SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K


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

       For the fiscal year ended              December 31, 1998
                                             ------------------

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

       For the transition period from __________ to __________

                           Commission File No. 0-22758

                               UNILAB CORPORATION
             (Exact name of Registrant as specified in its Charter)

              Delaware                              95-4415490
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
  incorporation or organization)          

 18448 Oxnard Street,  Tarzana, California              91356
  (Address of principal executive offices)            (Zip code)

                                 (818) 996-7300
              (Registrant's telephone number, including area code)

 Securities  registered  pursuant  to  Section  12(b)  of  the  Act:  None
 Securities registered pursuant to Section 12(g) of the Act:

   Title of Each Class              Name of Each Exchange on Which Registered
 Common Stock, $.01 par value              American Stock Exchange

 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 requirement 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. [ ]

 At February 12, 1999, 40,729,293 shares of Registrant's Common Stock, par
 value $.01 per share were outstanding.  The aggregate market value of the
 Common Stock,  based on the closing price on the American  Stock Exchange
 as of February 12, 1999,  held by  nonaffiliates  of the  Registrant  was
 approximately $104.2 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

 Part II - Portions  of the  Annual  Report to  shareholders  for the year
 ended December 31, 1998 Part III - Proxy  Statement for Annual Meeting of
 Stockholders to be held June 17, 1999

 Page 1 of 39 pages.


<PAGE>








                                TABLE OF CONTENTS

Item                                                                      PAGE

Part I.       1  Business.................................................   3

              2  Properties...............................................  20

              3  Legal Proceedings........................................  21

              4  Submission of Matters to a Vote
                 of Security Holders......................................  23

Part II.      5  Market for the Registrant's Common Equity and
                 Related Stockholder Matters..............................  26

              6  Selected Financial Data..................................  27

              7  Management's Discussion and Analysis of Financial
                 Condition and Results of Operations......................  28

              8  Financial Statements and Supplementary Data..............  28

              9  Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure......................  28

Part III.    10  Directors and Executive Officers of the Registrant.......  29

             11  Executive Compensation...................................  29

             12  Security Ownership of Certain Beneficial Owners
                 and Management and Directors.............................  29

             13  Certain Relationships and Transactions with Related
                 Persons..................................................  29

Part IV.     14  Exhibits, Financial Statements, Financial Statement
                 Schedules and Reports on Form 8-K........................  30

Signatures       .........................................................  32


<PAGE>
                                     PART I

Item 1.          Business


General

                 Unilab  Corporation  ("Unilab" or the "Company") is the largest
independent  clinical  laboratory  testing  company  in  California,   providing
laboratory  testing services to physicians,  managed care groups,  hospitals and
other  health  care  providers.  The  Company  believes  that  its  revenues  in
California  for the year ended  December 31, 1998 were  approximately  twice the
annual sales in California of the next largest  independent  clinical laboratory
in that market.  During most of such  period,  Unilab had  approximately  15% of
California's  independent clinical laboratory market, which is the largest state
clinical  laboratory  market in the United States. In November 1998, the Company
completed  the  acquisition  of  substantially   all  of  the  assets  of  Meris
Laboratories,  Inc., a San Jose,  California  based  independent  clinical  lab,
resulting  in  an  increase  of  Unilab's  estimated  market  share  to  20%  of
California's  independent  clinical  laboratory market. As of December 31, 1998,
the  Company  operated  three   centrally-located   full-service   laboratories,
approximately 40  strategically-located  short turn around ("STAT") laboratories
and approximately 270  conveniently-located  patient service centers ("PSC"). As
of December 31, 1998, the Company  processed on average 37,000 patient specimens
and performed over 85,000 test batteries per work day.

Facilities and Testing

                 Unilab   currently   operates   three   full-service   clinical
laboratories in San Jose, Tarzana (Los Angeles) and Sacramento, California which
offer over 1,000 clinical testing procedures,  ranging from routine screening to
advanced technical procedures,  used in the diagnosis,  monitoring and treatment
of diseases and other medical  conditions.  Unilab  operates 24 hours a day, 365
days a year,  utilizing a fully  integrated  collection and  processing  system.
Patient  specimens are collected  from client offices or Unilab's own collecting
stations and efficiently transported to full-service or STAT laboratories, where
each  specimen and related test  request form is checked for  completeness,  bar
coded and logged for testing and billing purposes into Unilab's computer system.
Laboratory  technicians then perform the requested tests, with results generally
available to clients the next morning.  Unilab's clinical computer program keeps
track of  patients'  samples,  reports  test  results in a  readable  format and
maintains records and billing information. The Company is in the final stages of
upgrading and modifying its laboratory,  billing and accounting systems in order
for such systems to properly recognize and perform date calculations in the year
2000 (the "Year 2000 issue").  The company spent approximately  $400,000 in 1998
and  anticipates  spending  another  $100,000 in 1999 for  additional  hardware,
upgraded  software and consulting time to enable the Company to properly address
the Year 2000  issue.  The  expected  cost to fix the Year 2000 issue is in line
with the company's original  estimates.  While the consequences of an incomplete
or untimely resolution of the Year 2000 issue could have a significant impact on
the  Company  finalizing  laboratory  results,  properly  billing  the  numerous
different payor groups and gathering and reporting payroll, accounting and other
employee and financial information, the Company believes that it will adequately
resolve  the Year  2000  issue.  The  Company  believes  that  modifications  to
laboratory  software  and  equipment  and  most  accounting  systems  have  been
completed and the final modifications to the billing and payroll systems will be
completed by the end of the first  quarter  1999 in order to provide  sufficient
time for further modifications, if any, prior to the arrival of the year 2000.
<PAGE>

                 As  part  of  its   contingency   planning,   the  Company  has
standardized  the platform and  software  used to process and report  laboratory
results during the last several years.  In addition,  the Company  converted the
last billing system not on the Company's standard billing platform in 1998. If a
problem  occurred with the  laboratory  hardware or software,  the Company might
have to rely on outside  reference  laboratories to process  specimens until the
Year 2000 issue was fixed.  If the  Company  had to rely on another  location or
outside  reference  laboratory  to process  specimens,  turn around time on test
results would be diminished and billings and cash  collections from payor groups
could be  significantly  delayed.  The  Company  is  reliant  on the  ability of
numerous payor groups,  primarily  insurance companies and government payors, to
solve their Year 2000 issues in order to process the Company's billings and make
appropriate cash remittances. If such payor groups do not properly resolve their
Year 2000 issues, cash collections could be significantly  delayed. In addition,
the  Company  sends  less  than  2%  of  its  specimens  to  outside   reference
laboratories  for testing and does not believe it would have difficulty  finding
another  reference  laboratory  to perform such tests if its current main vendor
encounters  difficulties  with the Year 2000  issue.  The  Company has asked all
significant  vendors to report in writing to the  Company on the status of their
Year 2000 issue and whether their  systems will be compliant in sufficient  time
to satisfy the Company's current requirements and workflow.  The Company reviews
such reports regularly and makes  modifications to its own planning process,  if
necessary, based on the reports received from vendors.

