
effective until written notice of the revocation is received by the Company at
or prior to the Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians,
nominees and fiduciaries to forward copies of the proxy material to their
principals and to request authority for the execution of proxies. The Company
may reimburse such persons for their expenses in doing so.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the Company's stockholders will consider and vote
upon the following matters:
(1) To elect three (3) members to the Company's Board of Directors to serve
until the 2005 annual meeting of the stockholders of the Company and
until their successors are elected and qualified; and
(2) To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
If you sign and return the enclosed proxy, the proxies named therein will
have authority to vote your shares of AmeriPath's Common Stock at the Annual
Meeting as indicated therein. Unless you indicate otherwise on the enclosed
proxy, all shares of AmeriPath Common Stock represented by valid proxies
(including your shares) received pursuant to this solicitation (and which have
not been revoked in accordance with the procedures set forth herein) will be
voted (a) for the election of the respective nominees for director named below
and (b) by the proxies in their discretion upon any other proposals that may
properly come before the meeting. In the event a stockholder specifies a
different choice by means of the enclosed proxy, his shares will be voted in
accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on March 25, 2002 as
the record date (the "Record Date") for determining stockholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of March
25, 2002, there were 30,449,989 shares of Common Stock issued and outstanding,
the holders of which are entitled to vote at the Annual Meeting. Each share of
Common Stock is entitled to one vote on each matter submitted to stockholders
for approval at the Annual Meeting. Stockholders do not have the right to
cumulate their votes for directors.
Prior to the Annual Meeting, the Company will select one or more inspectors
of election for the meeting. Such inspector(s) shall determine the number of
shares of Common Stock represented at the meeting, the existence of a quorum
and the validity and effect of proxies, and shall receive, count and tabulate
ballots and votes and determine the results thereof.
You may cast your vote in several different ways. When voting for director
nominees, you may (1) vote "for" all the nominees, (2) "withhold" your
authority to vote for all nominees, or (3) withhold authority to vote for one
or more nominees but vote for the other nominees. With respect to other
proposals, you may vote "for" or "against" the proposal, or you may "abstain"
from voting on the proposal. If you hold your shares through a broker or
nominee and you have not given your broker or nominee instructions about how
to vote on a particular matter for which the broker or nominee does not
otherwise have discretionary voting power, your shares will be considered
"broker or nominee non-votes" with respect to that matter.
In accordance with Delaware law (under which the Company is organized), and
the Company's bylaws, the presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum, which is required before
any action can be taken at the Annual Meeting. Abstentions, votes withheld and
broker or nominee non-votes, and shares represented by proxies reflecting
abstentions, votes withheld or broker or nominee non-votes, will all be
counted as votes that are present and entitled to vote for the purpose of
determining the presence of a quorum. If less than a majority of the
outstanding shares entitled to vote are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting to
another date, time or place.
Abstentions and votes withheld, and shares represented by proxies reflecting
abstentions or votes withheld, will be considered as shares present and
entitled to vote at the Annual Meeting and will be counted as votes cast at
the Annual Meeting for purposes of determining the outcome of any matter
submitted to the stockholders for
2
a vote, but will not be counted as votes "for" or "against" any matter subject
to the abstention or the votes withheld. Broker or nominee non-votes, and
shares represented by proxies reflecting broker or nominee non-votes, will be
considered as not present and not entitled to vote on that subject matter and
therefore will not be considered by the inspectors of election when counting
votes cast on the matter (even though those shares are considered entitled to
vote for quorum purposes and may be entitled to vote on other matters).
If a quorum is present at the Annual Meeting, the following stockholder
votes will be required for approval of the proposals to be submitted at the
Annual Meeting.
. The nominees for director shall be elected by a plurality of the votes
of the shares present, in person or by proxy, at the Annual Meeting.
Abstentions, votes withheld, and broker or nominee non-votes, and shares
represented by proxies reflecting abstentions, votes withheld, or broker
or nominee non-votes, will not effect the outcome of director elections.
. Other proposals shall be approved by a majority of the shares present,
in person or by proxy, and entitled to vote at the Annual Meeting.
Abstentions and votes withheld, and shares represented by proxies
reflecting abstentions or votes withheld, will have the same effect as a
negative vote, but broker or nominee non-votes, and shares represented
by proxies reflecting broker or nominee non-votes, will not have the
effect as a vote against any other proposal.
3
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth, as of March 25, 2002, information with
respect to the beneficial ownership of the Company's Common Stock by (i) the
Company's Chief Executive Officer and each of the other Executive Officers and
Directors, including "Named Executive Officers" (as defined below in
"Executive Compensation--Summary Compensation Table"), (ii) each director of
the Company, (iii) all directors and executive officers of the Company as a
group and (iv) each holder of five percent (5%) or more of the Company's
outstanding shares of Common Stock. The Company is not aware of any beneficial
owner of more than five percent of the outstanding shares of Common Stock
other than as set forth in the following table.
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OF BENEFICIAL OWNER (1) OWNED (2) SHARES (2)
---------------------------- ------------ -----------
Wasatch Advisors, Inc. (3)............................. 4,366,337 14.3%
T. Rowe Price Associates, Inc. (4)..................... 2,357,250 7.7%
FMR Corp. (5).......................................... 1,508,290 5.0%
James C. New (6)....................................... 102,418 *
Dennis M. Smith, Jr., M.D. (7)......................... 228,136 *
Brian C. Carr (8)...................................... 40,000 *
Alan Levin, M.D. (9)................................... 21,200 *
Gregory A. Marsh (10).................................. 17,500 *
Stephen V. Fuller (11)................................. 11,000 *
James E. Billington (12)............................... 16,205 *
E. Martin Gibson (13).................................. 1,000 *
C. Arnold Renschler, M.D. (14)......................... 11,000 *
Haywood D. Cochrane, Jr. (15).......................... 10,041 *
James T. Kelly (16).................................... -- *
All directors and executive officers as a group........ 458,500 1.5%
--------
* Less than one percent.
1. Unless otherwise indicated, the address of each of the beneficial owners
identified is 7289 Garden Road, Suite 200, Riviera Beach, Florida 33404.
2. Based on 30,449,989 shares of Common Stock outstanding as of March 25,
2002. Pursuant to the rules of the Securities and Exchange Commission,
shares of Common Stock which a person has the right to acquire within 60
days pursuant to the exercise of stock options or warrants or the
conversion of a convertible security are deemed to be outstanding for the
purpose of computing the number of shares beneficially owned by such person
and the percentage ownership of such person but are not deemed outstanding
for the purpose of computing the percentage ownership of any other person.