                 Tests  performed  by Unilab  measure the levels of, and analyze
chemical and cellular  components  in, human body fluids and tissue and are used
in the diagnosis,  monitoring and treatment of disease.  They include procedures
in the areas of blood chemistry,  hematology,  urine chemistry, tissue pathology
and cytology,  among others.  Commonly ordered  individual tests include red and
white blood cell counts, PAP smears,  blood cholesterol level tests,  urinalysis
and procedures to measure blood sugar levels and to determine pregnancy. Routine
test groups include tests to determine the function of the kidney,  heart, liver
and thyroid,  as well as other organs, and a general health screen that measures
several  important  body  health  parameters.  Many  of the  routine  tests  are
performed by automated equipment and are capable of being performed and reported
within a 24-hour period.  Approximately 85% of the tests conducted by Unilab are
considered to be routine.  Reports are frequently sent via telecommunications to
equipment  installed by Unilab in the  physicians'  offices or are  delivered by
hard copy.

                 Unilab also conducts esoteric testing services.  Esoteric tests
generally require complex manual techniques,  a higher degree of technical skill
and knowledge and sophisticated equipment. As a consequence,  esoteric tests are
priced higher than routine  tests.  Two examples of esoteric  tests  provided by
Unilab  include  immunoelectrophoresis,  used for the  diagnosis  of  autoimmune
disorders and myelomas,  and hepatitis markers,  used for the diagnosis of acute
hepatitis A and B and for  identification of chronic carriers of these diseases.
The number of esoteric tests performed by the Company has been increasing as new
medical discoveries are made and testing procedures  developed.  Unilab performs
more than 98% of the tests  requested  by its  clients,  with the  remaining  2%
performed by third party reference laboratories with whom Unilab contracts. On a
revenue basis,  approximately 6% of testing fees collected by Unilab are paid to
third party reference laboratories or pathology services.

Customers

                 Unilab  provides  testing  services  to a broad range of health
care providers.  The following  factors,  among others, are often used by health
care  providers  in  selecting  a  laboratory:  (i)  accuracy,   timeliness  and
consistency in reporting test results;  (ii) size and scope of testing  services
performed;  (iii) service capability and convenience  offered by the laboratory;
(iv) pricing of the laboratory's  testing  services;  (v) extent of managed care
exclusive contract  coverage;  (vi) local STAT testing  availability;  and (vii)
reputation of the laboratory for the foregoing.
<PAGE>

                 The primary  types of  customers  that Unilab  services  are as
follows:

o Physicians  and  Physician  Groups.  Physicians  performing  testing for their
patients  who are  unaffiliated  with a pre-paid  health plan are the  principal
source  of  Unilab's  clinical  laboratory  business.   These  physicians  often
participate in Independent Physician Associations  ("IPAs").  Unilab markets its
services to physicians and physician groups through its sales force and competes
primarily  on the basis of the  accuracy of testing,  convenient  locations  for
patient  specimen  collection,  rapid test result  reporting  and  informational
services,  and its competitive  pricing.  Fees for clinical  laboratory  testing
services  rendered for physicians'  non-managed  care patients are billed to the
patient's  appropriate  third-party payor such as private  insurance  companies,
Medicare and  Medicaid.  When Unilab  provides  contracted  testing  services to
physicians  who  belong to IPAs,  the  Company  bills the IPA  (usually  under a
capitated arrangement).

o Independent  Physician  Associations.  Physicians  often band together to form
IPAs as a means to achieve greater local  recognition and contracting  leverage.
These IPAs often provide primary care services under  capitated  arrangements to
HMOs, and therefore often desire to purchase support services (like lab testing)
under capitated  arrangements.  As stated above,  if Unilab provides  contracted
testing  services to physicians who belong to an IPA, the Company bills the IPA.
Otherwise,  services  provided to other  patients seen by these  physicians  are
billed to various  other  payors such as  insurance,  client  bill,  Medicare or
Medicaid.

o Health Maintenance Organizations and Other Managed Care Groups. HMOs and other
managed care payors (which designate the laboratory to be used for tests ordered
by the physician)  represent a substantial  portion of Unilab's  business.  HMOs
generally select an independent  laboratory based on competitive pricing offered
to high volume  customers,  capability of the laboratory to effectively  service
incremental blocks of business,  field distribution  system,  including couriers
and PSCs to service their networks of physician providers, and the reputation of
the laboratory in the medical  community.  The Company believes that it services
more managed care contracts  than any other lab in the  California  marketplace,
and that the  Company has become a preferred  lab  services  provider to managed
care for several reasons.  First, Unilab has a state-wide presence,  which gives
managed care clients the ability to partner with one lab subcontractor  that has
state-wide coverage,  instead of several  subcontractors with limited geographic
coverage. Second, Unilab's internal cost-efficiencies allow the Company to offer
competitive pricing to the cost-conscious managed care community.  Third, Unilab
possesses  considerable  expertise in addressing the needs and issues of managed
care payors.

o Hospitals.  Unilab provides both esoteric  testing for hospitals  (which often
are not  equipped to perform  such  sophisticated  tests) and general  reference
testing  for  hospitals  which have  reduced  or  eliminated  their  in-hospital
laboratory  testing  in an attempt to reduce  their cost of  delivering  patient
care. The selection of an  independent  laboratory by hospitals is usually based
on  reputation  of the  laboratory  in the medical  community,  type of services
offered,  accuracy,  timeliness and  consistency of test results and competitive
pricing.

<PAGE>


o  Independent  Laboratories.  Unilab also provides reference testing services
to  independent  clinical  laboratories  which  do  not  have the full range of
Unilab's testing capabilities.

o Clinics.  Unilab has  arrangements  with a broad  network of community  health
clinics  across the state of  California  that  provide  preventive  health care
and/or medical  attention for the lower-income  and indigent patient  population
(frequently MediCal  recipients).  Under these arrangements,  the Company is the
primary  provider  of  testing  services  for  patients  who choose to use these
clinics.

                California has the highest enrollment rate (approximately 40% of
the  population)  in managed  care plans of any state in the  country  and, as a
result,  delivery  of health  care to  participants  in such  plans  has  become
integral  to  the  health  care  delivery  system   throughout  the  state.  The
proliferation  of managed care providers in the healthcare  industry has altered
the customer base of healthcare  service  providers,  especially in  California.
From 1993 to 1994,  Unilab more than doubled its number of covered  lives (i.e.,
individuals  covered by contracts  between  pre-paid health plans and Unilab for
the provision of laboratory  services) to over 2 million lives.  During 1995 the
Company  continued to serve a similar  number of covered  lives,  and during the
first half of 1996,  increased  its managed care  coverage to over 2 1/2 million
lives. Today, Unilab serves over 3 million managed care lives. This business had
historically been viewed as having  substantial  value, in large part because of
the economies of scale inherent in its considerable  volume.  It was also viewed
as a competitive  advantage in obtaining  additional  non-managed  care business
generated  from  many of the  same  offices  which  were  serving  managed  care
patients.  Increasingly,  Unilab, like other major laboratory companies, came to
recognize that the pricing received in relation to the cost of services provided
to managed care patients was disproportionately low, and the Company undertook a
concerted  effort  in  1997 to  improve  the  situation.  To  this  end,  Unilab
renegotiated  contracts  representing  approximately  two-thirds  of the covered
lives  and  received  an  average  price  increase  in  excess  of 50% on  those
renegotiated  contracts.  By year-end  1998,  Unilab had once again repriced the
capitation rates on approximately  40% of its 3 million managed care lives at an
average  increase  of  greater  than 30%.  In  addition,  these  contracts  have
increasingly  been structured so that they exclude unlimited high cost services,
such as high labor-intensive pap smears and outsourced esoteric tests. Unilab is
committed to providing  high quality  laboratory  testing at profitable  pricing
levels.

Specimen Collection and Processing

                 Unilab utilizes an extensive distribution and collection system
of approximately 320 collection routes, approximately 270 PSCs and approximately
20 courier hubs to achieve  efficient  and  integrated  collection  and testing.
Courier routes are logically designed based on lab location,  geographic density
and specimen  volume.  Strategically  located  full  service labs and  satellite
courier "hubs" serve as control  centers to ensure courier  routing is efficient
and tightly  controlled.  In addition,  PSCs act as initial specimen  processing
centers  effectively  putting  control of the  specimen in  Unilab's  possession
earlier in the process. The Company believes this distribution infrastructure is
integral to providing efficient, convenient and reliable service to its clients.

Quality Assurance

                 Unilab believes that its quality  assurance  procedures meet or
exceed  the  highest  standards  in  the  industry.  Unilab  has  established  a
comprehensive  quality  assurance  program for all of its laboratories and other
facilities to ensure that  specimens are  collected  and  transported  properly,
tests are performed  accurately,  and client,  patient and test  information are
reported,  billed  and filed  correctly.  Unilab's  quality  assurance  programs
include  (i)  preventive  maintenance  of  laboratory  testing  equipment,  (ii)
maintenance  of high  personnel  standards and training  which require that only
qualified  personnel  perform  testing,  (iii)  rigorous  utilization of control
specimens in order to ensure accuracy and precision of test equipment,  and (iv)
a  tightly  managed  collection  and  distribution  network.  In  addition,  all
laboratories certified by the Health Care Financing  Administration ("HCFA") for
participation in the Medicare program under the Clinical Laboratory  Improvement
Amendments of 1988 ("CLIA"),  such as Unilab,  must participate in basic quality
assurance programs.  Each of Unilab's laboratories is licensed (or has licensure
pending)  by  its  respective  state  authorities  and  certified  by  HCFA  for
participation in the Medicare program under CLIA.
<PAGE>

                 In addition,  Unilab  participates  in a number of  independent
proficiency   testing   programs.   Participation  in  a  federally   recognized
proficiency  testing program is a requirement of CLIA. Under these programs,  an
independent testing authority submits pre-tested samples to a laboratory.  These
tests  measure the  laboratory's  test results  against known  proficiency  test
values.  Unilab also  participates in a number of proficiency  testing  programs
which generally entail submitting  pre-tested  samples to a laboratory to verify
the laboratory  test results  against the known  proficiency  test value.  These
proficiency  programs are conducted both by Unilab on its own and in conjunction
with groups such as the College of American  Pathologists ("CAP"), and state and
Federal government regulatory agencies.  CAP is an independent  non-governmental
organization  of board  certified  pathologists  which  offers an  accreditation
program to which  laboratories  can  voluntarily  subscribe.  CAP  accreditation
program involves both on-site inspections of the laboratory and participation in
CAP's proficiency  testing program for all categories in which the laboratory is
accredited by CAP. CAP's proficiency testing program is federally recognized for
purposes of CLIA. A laboratory's  receipt of  accreditation by CAP satisfies the
Medicare   requirement  for   participation  in  proficiency   testing  programs
administered by an external source. Each of Unilab's  full-service  laboratories
in Sacramento, San Jose and Tarzana has earned full accreditation by CAP. In the
1998  External  Proficiency  Testing  Program  conducted by CAP at the Company's
three  primary  laboratories,  the total  accuracy  rate for all sections of the
laboratories  was 99.5 %, consistent  with the 1997 accuracy rate of 99.5%,  and
slightly better than the 1996 cumulative accuracy rate of 99.4%, 1995 cumulative
accuracy rate of 99.3% and the 1994 cumulative accuracy rate of 99.2%.

Regional Operations, Sales, Service and Marketing

                 As of December 31, 1998 Unilab's sales and service organization
was comprised of approximately 75 full-time sales and  sales/service  employees.
Sales  representatives  are primarily  responsible  for executing  focused sales
initiatives    established   within   their   regions,    while    sales/service
representatives  are primarily  responsible for account  retention and enhancing
client  relations  (although they also have defined  selling  responsibilities).
This separation  between  "selling" and "servicing" is a key feature of Unilab's
sales  organization,  in that sales/service staff specialize in their respective
disciplines.  Incentive compensation paid on new sales  generation--achieved  by
either sales or sales/service representatives--is designed to recognize the cost
of supporting  the new business and reward the  dedication to client support and
client retention.

                 Unilab's  marketing  department  is committed to promoting  the
Company's  mission of "maintaining  high quality and  cost-effective  laboratory
services  that  are   responsive  to  the  values  and  needs  of  patients  and
physicians."  Unilab promotes this mission and other Company initiatives through
the creation and targeted  dissemination  of marketing  materials to clients and
prospects  by  Unilab's  sales  and  sales/service  representatives  (as well as
Unilab's  couriers).  More  specifically,  Unilab's  marketing  initiatives  and
materials address four distinct objectives:
<PAGE>

o Enhance medical community  awareness of Unilab's full spectrum of services;

o Promote and sell new services and technological  advances;

o Educate clients on regulatory and compliance issues that will affect the
  medical  community;  and

o Address customer needs and concerns about new testing procedures.