3. Represents shares beneficially owned by Wasatch Advisors, Inc. ("Wasatch"),
as to which Wasatch has sole voting power with respect to 4,366,337 of such
shares and sole dispositive power with respect to all such shares. The
address of Wasatch is 150 Social Hall Avenue, Salt Lake City, Utah, 84111.
This disclosure of Wasatch's beneficial ownership is based solely upon
information set forth in Wasatch's Schedule 13G dated February 14, 2002.
4. Represents shares beneficially owned by T. Rowe Price Associates, Inc.
("Price"), as to which Price has sole voting power with respect to 374,600
of such shares and sole dispositive power with respect to 2,357,250 such
shares. The address of Price is 100 E. Pratt Street, Baltimore, Maryland
21202. This disclosure of Price's beneficial ownership is based solely upon
information set forth in Price's Schedule 13G dated February 20, 2002.
5. Represents shares beneficially owned by FMR Corp. ("FMR"), as to which FMR
has sole voting power with respect to 1,508,290 of such shares and sole
dispositive power with respect to 198,000 such shares. The address of FMR
is 82 Devonshire Street, Boston, Massachusetts, 02109. This disclosure of
FMR's beneficial ownership is based solely upon information set forth in
FMR's Schedule 13G dated February 13, 2002.
4
6. Includes 93,411 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 212,600 shares subject
to presently unexercisable stock options.
7. Includes 39,600 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 99,400 shares subject
to presently unexercisable options.
8. Includes 40,000 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 195,000 shares subject
to presently unexercisable stock options.
9. Includes 14,700 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 73,100 shares subject
to presently unexercisable stock options.
10. Includes 17,500 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 76,200 shares subject
to presently unexercisable stock options.
11. Includes 11,000 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 60,200 shares subject
to presently unexercisable stock options.
12. Includes 16,205 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 85,000 shares subject
to presently unexercisable stock options.
13. Includes 1,000 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 14,000 shares subject
to presently unexercisable stock options.
14. Includes 9,000 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 21,000 shares subject
to presently unexercisable stock options.
15. Includes 1,928 shares subject to stock options which are exercisable or
become exercisable within 60 days. Does not include 15,000 shares subject
to presently unexercisable stock options.
16. No shares are subject to stock options which are exercisable or become
exercisable within 60 days. Does not include 15,000 shares subject to
presently unexercisable stock options.
5
ELECTION OF DIRECTORS; NOMINEES
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors constituting the Company's Board of Directors shall not be
less than three nor more than twelve, as determined from time to time by
resolution of the Board of Directors. The size of the Board of Directors is
currently fixed at seven (7) directors.
The Company's Certificate of Incorporation divides the Board of Directors
into three classes. Each class of directors serves staggered three year terms
and until their successors are elected and qualified.
The current classes of the Board of Directors and their terms of office are
as follows:
TERM
CLASS DIRECTORS EXPIRATION
----- --------- ----------
I James C. New 2004
I James T. Kelly 2004
II Brian C. Carr 2002
II Haywood D. Cochrane, Jr. 2002
II E. Martin Gibson 2002
III Dennis M. Smith, Jr., M.D. 2003
III C. Arnold Renschler, M.D. 2003
The Board of Directors have nominated the three directors in Class II, E.
Martin Gibson, Brian C. Carr, and Haywood D. Cochrane, Jr., for re-election at
the Annual Meeting. Each Class II director elected at the Annual Meeting will
serve until the Company's annual meeting of stockholders to be held in 2005
and until their successors have been elected and qualified.
On December 19, 2001, E. Roe Stamps, IV resigned as a Director of the
Company. The Board of Directors elected James T. Kelly to replace Mr. Stamps
as a Director. Mr. Kelly will serve the remainder of Mr. Stamps' term until
2004.
On November 1, 2001, Alan Levin, M.D. resigned as a Director of the Company.
The Board of Directors elected Dennis M. Smith, Jr. M.D. to replace Dr. Levin
as a Director. Dr. Smith will serve the remainder of Dr. Levin's term until
2003.
All proxies will be voted for Messrs. Carr, Cochrane, and Gibson, absent
contrary instructions. The Board of Directors has no reason to believe that
the nominees will refuse or be unable to accept election; however, in the
event that any nominee is unwilling or unable to accept election or if any
other unforeseen contingencies should arise, each proxy that does not
specifically direct otherwise will be voted for the remaining nominees, if
any, and for such other person(s) as may be designated by the Board of
Directors.
6
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
James C. New (1)(2)(3)........... 56 Chairman of the Board, Chief Executive
Officer and Director
Brian C. Carr.................... 40 President and Director
Dennis M. Smith, Jr., M.D. (1)... 50 Executive Vice President of Genomic
Strategies, Medical Director and Director
James E. Billington.............. 39 Senior Vice President, Operations
Stephen V. Fuller................ 47 Senior Vice President, Human Resources
Gregory A. Marsh................. 41 Vice President, Chief Financial Officer
and Secretary
Haywood D. Cochrane, Jr. (4)..... 52 Director
E. Martin Gibson (1)(4)(5)....... 63 Director
James T. Kelly (5)............... 55 Director
C. Arnold Renschler, M.D. (4)(5). 60 Director
--------
(1) Member of Acquisition Committee.
(2) Member of Small Acquisition Committee.
(3) Member of Stock Option Committee
(4) Member of Audit Committee.
(5) Member of Compensation Committee.
James C. New has been the Chairman of the Board of Directors and Chief
Executive Officer of AmeriPath since January 1996. Mr. New also held the
presidency until November 30, 2000. Prior to joining AmeriPath, Mr. New served
as President and Chief Executive Officer, and as a director of RehabClinics,
Inc., one of the largest outpatient rehabilitation companies in the country,
which he founded in 1991. RehabClinics completed its initial public offering
in June 1992 and merged with NovaCare, Inc. in February 1994. Mr. New was
President of NovaCare, Inc.'s Outpatient Division from 1994 to 1995. Prior to
founding RehabClinics, Inc., he served as President of Greater Atlantic Health
Service and Physicians Choice of Southeastern Pennsylvania, both HMOs. From
1993 through 1996, Mr. New was the Chairman of the Acquisition Committee and
member of the Board of Directors of Pet Practice, Inc. From 1978 to 1985, Mr.
New served in various executive positions at Textron, Inc. and Emerson
Electric, Inc.