                 These  marketing   initiatives   are   prioritized   through  a
collaborative effort among senior management,  sales and sales/service employees
and other relevant departments.

Acquisitions

                 Unilab's  management,  while  employed  by the  Company  or its
predecessor,  has successfully  executed and integrated a number of acquisitions
in the clinical  laboratory  industry,  which have  accounted  for a substantial
portion of the Company's growth.  Since 1989, the Company or its predecessor has
completed  nine  acquisitions  in  California,  including  five  since 1994 with
aggregate annual revenues in excess of $75 million  (including the November 1998
acquisition  of  Meris   Laboratories).   Unilab  intends  to  selectively  seek
acquisitions  designed to result in cost  savings and other  benefits  resulting
from the elimination or reduction of (i)  redundancies in testing  equipment and
personnel,  (ii)  overlapping  courier routes,  (iii)  overlapping PSCs and STAT
laboratories,  (iv)  duplicative  administrative  personnel  and  (v)  redundant
marketing  efforts and  personnel.  The Company  seeks to achieve  consolidation
efficiencies within six months after completion of an acquisition.

Meris Acquisition

                 On  September  16,  1998,   the  Company  signed  a  definitive
agreement  to acquire  substantially  all of the  assets of Meris  Laboratories,
Inc.,  one  of  the  leading  regional  independent   laboratories  in  Northern
California with run-rate revenue of approximately $25.2 million. Meris had filed
for bankruptcy  protection  under Chapter 11 in November  1997. The  transaction
closed on November 5, 1998.

                 The gross  purchase  price  paid for  Meris  was $16.5  million
(approximately 0.60x annual revenue),  consisting of a $14.0 million convertible
subordinated   note   (bearing   7.5%   interest,   convertible   under  certain
circumstances  at  $3.00  per  share)  and the  assumption  of $2.5  million  in
additional  liabilities  (to be paid in equal  installments of $35,000 per month
over 72  months).  In  addition  to the  customer  list,  the  Company  acquired
approximately  $4.0 million of assets, the majority of which were trade accounts
receivable.

                 Within  approximately two months after closing the transaction,
the Company had substantially integrated the Meris business and realized much of
the significant synergies available in the consolidation.

The Clinical Laboratory Industry

Overview and Trends

                 Unilab  believes based on published  industry  reports that the
total U.S. clinical  laboratory market during 1998 was approximately $30 billion
in annual revenue, of which the California market accounted for approximately $4
to $4.5  billion.  Even  after  years of  industry  consolidation  the  clinical
laboratory  market  nationally,   and  particularly  in  California,  is  highly
fragmented  and  composed  of  three  segments:   (i)  laboratories  located  in
hospitals;  (ii) laboratories located in physicians' offices and physician-owned
laboratories;  and (iii)  independent  clinical  laboratories.  Industry sources
estimate that there are currently fewer than 4,500 independent  clinical labs in
the United  States,  with as many as 600  located  in  California.  The  Company
believes  that  approximately  55% of clinical  laboratory  testing  revenues in
California result from tests performed by hospitals, 15% from tests performed by
physicians in their offices and physician-owned  laboratories and 30% from tests
performed  by   independent   laboratories.   The  Company   believes  that  the
consolidation  trend of the last several years is likely to continue,  resulting
in fewer independent clinical labs both nationally and in California.
<PAGE>

                 Clinical laboratory testing continues to be an integral part of
the  delivery  of health care  services in the United  States due to a number of
factors, including: (i) the aging of the U.S. population, resulting in increased
utilization of testing services; (ii) an increase in the number of routine tests
and esoteric tests due to advances in technology and scientific knowledge; (iii)
increased  automation in testing  procedures  due to the  development  of highly
automated   laboratory   testing   equipment   which  has  resulted  in  greater
efficiencies in testing  operations;  (iv) increased  awareness among physicians
and the general  public  concerning  the  importance of preventive  medicine and
early  detection;  and (v)  increased  use of tests by  physicians as protection
against potential  malpractice suits. Unilab believes that there will be further
opportunities  for independent  laboratories to capture certain testing from the
market  currently  served by  hospital  and  physician  office  laboratories  by
focusing on the cost and service advantages which large independent laboratories
like Unilab have with respect to high volume,  non-emergency  testing.  However,
the number of clinical  laboratories  has declined as hospitals  and  physicians
have exited the clinical  laboratory  business and consolidation has occurred in
the  independent  laboratory  segment.  Moreover,  as a result of certain recent
required  changes  in the  billing  and  collecting  of  Medicare  and  Medicaid
payments, more detailed procedures have been required,  complicating the billing
and collection process and making such processes more expensive.

California Market

                 California  is the single  largest  state  clinical  laboratory
market in the U.S., accounting for approximately 13% of the country's laboratory
testing  revenues.  The Company  believes that  consolidation  in California has
occurred and will  continue  for reasons  similar to those which have caused the
industry  nationwide to  consolidate,  such as: (i) the cost of compliance  with
increasingly  stringent  regulatory  requirements;  (ii) the  cost  efficiencies
afforded  by  large-scale  automation  of  routine  testing;  (iii)  legislative
developments,  such as restrictions on physician self-referrals and ownership of
laboratories;  (iv) reductions in Medicare and other third-party reimbursements;
(v) the growth of HMOs and other  managed  care groups which  require  efficient
testing services from high-capacity laboratories; (vi) the increasing demand for
sophisticated  equipment  and  management  information  systems  that tend to be
prohibitively expensive for small laboratories;  and (vii) the competition for a
limited supply of qualified laboratory personnel. The Company has focused on the
California clinical  laboratory market because of (1) its size and density,  (2)
the high degree of fragmentation  and prospects of continued  consolidation  and
(3)  Unilab's  current  leadership  position in the market and the  prospects of
leveraging this status across the state.

Strategy

                 Unilab's objective is to build upon its position as the largest
and low cost provider of clinical laboratory testing services in California both
to provide quality and valued services to its customers and to earn a profitable
return for its stake-holders. The Company's business strategy for achieving this
objective  is to  maintain  superior  quality  and  service,  provide  ancillary
services commensurate with the value which its customers place on them, maintain
its position as a low cost provider,  conduct its billing and business practices
in an appropriate, efficient, effective, and responsible manner and grow through
organic growth and acquisitions.  Similar to the actions taken in 1997 and 1998,
the Company also intends to closely monitor and, where  appropriate,  reduce its
expense base, while  simultaneously  taking steps to increase its revenue stream
through higher pricing and selected acquisitions.
<PAGE>

Governmental Regulation

                 Numerous aspects of Unilab's operations,  including its testing
processes,  its business practices and in some instances, the amount and methods
by which it is paid,  are subject to  governmental  regulation  at the  Federal,
state and/or local levels.

Federal and State Clinical Laboratory Licensing

                 All clinical laboratories  operating in the United States, with
limited  exceptions,  are required to obtain Federal  certification  pursuant to
CLIA and its implementing regulations.  The law and its implementing regulations
impose,  as conditions  for such  certification,  requirements  relating to test
processes,  personnel qualifications,  facilities and equipment,  recordkeeping,
quality control, quality assurance and participation in proficiency testing. The
same regulatory  requirements  also apply as conditions for participation in the
Medicare  and  Medicaid  programs.   CLIA  regulations  vary  depending  on  the
complexity  of the  methodologies  performed by the  laboratory.  Compliance  is
verified  by  periodic  on-site  inspections.  Sanctions  for  failure  to  meet
CLIA/Medicare  certification  requirements  include  suspension or revocation of
certification,  criminal penalties,  injunctive actions to close the laboratory,
civil  penalties or imposition of specific plans of correction to remedy alleged
deficiencies.

                 Licensing  requirements  similar to those  imposed  pursuant to
CLIA also apply at the state level,  with similar  sanctions for  noncompliance.
Effective January 1, 1996,  California Senate Bill 113 ("SB 113") became law and
amended the California  laws  governing  clinical  laboratories  to make them at
least as stringent  as CLIA was as of January 1, 1994.  Since Unilab must comply
with CLIA in any event, SB 113 has had little  practical  effect on the Company.
This   law   could,   however,   impose   additional   regulatory   burdens   on
California-based  physician  office  laboratories  ("POL's") by  increasing  the
responsibilities of directors at POL's for oversight and supervision. In each of
the past two  Congresses,  however,  legislation  has been  introduced,  but not
passed,  to exempt POLs from CLIA. Such legislation has again been introduced in
the current  106th  Congress  in February  1999.  Moreover,  in 1999  California
received deemed  equivalency  status under CLIA, which is formal  recognition by
the federal government that California quality  requirements meet or exceed CLIA
levels.

                 Additionally,   in  California  specific   proficiency  testing
participation  is required for those  laboratories,  like  Unilab,  that perform
testing to detect the  presence  of the human  immunodeficiency  virus  ("HIV").
Notwithstanding compliance costs, Unilab regards these licensing requirements as
beneficial  to the  industry  and  favorable  to its  business  because the CLIA
certification requirements apply not only to independent laboratories but to all
clinical  laboratories,   with  only  narrow  exceptions  for  those  facilities
performing a limited number of simple procedures.

Federal and State Billing and Fraud and Abuse Laws

                 The Federal Medicare laws impose specific billing  requirements
on  clinical  laboratories.  Generally,  laboratories  are  required to bill the
Medicare  program  directly  rather than billing  physicians  or  beneficiaries.
Exceptions to this "direct billing" requirement permit a referring laboratory to
bill Medicare for testing performed by another laboratory if at least 70% of the
tests for which the referring  laboratory  receives  requisitions  are performed
on-site.  This  so-called  "shell  lab"  exception  is  expected  to benefit the
independent  laboratory  industry by  limiting  incentives  for  physician-owned
laboratories.
<PAGE>

                 Additionally, a wide array of Medicare/Medicaid fraud and abuse
provisions apply to those clinical laboratories participating in these programs.
These laws prohibit,  among other things,  (i) the submission of false claims or
false information to the programs,  (ii) deceptive or fraudulent conduct,  (iii)
the  provision  of excessive  or  unnecessary  services or services at excessive
prices  and (iv) the offer or receipt of  broadly  defined  inducements  for the
referral of Medicare,  Medicaid or other federal health care program patients or
business.  Penalties for violations of these Federal laws include exclusion from
participation  in  the  Medicare/Medicaid  programs,  asset  forfeitures,  civil
penalties and criminal  penalties.  Civil penalties for a wide range of offenses
may be up to $10,000  per item and treble  the  amount  claimed.  In the case of
certain severe offenses,  exclusion from  participation in Medicare and Medicaid
is a  mandatory  penalty.  These  fraud and  abuse  provisions  are  interpreted
liberally and enforced  aggressively  by the various  enforcing  agencies of the
federal government.

                 Several Federal agencies are charged with the responsibility of
investigating  allegations  of  fraudulent  and  abusive  conduct by health care
providers. These agencies include, without limitation, the Department of Justice
("DOJ"),  Federal  Bureau of  Investigation  ("FBI") and the Office of Inspector
General  ("OIG")  of the  Department  of  Health  and  Human  Services  ("HHS").
Additionally,  Medicare  carriers and Medicaid  state  agencies now have certain
fraud and abuse control  authority.  According to public  statements by the DOJ,
health care fraud has been elevated to the  second-highest  priority of the DOJ,
and FBI agents  have been  transferred  from  investigating  counterintelligence
activities  to health  care  provider  fraud.  The OIG also is  involved in such
investigations  and has,  according to recent OIG Work Plans,  targeted  certain
laboratory practices for study,  investigation and prosecution.  Pursuant to one
such project in the fiscal 1992/1993 Work Plan, entitled "Laboratory  Unbundle,"
laboratories that offer packages of tests to physicians and "unbundle" them into
"several tests to get higher  reimbursement  when billing Medicare and Medicaid"
were to be identified  and "suitable  cases will be presented for  prosecution".
Under another project in the fiscal 1992/1993 Work Plan, laboratories "that link
price discounts to the volume of physician referrals,  `unbundle' tests in order
to bill Medicare at a higher total rate, and conduct unnecessary tests, ... will
be  identified  to  coordinate  investigations  throughout  the  country".  Such
projects culminated in the industry-wide  governmental "LabScam"  investigations
that  began in 1998 and that have  resulted  in  approximately  $800  million of
aggregate  settlement  payments being made by a number of  independent  clinical
labs in the past several years. The LabScam investigation appears to be ongoing.