Brian C. Carr has been President of AmeriPath since November 2000 and a
Director of the Company since December 2000. Prior to joining AmeriPath, he
served as Chief Executive Officer and a Director of Inform DX, which he co-
founded in 1997. Prior to founding Inform DX in 1997, Mr. Carr spent 2 years
at PhyCor, most recently serving as Director, Corporate Services, where he was
responsible for certain M & A activities. Mr. Carr served in various executive
positions with Allied Clinical Laboratories, a national, publicly held
clinical laboratory company. In the state of Texas, Mr. Carr is a certified
public accountant and a certified management accountant.
Dennis M. Smith, Jr., M.D. has been the Executive Vice President of Genomic
Strategies of AmeriPath since April 2000 and the Medical Director of AmeriPath
since March 1999. Dr. Smith has also been a Director since November 2001. From
March 1999 to April 2000, Dr. Smith was a Senior Vice President of AmeriPath.
He also
7
holds the position of Managing Director of AmeriPath Laboratory Physicians,
Jacksonville where he has served since 1984. Currently, Dr. Smith chairs the
Board of Trustees of the National Blood Foundation and serves as a director
for the Florida-Georgia Blood Alliance, and Immucor, Inc. He is also a member
of Vanderbilt University School of Engineering's Committee of Visitors. Dr.
Smith was previously President of the American Association of Blood Banks and
Director and Executive Head of the American Red Cross Blood Services,
Nashville Region, Chairman of the National Blood Foundation, and a member of
the Board of Directors of Immucor.
James E. Billington has been the Senior Vice President of Operations of
AmeriPath since November 2000. Mr. Billington joined AmeriPath when the
Company acquired Inform DX in November 2000. Prior to this position, he was
the co-founder, President, Chief Operating Officer and Chief Compliance
Officer of Inform DX. Prior to founding Inform DX in 1997, Mr. Billington
served as Vice President, Administration/Finance for LabCorp. In this
capacity, he had operational and financial oversight for six operating regions
with combined annual revenues of $532 million. Previously, Mr. Billington
spent five years with Allied Clinical Laboratories, most recently serving as
Assistant Vice President, Controller for the Texas Division. From 1984 to
1989, Mr. Billington served in various audit roles in the public accounting
industry.
Stephen V. Fuller began his employment at AmeriPath as Vice President of
Human Resources in November 1996, and was promoted to Senior Vice President of
Human Resources in June 1999. Prior to joining AmeriPath, he held executive
human resources positions at Miami Heart Institute, Delray Medical Center,
Hialeah Hospital, South Miami Hospital, Highland Park General Hospital, and
the University of Miami/Jackson Memorial Medical Center. Mr. Fuller has 23
years of experience in health care human resources, and is certified by the
HR Certification Institute as a Senior Professional in Human Resources and
certified by World at Work (formerly the American Compensation Association) as
a Certified Compensation Professional (CCP). Mr. Fuller is an active member in
the Society for Human Resources Management, and has served in a variety of
leadership capacities, including Area II Board Member, Board Member of the HR
Florida State Council, State Director for Florida, District Director for South
Florida, and President of the Greater Miami Society for Human Resources
Management.
Gregory A. Marsh has served as the Vice President, Chief Financial Officer
and Secretary of AmeriPath since February 2001. From August 1996 to February
2001, he served as Vice President, Corporate Controller of AmeriPath. Prior to
joining AmeriPath, Mr. Marsh was the Director of Budgeting and Financial
Analysis for Sensormatic Electronics Corporation from November 1991 to July
1996. From 1983 to October 1991, Mr. Marsh worked for Coopers & Lybrand in
Pittsburgh, PA and South Florida. Mr. Marsh is a Certified Public Accountant
in the State of Florida.
Haywood D. Cochrane, Jr. has been a Director of the Company since August
2001. Mr. Cochrane has served as the Chief Executive Officer of CHD Meridian
Corporate Healthcare ("CHD Meridian") in Nashville, Tennessee since February
1997. Prior to joining CHD Meridian, Mr. Cochrane served as a consultant to
Laboratory Corporation of America Holdings ("LabCorp"). From April 1995 to
November 1996 he was Executive Vice President, Chief Financial Officer and
Treasurer of LabCorp. Mr. Cochrane was an employee of National Health
Laboratories, Inc. ("NHL") from June 1994 to April 1995, following NHL's
acquisition of his former employer, Allied Clinical Laboratories, Inc.
("Allied"). Mr. Cochrane was President and Chief Executive Officer of Allied
from its formation in 1989 until its acquisition by NHL in June 1994. Mr.
Cochrane is currently a director at JDN Realty, Inc., TriPath Imaging, Inc.,
and Sonus Corp.; all publicly traded companies, as well as CHD Meridian.
E. Martin Gibson has been a director of the Company since March 2001. Mr.
Gibson retired from Corning, Inc. in 1994 after a 32-year career. His last
position at Corning was Chairman and CEO of Corning Lab Services, Inc., the
company's largest subsidiary. He served as a Corning Director for 11 years.
Mr. Gibson serves as a Director of the IT Group and Hardinge, Inc.
James T. Kelly has been a director since December 2001. Mr. Kelly served as
the Chief Executive Officer of Lincare Holdings Inc. from 1986 through 1996,
and served as Chairman of the Board of Lincare from 1994
8
through 2000. Prior to joining Lincare in 1986, Mr. Kelly spent 19 years with
the Mining and Metals Division of Union Carbide Corporation, serving in a
number of sales, operations and finance positions. Mr. Kelly is currently a
director of American Dental Partners, Inc. and Health Management Systems, Inc.
C. Arnold Renschler, M.D. has been a director of the Company since April
1997. Recently retired in May 2000, he had been Executive Vice President of
Bergen Brunswig Corp. since April 1999. From December 1997 to April 1999, he
was President and CEO of PharMerica, Inc. and a member of its Board of
Directors. From June 1996 to November 1997, Dr. Renschler was President and
Chief Executive Officer of Pharmacy Corporation of America, a division of
Beverly Enterprises, Inc. From January 1990 to June 1996, he held various
positions, including serving as a Director, President and Chief Operating
Officer and Chief Clinical Officer of NovaCare, Inc. He currently serves as a
Director of two privately-held health care companies, Cora Health, Inc. and
Elderport, Inc. Dr. Renschler is certified in pediatric medicine.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's year ended December 31, 2001, the Company's Board of
Directors held nine formal meetings and six special meetings and took a number
of other actions by written consent. During 2001, no director attended fewer
than 75% of the aggregate of (i) the number of meetings of the Board of
Directors held during the period he served on the Board, and (ii) the number
of meetings of committees of the Board of Directors held during the period he
served on such committees, except E. Roe Stamps IV.