                 The OIG's fiscal year  1994/1995 Work Plan also targeted a wide
range of clinical  laboratory  practices for study and investigation.  In fiscal
years 1994-1995,  the OIG planned to "continue to investigate potential fraud in
Part B of the Medicare  program",  targeting  certain  specific areas  including
"laboratory  fraud".  In October 1994 the OIG issued a "Fraud  Alert"  targeting
certain specific practices in the clinical  laboratory  industry,  including the
provision  of  free  computers  or fax  machines  to  ordering  physicians;  the
provision of free laboratory  testing for health care providers,  their families
and  employees;  the  provision  of  phlebotomy  services  to  physicians;   the
collection by laboratories of bio-hazardous  waste from physician  offices;  and
certain  other  practices.  The  Fraud  Alert,  entitled  "Arrangements  for the
Provision  of  Clinical   Laboratory   Services,"  was  disseminated  widely  to
physicians and other providers of Medicare/Medicaid  services. In this document,
the OIG asked  persons who become  aware of any of the  identified  practices to
contact  OIG  Regional  Offices  around the U.S.  Additionally,  the Fraud Alert
announced the OIG's plan to "actively  investigate  and prosecute" the practices
described in the document.
<PAGE>

                 The OIG's  1996/97  Work Plan also  proposed  targeting  a wide
range of laboratory practices for investigation, including HCFA's enforcement of
CLIA;  duplicate claims from physician  office and independent  laboratories for
the same tests; and billing by hospital laboratories for outpatient services. In
addition,  in 1997 the OIG  released  a "Model  Compliance  Plan"  for  clinical
laboratories,  which set out certain  voluntary  standards  laboratories were to
follow to comply  with  federal  fraud and abuse  laws.  The OIG  reissued  this
compliance guidance document in slightly revised form in 1998.

                 The OIG's 1997/98 Work Plan again identified various laboratory
practices for evaluation and  investigation.  These include a follow-up audit of
hospital  outpatient  billing for chemistry,  hematology  and  urinalysis  tests
covered by a previous investigation;  scrutiny of the enforcement of the Stark I
physician/laboratory  self-referral  ban to ensure that enforcement is adequate;
evaluating the enforcement of CLIA to make sure that it is adequate; and a study
of trends in  laboratory  test  utilization  to  identify  possible  utilization
controls.

                 The OIG's April 1,  1998-September  30, 1998 Semi-annual Report
reported  that the OIG  successfully  completed  several  civil cases related to
fraudulent  billing by clinical  laboratories  to  Medicare,  Medicaid and other
federal health care  programs,  and that the OIG also obtained  convictions  and
settlements  for other types of fraudulent or abusive  activities on the part of
laboratories.  The Report describes one particular case that, in the OIG's view,
was  "one of the most  reprehensible  cases  involving  fraudulent  billing  for
laboratory tests." (OIG Semi-Annual Report,  April 1, 1998-September 30, 1998 at
25.) In this  case,  according  to the  Report,  a  laboratory  unbundled  blood
chemistry  tests  and  billed  Medicare  for  thousands  of tests  that were not
medically necessary during a nine-year period receiving $5.0 million in Medicare
overpayments.  The Report stated that this laboratory  agreed to pay $15 million
to resolve this liability.

                 In its Fiscal Year 1999 Work Plan, the OIG targeted  laboratory
tests  provided  to  End  Stage  Renal  Disease  (ESRD)  beneficiaries  for  two
nationwide reviews: one concerning inappropriate separate billing for laboratory
tests included in the ESRD composite rate, and the other  concerning the medical
appropriateness  for such tests.  The FY 1999 Work Plan also announced a project
to analyze HCFA's enforcement of Medicare's  physician/laboratory  self-referral
prohibition (see discussion below).

                 In addition to these  recent OIG  initiatives,  HHS  anti-fraud
initiatives  launched  in  1999  include  a  comprehensive   anti-fraud  program
announced by HCFA in February 1999. In this initiative,  HCFA will take numerous
steps to enhance the fraud  detection and  enforcement  elements of its Medicare
and Medicaid program  administration,  including  implementation of the Medicare
Integrity  Program,  a program created by the Health  Insurance  Portability and
Accountability Act of 1996 ("HIPAA") to enhance the anti-fraud activities of the
contractors  that  administer  the Medicare  program.  The 1999 HCFA  anti-fraud
initiative  responds in part to a recent OIG report estimating that, in 1998, 7%
of Medicare claims were billed improperly or erroneously.

                 In addition, a Federal "self-referral" law commonly referred to
as the "Stark" law prohibits  Medicare payments for laboratory tests referred by
physicians who (personally or through a family member) have a financial interest
(including "ownership interests" and "compensation arrangements") in the testing
laboratory.  There are certain exceptions,  the most significant being in-office
testing personally performed by or under the supervision of the physician or the
group practice to which the physician belongs.  Another exception would permit a
physician to refer  specimens to a laboratory  owned by a company,  the stock of
which is traded on a public  exchange and which has  shareholders'  equity of at
least $75  million  in the most  recently  completed  year or an  average of $75
million  over the prior  three  years even if the  physician  owns stock of that
company.  Sanctions for laboratory  violations of the prohibition include denial
of Medicare  payment,  refunds,  civil money penalties of up to $15,000 for each
service billed in violation of the  prohibition  and exclusion from the Medicare
program. These restrictions, which became effective January 1, 1992, may benefit
the  independent  clinical  laboratory  industry by restricting  physicians from
"self-referring"  Medicare testing to physician-owned entities. As of January 1,
1995,  as a result of the  adoption  of the "Stark II" law,  these  restrictions
applied to  Medicaid-covered  services and to certain additional  diagnostic and
therapeutic  "designated  health  services",  as  well,  with  similar  expected
benefits for the independent laboratory industry.  Regulations  implementing the
Stark I Law were published August 14, 1995. Proposed  regulations  to implement
the Stark II Law were  published  January 9, 1998.
<PAGE>

                 The 1995 House  Medicare  reform  proposal  contained,  and the
House-Senate   report   adopted,   provisions   that  would  have,   if  passed,
significantly  narrowed the scope of the Stark anti-referral laws. That proposal
would have ended the ban on  physician  referrals to  laboratories  based on any
"compensation arrangements" between the lab and the physician. Such compensation
arrangements would have remained subject to the federal  anti-kickback laws. The
President vetoed this bill on December 5, 1995. The President's  Medicare reform
proposal  would  not have  narrowed  the  scope of the  Stark  laws.  While  the
proposals  to  narrow  the  scope of the  self-referral  law were not  passed in
1995-1998, it is possible that similar proposals could be introduced in Congress
in 1999.

                 In 1996,  Congress  passed and the  President  signed  into law
HIPAA,  frequently  referred  to  as  the  "Kennedy-Kassebaum  Act",  after  its
principal Senatorial  sponsors.  The law made major changes in federal fraud and
abuse laws  applicable to health care  providers.  It  established a new federal
program designed to coordinate federal,  state and local fraud and abuse control
programs.  The  law  permitted  the  DOJ  and  the  OIG to  conduct  audits  and
investigations  relating to the  delivery  of health care in the United  States,
without  limitation to Medicare and Medicaid,  and established a Fraud and Abuse
Trust Fund.  HIPAA also  mandated  the  creation of a new safe harbor  under the
anti-kickback law that is to apply to remuneration paid or received by a managed
care organization,  where there is a written agreement that places the entity at
substantial  financial  risk for the cost or utilization of health care services
provided.  HIPAA also expanded the federal  antikickback  law so that it applies
not only to  situations  involving  Medicare  and  Medicaid,  but to almost  all
federally funded health care programs.  In addition,  the law for the first time
permits providers to obtain advisory opinions from the government concerning the
legality of certain contemplated  practices under the anti-kickback law; the OIG
published  regulations  implementing  this advisory  opinion mandate in February
1997 and amended  those  regulations  in 1998.  The  Kennedy-Kassebaum  law also
significantly  increased  the  penalties  for certain  civil  violations  of the
Medicare law and increased  the types of offenses for which a provider  could be
excluded from  Medicare/Medicaid.  Finally,  the law established a number of new
criminal provisions applicable to health care fraud.

                 The Balanced  Budget Act of 1997 ("BBA '97") contains  numerous
changes  in  Medicare/Medicaid  fraud and  abuse  provisions.  BBA '97  requires
permanent  exclusion  from Medicare and Medicaid for persons  convicted of three
health  care-related crimes and a 10-year exclusion period for persons convicted
of certain  offenses who have one previous  conviction.  The statute permits the
Secretary of HHS to refuse to enter into Medicare participation  agreements with
individuals  or  entities  that have been  convicted  of  felonies.  The new law
further  permits the  exclusion  from Medicare and Medicaid of an entity that is
controlled  by a family  member of an  individual  who has incurred  Medicare or
Medicaid  sanctions,  where such  sanctioned  individual  transferred his or her
ownership or control interest in the entity in anticipation of, or following,  a
conviction,  money penalty or exclusion from the program.  In addition,  BBA '97
expands the reach of Medicare/Medicaid civil money penalties to apply to persons
who arrange or contract  with  excluded  persons  for the  provision  of covered
services.  Further,  the  statute  includes a provision  permitting  civil money
penalties  of up to  $50,000  per  violation  for  certain  specified  types  of
violations,  plus damages equal to three times the total amount  offered,  paid,
solicited or received,  for  violations of the  Medicare/Medicaid  anti-kickback
statute.  Finally,  BBA '97  requires  the  Secretary  of HHS to issue  advisory
opinions  regarding  potential  violations  of  the  Stark  II  law  prohibiting
Medicare/Medicaid  physician self-referral for designated health services (other
than  laboratory  services).  The Health Care  Financing  Administration  (HCFA)
published regulations implementing this advisory opinion provision on January 9,
1998.
<PAGE>

                 The  LabScam   investigation   and  settlements   have  spawned
additional   federal   lawsuits   brought  by  private  parties   (insurers  and
individuals) under the Racketeering  Influenced Corrupt Organization Act (RICO),
which permits the recovery of treble  damages.  At least two lawsuits were filed
under this statute against major clinical laboratories during 1997.

                 It should be noted  that,  among  the many  federal  provisions
available to enforcement authorities in connection with health care offenses, an
especially potent remedy is exclusion from Medicare,  Medicaid and other federal
health care  programs.  Particularly  significant  is the  permissive  exclusion
authority  of the OIG,  the  principal  threat  that has brought  many  clinical
laboratories to the settlement table in the LabScam  operation.  On December 29,
1997, the OIG released  non-binding  guidelines  indicating the criteria it will
use in  making  permissive  exclusion  decisions.  These  criteria  address  the
circumstances  and  seriousness  of the  offense,  the  defendant's  response to
allegations,  the likelihood of reoccurrences  of the same or similar  offenses,
and whether the  provider  can  continue  participating  in federal  health care
programs  without a real  threat of  bankruptcy  or to its  ability  to  provide
quality care.

                 At the state  level,  laboratory  operations  are  affected  by
billing  requirements  applicable to all laboratory services and state fraud and
abuse and anti-inducement  laws that similarly apply to all laboratory services.
California,  where the Company conducts almost all of its business,  has adopted
especially stringent laws of this type,  including an expansive  anti-inducement
law that is even broader than the federal law (Ca. Bus.  Prof.  Code ss.650) and
the  Physician  Ownership and Referral Act,  known as the "Speier  Bill",  which
became effective January 1, 1995 and which prohibits,  under most circumstances,
referrals of laboratory  testing business by physicians to laboratories in which
the  physician  has a "financial  interest".  Penalties  for  violation of these
provisions can include fines, criminal penalties and disciplinary action against
referring  physicians.  In addition,  California has adopted the "Calderon" law,
which prohibits  physicians from "marking up" laboratory  bills for lab services
the  physician did not perform.  The Company  believes the Calderon law benefits
independent    laboratories   by   reducing   the   financial   incentives   for
physician-owned laboratories.

                 In  August  1993,  Unilab  received  a  subpoena  from  HHS  in
connection  with an  investigation  and internal review relating to the possible
submission of false or improper claims under the Medicare and Medicaid programs.
The HHS subpoena  required  production of a broad range of documents,  including
those  relating to Unilab's  selling,  pricing  and billing  practices.  The HHS
subpoena concerned fourteen tests, including five tests that were the subject of
the civil  claims  settlements.  See "Legal  Proceedings--Department  of Justice
Settlement". Unilab completed production of these documents in February 1994.
<PAGE>

                 In August 1995, the Company received a subpoena from HHS
requesting certain information with respect to the Company's marketing and
billing practices for a complete blood count (CBC), a diagnostic test which was
not included in any prior subpoena or the subject of any of the settlements
entered into by the Company in September 1993 (the "Settlements").  See,
"Legal Proceedings-Department of Justice Settlement". Unilab promptly completed
production of all documents in response to the HHS subpoena and cooperated
fully in the HHS investigation.  The Company reached an agreement with the
Federal government in September 1996 to pay $4.0 million to conclude this
investigation.  The Company has one remaining payment, excluding interest, to
the U.S. Government of approximately $324,000 due on September 1, 1999.  In
addition, in October 1996, the Company paid the California MediCal program
approximately $160,000 to settle all their claims regarding the same issue.
The settlements did not constitute an admission by the Company with respect to
any allegation, issue of law or fact arising from the investigation and the
Company received a full civil and administrative release from all claims by the
government with respect to these billings through the date of the settlement
agreement.

                 In November  1998,  Unilab  acquired  substantially  all of the
assets of Meris Laboratories, Inc. At that time, Meris had a corporate integrity
agreement (CIA) with the OIG arising from the settlement of claims against Meris
asserted by the United States in connection with its LabScam investigations.  As
part of Unilab's  purchase of the Meris assets and in lieu of assuming the Meris
CIA,  Unilab  voluntarily  entered  into an  agreement  with  the  OIG  entitled
"Compliance Program Disclosure Agreement" (the "Unilab/OIG Agreement"). Pursuant
to this Agreement  Unilab will maintain its hotline,  undertake  special billing
audits of the  former  Meris  facilities,  obtain  new CLIA  certifications  and
provider  numbers  for  the  former  Meris   facilities,   and  provide  certain
information  to the OIG. The  Unilab/OIG  Agreement will last until February 28,
2000.