The only committees of the Board of Directors are the Audit Committee, the
Compensation Committee, the Stock Option Committee, the Acquisition Committee,
and the Small Acquisition Committee.
From the beginning of 2001 until August 2001, Mr. Gibson and Dr. Renschler
were the members of the Audit Committee. In August 2001, the Board of
Directors elected Mr. Cochrane as a Director, and concurrently, Mr. Cochrane
joined the Audit Committee with Mr. Gibson and Dr. Renschler for the remainder
of 2001. During 2001, the Audit Committee held three meetings and took a
number of other actions by written consent. The duties and responsibilities of
the Audit Committee include (i) recommending to the Board of Directors the
appointment of the Company's independent public accountants and any
termination of engagement, (ii) overseeing the independent auditor
relationship, (iii) reviewing the Company's significant accounting policies
and internal controls, and (iv) reporting its recommendations and findings to
the full Board of Directors. The members of the Audit Committee for 2002 are
Messrs. Cochrane and Gibson and Dr. Renschler. All members of the audit
committee are independent as required by applicable listing standards of the
Nasdaq National Market.
From the beginning of 2001 to March 2001, Messrs. Roberts and Stamps were
the members of the Compensation Committee of the Board of Directors. From
March 2001 until December 2001, Messrs. Gibson and Stamps were the members of
the Compensation Committee. In December 2001, Mr. Stamps resigned from the
Board of Directors, and the Board of Directors elected Mr. Kelly as a
Director. Concurrently, Mr. Kelly joined the Compensation Committee with Mr.
Gibson for the remainder of 2001. During 2001, the Compensation Committee held
one meeting. The Compensation Committee reviews and approves the compensation
of the Company's chief executive officer and administers the Company's stock
option plans. The members of the Compensation Committee for 2002 are Messrs.
Gibson and Kelly and Dr. Renschler.
Although the Compensation Committee is responsible for granting options
under the Company's stock option plans, in December 2001, the Board of
Directors delegated to a Stock Option Committee the authority to make routine
option grants to employees other than executive officers and directors. The
Compensation Committee retains the authority to grant options to executive
officers and directors. Mr. New was the sole member of its newly appointed
Stock Option Committee in 2001. The Stock Option Committee took no actions in
2001. Mr. New will be the sole member of the Stock Option Committee in 2002.
From the beginning of 2001 until November 2001, Messrs. Gibson and New and
Dr. Levin were the members of the Acquisition Committee. In November 2001, Dr.
Levin resigned from the Board of Directors,
9
and the Board of Directors elected Dr. Smith as a Director. Concurrently, Dr.
Smith joined the Compensation Committee with Messrs. Gibson and New for the
remainder of 2001. During 2001, the Acquisition Committee held one meeting and
took a number of other actions by written consent. The Acquisition Committee
is authorized to review and approve acquisitions by the Company with a
purchase price of less than $15 million. The Acquisition Committee reviews and
recommends acquisitions of $15 million or more to the Board of Directors, for
the Board's approval. The members of the Acquisition Committee for 2002 are
Messrs. Gibson and New and Dr. Smith.
Mr. New was the sole member of the Small Acquisition Committee during 2001.
The Small Acquisition Committee took no actions in 2001. The Small Acquisition
Committee is authorized to review and approve acquisitions by the Company with
a purchase price of up to $3 million. Mr. New will be the sole member of the
Small Acquisition Committee for 2002.
DIRECTOR COMPENSATION
The Company pays each director who is not an employee a retainer of $10,000
per year plus $1,500 for each meeting of the Board of Directors, and $500 for
each meeting of a committee of the Board of Directors, attended in person. In
addition, each director who is not an employee of the Company receives an
option to purchase 5,000 shares of Common Stock under the Company's 1996
Director's Stock Option Plan in connection with his or her initial election to
the Board of Directors and is eligible to receive discretionary grants of
options to purchase additional shares from time to time thereafter. During
2001, the Company made a discretionary grant of 5,000 stock options, at an
exercise price of $24.95, to Dr. A. Renschler. The Company also reimburses all
directors for out-of-pocket expenses incurred in connection with the rendering
of services as a director.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid or earned
during the prior three years to the Company's Chief Executive Officer and each
of the Company's four other most highly compensated executive officers whose
total annual salary and bonus was $100,000 or more for 2001 (the Chief
Executive Officer and such other executive officers are sometimes referred to
herein as the "Named Executive Officers").
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ---------------
OTHER ANNUAL NUMBER OF
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS GRANTED
--------------------------- ----------- ---------- --------- ---------------- ---------------
James C. New............... 2001 425,000 255,000 -- (1) 75,000
Chairman of the Board,
President and 2000 375,000 225,000 -- 61,000
Chief Executive Officer 1999 350,000 190,000 -- 50,000
Alan Levin, M.D............ 2001 294,700 100,800 -- 25,000
Corporate Vice President 2000 279,394 96,900 -- 28,500
1999 270,636 84,700 -- 20,000
Brian C. Carr.............. 2001 271,862 100,000 57,023 (2) 200,000
President
Dennis M. Smith, Jr., M.D.. 2001 348,769 -- -- 25,000
Executive Vice President
of Genomic 2000 252,308 -- -- 34,000
Strategies and Chief Medi-
cal Officer 1999 294,167 33,333 -- 25,000
Gregory A. Marsh........... 2001 180,939 100,000 -- 35,000
Vice President and Chief
Financial Officer
--------
(1) The aggregate amount of perquisites and other personal benefits provided
to the executive officer is less than the lesser of 10% of the total
annual salary and bonus of such officer or $50,000, but is not $0.
(2) Represents reimbursement of expenses in connection with Mr. Carr's
relocation to West Palm Beach, Florida from Nashville, Tennessee.
11
OPTION GRANTS TABLE
The following table sets forth certain information regarding options granted
to the Named Executive Officers during 2001.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS GRANTED EXERCISE FOR OPTION TERM (2)
UNDERLYING TO EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME OPTIONS GRANTED (1) IN YEAR SHARE DATE 5% 10%
---- ------------------- ---------------- --------- ---------- ---------- ----------
James C. New................ 75,000 8% 24.95 5/3/11 $1,176,819 $2,982,291
Alan Levin, M.D............. 25,000 2.7% 24.95 5/3/11 $ 392,273 $ 994,097
Brian C. Carr............... 200,000 21.4% 24.95 5/3/11 $3,138,184 $7,952,775
Dennis M. Smith, Jr., M.D. . 25,000 2.7% 24.95 5/3/11 $ 392,273 $ 994,097
25,000 2.7% 30.03 7/31/11 $ 472,143 $1,196,502
Gregory A. Marsh............ 10,000 1.1% 18.75 3/6/11 $ 117,918 $ 298,827
25,000 2.7% 24.95 5/3/11 $ 392,273 $ 994 ,097
--------
(1) All options were granted under either the Company's Amended and Restated
1996 Stock Option Plan or the Company's 2001 Stock Option Plan at exercise
prices equal to or greater than the fair market value of the Common Stock
on the date of the grant, and vest over five years with a ten-year term.
(2) These assumed annual rates of appreciation were used in compliance with
the rules of the Securities and Exchange Commission and are not intended
to forecast future price appreciation of the Common Stock.
OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUE TABLE
The following table sets forth information regarding exercise of options
during 2001 and the options held at December 31, 2001 by each of the Named
Executive Officers.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NUMBER OF AT YEAR END AT 2001 YEAR END (1)
OPTIONS AMOUNT ------------------------- -------------------------
NAME EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- ---------- ----------- ------------- ----------- -------------
James C. New............... 150,000 $2,845,294 266,211 169,800 $217,322 $2,489,084
Alan Levin, M.D............ 47,300 $ 510,412 7,200 67,800 $160,272 $1,185,474
Brian C. Carr.............. 2,008 $ 20,761 -- 200,000 -- $1,462,000
Dennis M. Smith, Jr., M.D.. -- -- 22,800 96,200 $506,184 $1,325,486
Gregory A. Marsh........... 9,500 $ 162,025 10,500 59,200 $232,739 $ 900,562
--------
(1) The indicated value of the options is a computation of the difference
between the applicable option exercise price and the closing market price
of the Common Stock as of December 31, 2001 ($32.26) multiplied by the
number of shares of Common Stock underlying such option.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. New effective
April 1, 2001, pursuant to which Mr. New is eligible to receive an annual
bonus of up to 50% of his base salary upon attaining mutually agreed upon
objectives relating to the Company's performance, and a potential additional
amount of bonus for exceeding the objectives. For the year ended December 31,
2001, the Compensation Committee of the Board of Directors determined that Mr.
New exceeded his performance objectives for 2001 and awarded a bonus to
Mr. New that exceeded 50% of his base salary. Upon termination of his
employment by the Company for reasons other than disability, death or cause,
Mr. New will receive a pro rata portion of his bonus for the year in which
12
the termination occurs, his base salary and prior years' bonus for a period of
24 months, and his benefits for a period of 18 months. In the event of a
"change-in-control" of the Company, the Company will pay Mr. New a bonus equal
to two times his annual base salary and bonus, if either the Board of
Directors approves such payment or if the per share selling price is greater
than average market price for the prior six months, and accelerate the vesting
of all the unvested options held by Mr. New. If Mr. New's employment is
terminated in connection with a change-in-control or within one year after a
change-in-control, the Company will also pay Mr. New a pro rata portion of his
bonus for the year in which the termination occurs, make a lump sum payment to
Mr. New equal to two times his annual base salary and bonus plus the cost of
18 months of benefits, and accelerate the vesting of all of the unvested
options held by Mr. New. On the other hand, if Mr. New is still employed by
the Company on the one-year anniversary of the change-in-control, the Company
will pay him a bonus equal to one times his annual base salary and bonus.
Following the termination of his employment with the Company, Mr. New has
agreed not to compete with the Company or solicit the Company's employees or
customers for two years.
The Company entered into an employment agreement with Mr. Carr on November
30, 2000 and amended it on April 1, 2001. Under this agreement, Mr. Carr is
eligible to receive an annual bonus of up to 35% of his base salary upon
attaining mutually agreed upon objectives relating to the Company's
performance, and a potential additional amount of bonus for exceeding the
objectives. Upon termination of his employment by the Company for reasons
other than disability, death or cause, Mr. Carr will receive a pro rata
portion of his bonus for the year in which the termination occurs and his base
salary for a period of 12 months. If the Company experiences a change-in-
control, the Company will pay Mr. Carr a bonus equal to one times his base
salary and accelerate the vesting of all of the unvested options held by Mr.
Carr. If Mr. Carr's employment is terminated within one year after a change-
in-control, the Company will also pay Mr. Carr a pro rata portion of his bonus
for the year in which the termination occurs plus a lump sum payment equal to
two times his annual base salary and accelerate the vesting of all of the
unvested options held by Mr. Carr. On the other hand, if Mr. Carr is still
employed by the Company on the one year anniversary of the change-in-control
the Company will pay him a bonus equal to one times his base salary. Following
the termination of his employment with the Company, Mr. Carr has also agreed
to neither compete with the Company for one year nor solicit its employees or
customers for two years.
The Company assumed obligations of an employment agreement with Dr. Levin,
in his capacity as an Affiliated Physician, as of June 30, 1996 in connection
with the Company's acquisition of Derrick and Associates. On August 12, 1999,
the Company entered into an Executive Retention Agreement with Dr. Levin. On
June 1, 2001, the Company entered into an Amendment to Employment and
Retention Agreements with Dr. Levin that amended the first two agreements.
Pursuant to the Company employment agreements with Dr. Levin, he is eligible
to receive an annual bonus of up to 35% of his base salary upon attaining
mutually agreed upon objectives relating to the Company's performance, and a
potential additional amount of bonus for exceeding the objectives. Upon
termination of his employment by the Company for reasons other than
disability, death or cause, Dr. Levin will receive a pro rata portion of his
bonus earned for the year in which the termination occurs and his base salary
for a period of 12 months and benefits for a period of 18 months. If the
Company experiences a change-in-control, the Company will pay Dr. Levin a
bonus equal to two times his base salary and accelerate the vesting of all of
the unvested options held by Dr. Levin. If Dr. Levin's employment is
terminated in connection with a change-in-control or within one year after a
change-in-control, the Company will also pay Dr. Levin a pro rata portion of
his bonus for the year in which the termination occurs plus a lump sum equal
to one times his base salary plus the cost of 18 months of benefits and
accelerate the vesting of all of the unvested options held by Dr. Levin. On
the other hand, if Dr. Levin is still employed by the Company on the one year
anniversary of the change-in-control, the Company will pay him a bonus equal
to one times his base salary. Following the termination of his employment with
the Company, Dr. Levin has also agreed not to compete with the Company or
solicit its employees or customers for two years. In November 2001, Dr. Levin
resigned his position as Chief Operating Officer and became the Corporate Vice
President and a practicing pathologist at one of the Company's operations.
The Company entered into an employment agreement with Mr. Marsh effective
April 1, 2001, pursuant to which Mr. Marsh is eligible to receive an annual
bonus of up to 35% of his base salary upon attaining mutually
13
agreed upon objectives relating to the Company's performance, and a potential
additional amount of bonus for exceeding the objectives. Upon termination of
his employment by the Company for reasons other than disability, death or
cause, Mr. Marsh will receive a pro rata portion of his bonus for the year in
which the termination occurs and his base salary and benefits for a period of
12 months. If the Company experiences a change-in-control, the Company will
pay Mr. Marsh a bonus equal to one and a half times his base salary and
accelerate the vesting of all of the unvested options held by Mr. Marsh. If
Mr. Marsh's employment is terminated within one year after a change-in-
control, the Company will also pay Mr. Marsh a pro rata portion of his bonus
for the year in which the termination occurs plus a lump sum equal to one and
a half times his base salary plus the cost of 12 months of benefits and
accelerate the vesting of all of the unvested options held by Mr. Marsh. On
the other hand, if Mr. Marsh is still employed by the Company on the one year
anniversary of the change-in-control, the Company will pay him a bonus equal
to one times his base salary. Following the termination of his employment with
the Company, Mr. Marsh has also agreed to neither compete with the Company for
one year nor solicit its employees or customers for two years.
The Company entered into an employment agreement with Dr. Smith, in his
capacity as an Affiliated Physician, as of December 1, 1997, in connection
with the Company's acquisition of Laboratory Physicians in Jacksonville,
Florida. On June 1, 2001, the Company and Dr. Smith amended this agreement to
change his title from "Medical Director of the Jacksonville Division" to
"Executive Vice President of Genomic Strategies and Chief Medical Officer."
Upon his termination because of death or disability, the Company will pay
Dr. Smith 60 days salary. If Dr. Smith is terminated without cause, the
Company will pay him one year salary. If the Company experiences a change-in-
control, all of Dr. Smith's unvested options shall become vested.
If Dr. Smith's employment is terminated within one year after a change-in-
control, the Company will pay Dr. Smith a lump sum equal to one times his base
salary and accelerate the vesting of all of the unvested options held by Dr.
Smith. Dr. Smith has agreed not to compete with the Company or solicit
employees or customers from the Company for two years following the
termination of his employment unless the Company terminates him without cause.
The Company entered into an employment agreement with Mr. Billington on
November 30, 2000 and amended it on April 1, 2001. Under this agreement, Mr.
Billington is eligible to receive an annual bonus of up to 30% of his base
salary upon attaining mutually agreed upon objectives relating to the
Company's performance, and a potential additional amount of bonus for
exceeding the objectives. Upon termination of his employment by the Company
for reasons other than disability, death or cause, Mr. Billington will receive
a pro rata portion of his bonus for the year in which the termination occurs
and his base salary for a period of 12 months. If the Company experiences a
change-in-control, the Company will pay Mr. Billington a bonus equal to one
times his base salary and accelerate the vesting of all of the unvested
options held by Mr. Billington. If Mr. Billington's employment is terminated
within one year after a change-in-control, the Company will also pay Mr.
Billington a pro rata portion of his bonus for the year in which the
termination occurs plus a lump sum payment equal to one times his annual base
salary and accelerate the vesting of all of the unvested options held by Mr.
Billington. Following the termination of his employment with the Company, Mr.
Billington has also agreed to neither compete with the Company for one year
nor solicit its employees or customers for two years.
The Company entered into an employment agreement with Mr. Fuller effective
April 1, 2001, pursuant to which Mr. Fuller is eligible to receive an annual
bonus of up to 35% of his base salary upon attaining mutually agreed upon
objectives relating to the Company's performance, and a potential additional
amount of bonus for exceeding the objectives. Upon termination of his
employment by the Company for reasons other than disability, death or cause,
Mr. Fuller will receive a pro rata portion of his bonus for the year in which
the termination occurs and his base salary and benefits for a period of 12
months. If the Company experiences a change-in-control, the Company will pay
Mr. Fuller a bonus equal to one times his base salary and accelerate the
vesting of all of the unvested options held by Mr. Fuller. If Mr. Fuller's
employment is terminated in connection with a change-in-control or within one
year after a change-in-control, the Company will also pay Mr. Fuller a pro
rata portion of his bonus for the year in which the termination occurs plus a
lump sum payment equal to one times his annual base salary plus the cost of 12
months of benefits and accelerate the vesting of all the unvested options held
by
14
Mr. Fuller. On the other hand, if Mr. Fuller is still employed by the Company
on the one-year anniversary of the change-in-control, the Company will pay him
a bonus equal to one times his base salary. Following the termination of his
employment with the Company, Mr. Fuller has also agreed to neither compete
with the Company for one year nor solicit its employees or customers for two
years.
Each of the Named Executive Officers holds options to purchase Common Stock
granted under either the Company's Amended and Restated 1996 Stock Option Plan
or the Company's 2001 Stock Option Plan. In addition to other events, such
options generally become fully exercisable upon: (i) a merger, consolidation,
reorganization, liquidation, or dissolution in which the Company does not
survive; (ii) a sale, lease, exchange or other disposition of all or
substantially all of the Company's property or other assets; (iii) certain
specified changes in control of the Company.
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or pension plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
From the beginning of 2001 through March 2001, Messrs. Roberts and Stamps
were the members of the Compensation Committee of the Board of Directors. From
March 2001 to December 2001, Messrs. Gibson and Stamps were the members of the
Compensation Committee. In December 2001, Mr. Stamps resigned from the Board
of Directors, and Mr. Kelly joined the Board of Directors and the Compensation
Committee with Mr. Gibson for the remainder of 2001. All compensation
decisions affecting Mr. New were approved by the Compensation Committee and by
the Company's Board of Directors, except for Mr. New.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Securities and Exchange Commission, the
Company is required to provide a report explaining the rationale and
considerations that led to fundamental compensation decisions affecting the
Company's executive officers (including the Named Executive Officers) during
the past fiscal year. The report of the Company's Compensation Committee is
set forth below.
The Compensation Committee is responsible for determining and making
recommendations to the Board of Directors concerning executive compensation,
including base salaries, bonuses and the basis for their awards, stock options
and other benefits.
The three principal components of the Company's executive compensation are
salary, bonus and stock options. These components are designed to facilitate
fulfillment of the compensation objectives of the Company's Board of Directors
and the Compensation Committee, which objectives include (i) attracting,
retaining and motivating qualified management, (ii) recognizing individual
initiative and achievement, (iii) rewarding management for short and long term
accomplishments and (iv) aligning management compensation with the achievement
of the Company's goals and performance.
It is the Compensation Committee's view that senior executives' interests
should complement those of the stockholders. Accordingly, consistent with
prior practice, it is anticipated that a substantial portion of senior
executive compensation above a base salary will be provided through bonuses
tied to certain indicators of Company performance and through the grant of
stock options, thus creating incentives for executives to achieve long term
Company objectives and increase stockholder value. Base salaries for new
management employees are determined initially by evaluating the
responsibilities of the position in question and the experience of the
individual, and by reference to the competitive marketplace for managerial
talent, including a comparison of base salaries for similar positions at
comparable companies. Annual bonuses are determined by evaluating the
competitive marketplace, the performance of the Company, the performance of
the executive and the responsibilities assumed by the executive.
15
The Compensation Committee has reviewed the Company's existing management
compensation arrangements and has consulted with the Chief Executive Officer
to evaluate the Company's current compensation programs, and believes that
they are consistent with the philosophy of the Compensation Committee.
Additionally, the Compensation Committee has made certain recommendations for
the present year regarding evaluation criteria in connection with the
incentive compensation to be awarded to the Company's senior management.
Executive Officer Compensation. The determination of 2001 executive officer
compensation by the Compensation Committee was made after a review and
consideration of a number of factors, including each executive's level of
responsibility and commitment, level of performance (with respect to specific
areas of responsibility and on an overall basis), past and present
contribution to and achievement of Company goals and performance, compensation
levels at comparable companies and historical compensation levels, and
following consultation with and recommendations from the Company's Chief
Executive Officer. In addition, the executive officers who are physicians that
sold their practices to the Company had previously existing employment
agreements which were assumed by the Company and that designate a substantial
portion of such officers' compensation. See "Employment Agreements" above for
a description of the Company's agreements with named executive officers
related to compensation.
Chief Executive Officer Compensation. The principal factors considered by
the Compensation Committee and the Board of Directors in determining the 2001
salary and bonus for James C. New, the Chief Executive Officer of the Company,
included the factors described in the preceding paragraph and an analysis of
the compensation of chief executive officers of comparable public companies
similar in size and capitalization to the Company, and it was the view of the
Compensation Committee that Mr. New's 2001 compensation was reasonable in
comparison. Based on such factors, Mr. New's base salary was increased from
$375,000 to $425,000 for 2001, and his 2001 bonus was awarded based upon his
achievement of performance objectives during 2001 that the Compensation
Committee established early in the year, including the Company's attainment of
revenue, earnings-per-share, practice acquisition and other goals. Because Mr.
New exceeded the performance goals set by the Compensation Committee, Mr. New
was awarded a bonus in 2001 that exceeded 50% of his base salary. Based on Mr.
New's and the Company's performance in 2001, Mr. New's base salary for 2002
was increased to $475,000.
C. Arnold Renschler, M.D.
E. Martin Gibson
James T. Kelly
As Members of the
Compensation Committee
16
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total stockholder return on the
Nasdaq Stock Market Index and the Nasdaq Health Services Index commencing on
October 22, 1997 (the first day the Common Stock began trading on the Nasdaq
Stock Market) through December 31, 2001. The closing price of the Company's
Common Stock used in the graph for October 22, 1997 is $19.75, the last sale
price on the first day the Common Stock began trading on the Nasdaq Stock
Market. The graph assumes a $100 investment on October 22, 1997 in each of
AmeriPath Common Stock, the Nasdaq Stock Market Index and the Nasdaq Health
Services Index.
RESEARCH DATA GROUP
PEER GROUP TOTAL RETURN WORKSHEET
AMERIPATH INC.
CUMULATIVE TOTAL RETURN
-----------------------------------------------------------------------------------------
10/22/97 12/97 3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
AMERIPATH, INC. $100.00 $106.25 $115.23 $ 73.83 $ 92.97 $ 55.86 $ 56.25 $ 53.91 $ 52.34 $ 51.18
NASDAQ STOCK MARKET (U.S.) $100.00 $ 92.23 $107.95 $110.91 $100.07 $130.04 $145.83 $159.52 $163.50 $241.65
NASDAQ HEALTH SERVICES $100.00 $ 86.88 $ 95.31 $ 86.55 $ 65.01 $ 73.64 $ 65.93 $ 81.45 $ 60.17 $ 59.24
17
CERTAIN TRANSACTIONS
Pursuant to the Company's acquisition of Derrick and Associates in 1996, Dr.
Levin received in exchange for his interest in Derrick a Subordinated
Contingent Note in the maximum principal amount of $584,615. The Company paid
$262,353, including interest, to Dr. Levin in 2001 with respect to the
Contingent Note based upon operating earnings achieved in 2000.
Pursuant to the Company's acquisition of Laboratory Physicians, Jacksonville
("LPJ") in 1997, Dr. Smith received in exchange for his interest in LPJ a
Subordinated Contingent Note in the maximum principal amount of $1,420,000.
The Company paid $217,664, including interest, to Dr. Smith in 2001 with
respect to the Contingent Note based upon operating earnings achieved in 2000.
SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's outstanding shares of Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports
of changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports that they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required to be filed, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with during 2001.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee operates pursuant to a Charter approved by the Board of
Directors. The primary responsibility of the Audit Committee is to assist the
Board of Directors in its oversight of the Company's financial reporting
process. Management of the Company is responsible for the preparation,
presentation and integrity of the Company's financial statements, the
Company's accounting and financial reporting principles and internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible for
auditing the Company's financial statements and expressing an opinion as to
their conformity with generally accepted accounting principles. In this
context, we have reviewed and discussed with management and the independent
auditors the Company's audited financial statements as of and for the year
ended December 31, 2001. We have discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. We have received
and reviewed the written disclosures and the letter from the independent
auditors required by Independence Standard No. 1, Independence Discussions
with Audit Committees, as currently in effect, and have discussed with the
auditors their independence. In addition, we have considered whether the
provision of non-audit services by the independent auditors to the Company is
compatible with maintaining the auditors' independence.
We are not professionally engaged in the practice of auditing or accounting
and are not experts in the fields of accounting or auditing, including in
respect of auditor independence. We rely without independent verification on
the information provided to us by, and on the representations made by,
management and the independent accountants. Accordingly, our oversight does
not provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, our considerations
and discussions referred to above do not assure that the audit of the
Company's financial statements has been carried out in accordance with
generally accepted auditing standards, that the
18
financial statements are presented in accordance with generally accepted
accounting principles or that the Company's auditors are in fact
"independent".
Based upon the reports and discussions described in this report, and subject
to the limitations on our role and responsibilities referred to above, we
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 filed with the Securities and Exchange Commission.
Haywood D. Cochrane, Jr.
E. Martin Gibson
C. Arnold Renschler
As Members of the
Audit Committee
INDEPENDENT AUDITORS
On April 1, 2002, the Company dismissed Deloitte & Touche LLP as the
Company's independent auditors and engaged Ernst & Young LLP as the Company's
new independent auditors. The decision to change accountants was recommended
by the Audit Committee of the Company's Board of Directors and approved by the
Company's Board of Directors.
The reports of Deloitte & Touche LLP on the Company's financial statements
for the two fiscal years ended December 31, 2000 and 2001 do not contain an
adverse opinion or a disclaimer of opinion, nor were such reports qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Company's December 31, 2000 and 2001 fiscal years and the subsequent interim
period preceding the date of the Company's change in independent auditors,
there were no disagreements with Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure as described in paragraph (a)(1)(iv) and Instructions 4 and
5 of Item 304 of the Securities and Exchange Commission's Regulation S-K, and
there were no "reportable events" as described in paragraph (a)(1)(v) of such
Item 304.
Representatives of Deloitte & Touche LLP, the Company's independent auditors
for 2001, and Ernst & Young LLP, the Company's independent auditors for 2002,
are expected to be present at the 2002 Annual Meeting of Stockholders. The
representatives will be given the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions
from stockholders.
AUDIT AND OTHER FEES
The aggregate fees billed by Deloitte & Touche LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2001 and for the reviews of the financial
statements included in the Company's quarterly reports on Form 10-Q for that
fiscal year were $175,000. The aggregate fees billed by Deloitte & Touche LLP
for audit related services rendered to the Company, other than the services
described above, were $187,200. Audit related services generally include fees
for consents and comfort letters, assistance in understanding and applying
financial accounting and reporting standards, and accounting assistance with
proposed transactions. In addition, Deloitte & Touche LLP provided non-audit
related services totaling $54,000 for the year 2001.
AUDIT COMMITTEE REVIEW
The Company's Audit Committee has reviewed the services rendered and the
fees billed by Deloitte & Touche LLP for the fiscal year ending December 31,
2001. The Audit Committee has determined that the services rendered and the
fees billed last year that were not related to the audit of the Company's
financial statements are compatible with the independence of Deloitte & Touche
LLP as the Company's independent accountants for 2001.
19
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote proxies
as in their discretion they may deem appropriate, unless they are directed by
a proxy to do otherwise.
A COPY OF THE 2001 ANNUAL REPORT ON FORM 10-K INCLUDING FINANCIAL STATEMENTS
AND ALL SCHEDULES AND AMENDMENTS THERETO, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO:
CORPORATE SECRETARY, AMERIPATH, INC., 7289 GARDEN ROAD, SUITE 200, RIVIERA
BEACH, FLORIDA, 33404.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a stockholder intending to present a proposal to be included in
the Company's proxy statement for the Company's annual meeting of Stockholders
to be held in 2003 must deliver a proposal in writing to the Company's
principal executive offices no later November 29, 2002. Such proposals also
will need to comply with Securities and Exchange Commission regulations
regarding the inclusion of stockholder proposals in company sponsored proxy
materials.
In addition, in order for a stockholder's proposal or director nomination to
be raised from the floor during next year's annual meeting, written notice
must be received by the Company after October 30, 2002 but no later than
November 29, 2002 and must contain all such information as required under the
Company's Bylaws. A copy of such Bylaw requirements for stockholder proposals
and nominations is available upon request from the Company's Investor
Relations Department, 7289 Garden Road, Suite 200, Riviera Beach, Florida,
33404.
By Order of the Board of Directors,
JAMES C. NEW
Chairman of the Board and
Chief Executive Officer
Riviera Beach, Florida
April 4, 2002
20
AMERIPATH, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a stockholder of AMERIPATH, INC., a Delaware corporation
(the "Company"), hereby appoints James C. New and Gregory A. Marsh, and each
of them, as proxies for the undersigned, each with full power of substitution,
and hereby authorizes them to represent and to vote, as designated on the
reverse side, all of the shares of common stock of the Company that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on May 2, 2002 at 11:00 a.m., local time, and at any
adjournments or postponements thereof. The proxies are further authorized to
vote in their discretion on other matters that may properly come before the
Annual Meeting or any adjournments or postponements thereof.
(COMPLETE AND SIGN ON REVERSE SIDE)
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE: [X]
The Board of Directors unanimously recommends a vote FOR the proposal below.
ELECTION OF DIRECTORS: To elect three directors to serve until the 2005 annual
meeting of stockholders of the Company and until their successors are elected
and qualified.
[_] VOTE FOR all nominees [_] WITHHOLD AUTHORITY TO VOTE
listed, except as marked for all nominees
to the contrary below*
NOMINEES:BRIAN C. CARR
HAYWOOD D. COCHRANE, JR.
E. MARTIN GIBSON
*INSTRUCTION: To withhold authority to vote for an individual nominee, write
that nominee's name in the space provided below:
-------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES IN THE PROPOSAL. THE
PROXIES WILL VOTE WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
The undersigned hereby acknowledges receipt of (1) the Notice of Annual
Meeting and Proxy Statement for the 2002 Annual Meeting and (2) the Company's
2001 Annual Report to Stockholders.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY USING THE ENVELOPE PROVIDED. NO
POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
(Signature) ________ (Signature if held jointly) ________ Dated: ________ 2002
IMPORTANT: Please sign exactly as your name appears hereon. When
signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. When shares are held jointly, all
should sign. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership or limited
liability company, please sign in partnership or limited liability
company name by authorized person.