Professional Ethics

                 The  American  Medical  Association's  (AMA's)  view  regarding
referrals by physicians to businesses in which they hold ownership  interests is
that "in general, physicians should not refer patients to a health care facility
outside  their  office  practice at which they do not  directly  provide care or
services when they have an investment  interest in the facility".  Under the AMA
guidelines physicians are expected to refer patients to independent laboratories
rather than to laboratories in which they have an investment  interest.  The AMA
guidelines do not have the force of law. The management of Unilab  believes that
such AMA policy against physician  self-referrals  may have a positive effect on
Unilab by further facilitating referrals away from physician-owned  laboratories
to independent laboratory concerns such as Unilab.

Reimbursement

                 Medicare reimbursement for clinical laboratory services is made
pursuant to Medicare  fee  schedules,  subject to a national  limitation  amount
("cap") that is based upon the median of all the Medicare fee schedules.  During
the late 1980s and the 1990s,  that cap dropped  from 115% of the median to 100%
of the median,  to 93% of the median, to 88% of the median, to 84% of the median
to 80% of the median to 76% of the median and  effective  January 1, 1998 to 72%
of the median.  BBA '97 provides for a freeze on fee schedule  payments for 1998
through 2002. The President's FY2000 budget proposes a reduction of the Medicare
fee  schedule  caps to 74% of the  laboratory  fee schedule  medians,  beginning
January 1, 2000.  It is too early to predict how  Congress  will respond to this
proposal.  In  addition,  an expert  panel  considering  changes in Medicare has
proposed  reinstatement  of  beneficiary  cost sharing for  diagnostic  clinical
laboratory  services  provided  to Medicare  patients,  although it is not known
whether the full Medicare  Commission will agree to this proposal or whether any
congressional action will be taken with regard to it.
<PAGE>

                 BBA '97 included a provision  that allows the  Secretary of HHS
to  implement  up  to  five  demonstration  projects  to  establish  competitive
acquisition  areas for Part B  services,  including  laboratory  services.  Each
project can be conducted in no more than three competitive acquisition areas and
can be operated over a three-year  period. The Secretary can limit the number of
contractors in a competitive  acquisition  area to the number needed to meet the
demand for services.  Where the Secretary  determines  after an evaluation  that
there is clear  evidence  that the project has resulted in a decrease in federal
expenditures  adversely  affecting or impacting access,  quality or diversity of
product selection,  the Secretary may expand the projects. BBA '97 also requires
the  Secretary  to  request  the  Institute  of  Medicine  to conduct a study of
laboratory  payments  to review the  adequacy  of the  current  methodology  and
recommendations  regarding  alternative  payment  systems.  This report is to be
completed   within  two  years.   The  new  law  also   includes  a  package  of
"administrative  simplification"  provisions for laboratory testing. Under these
provisions,  by July 1, 1999,  regional  carriers for not more than five regions
must be in  place  for  clinical  laboratories,  and by  January  1,  1999,  the
Secretary  must  establish  uniform  rules in several  laboratory  policy  areas
through a negotiated  rulemaking process.  HCFA has requested Congress to repeal
the BBA's  requirement  concerning  regional carriers and, although Congress has
not yet  acted on that  request,  HCFA has  taken no  action  to  implement  the
provision;  thus, it is unlikely to be implemented by the July 1, 1999 deadline.
Further, a negotiating  rulemaking committee has met on a number of occasions to
propose some changes in laboratory  payment and billing  policies as mandated by
the  BBA,  but  those  proposals  have  not yet been  finally  agreed  to by the
committee.  Once  agreed to by the  committee,  they must still be issued in the
form of a Notice of Proposed  Rulemaking by HCFA;  thus, it is likely to be some
time before any action is expected  with  regard to the  committee's  proposals.
Finally, effective July 1, 1998, Medicare Part B laboratory services (other than
physician  services)  provided to residents of nursing facilities must be billed
directly to the nursing  facility,  and payment  will flow from  Medicare to the
nursing facility and the nursing facility to the laboratory.

                 Current Procedural Terminology ("CPT") codes form the basis for
the  coding  of  tests  billed  to  Medicare  and  Medicaid,  as well as to some
third-party  payors,   and,  thus,  coding  changes  may  substantially   affect
reimbursement  levels. CPT codes are periodically revised by the AMA. One of the
areas of the CPT code revision that has most affected  laboratory  reimbursement
levels is a change in the codes that designate  panel and profile tests, so that
numerous panel codes have been eliminated entirely and those remaining have been
given specific definitions for constituent tests for the first time. This coding
change reduced laboratory  reimbursement for Unilab and the clinical  laboratory
industry generally. Other codes have been eliminated or superseded by new codes,
and codes have been added for new, previously uncoded procedures.

                 A  substantial  CPT  revision  effective  as of April  1,  1998
included  numerous  new and revised  individual  and panel test codes  affecting
several laboratory specialties. The most significant changes again concern panel
codes. The 1998 CPT revision replaced the 19 pre-existing multichannel chemistry
profile codes with four  "clinically  relevant" test panels.  Effective April 1,
1998,  HCFA  directed  that  laboratories  could no longer bill Medicare for the
multichannel  chemistry  profiles,  but must use the new  "clinically  relevant"
panels  exclusively.  This  change  appears  to have had an  adverse  effect  on
revenues and  operating  costs of the clinical  laboratory  industry,  including
Unilab.  Further  changes  were made in the CPT  manual for 1999,  including  an
expansion  by  one  test  of  one of the  "clinically  relevant"  panels.  It is
currently unclear what affect, if any, this change will have on Unilab.

                 Additionally,  laboratory  pricing  practices  in general  have
received substantial  scrutiny from the Federal government.  Under its "LabScam"
inquiry,  the federal  government,  through numerous of its agencies,  including
DOJ, OIG, FBI and HCFA, has investigated the sales and billing practices of many
of  the  country's  independent  clinical   laboratories.   A  number  of  these
laboratories,  including Damon Clinical Labs,  Corning  Clinical Labs (now Quest
Diagnostics),  Laboratory  Corporation of America Holdings,  Physicians Clinical
Laboratory, Meris Laboratories and SmithKline Beecham Clinical Laboratories,  as
well as the Company,  have in recent  years  entered  into  agreements  with the
government to settle the  government's  allegations  of  wrongdoing,  in certain
cases for  hundreds  of millions of dollars.  Additionally,  the  government  is
pursuing criminal investigations and prosecutions of certain former employees of
lab  companies  in  connection  with  allegedly  fraudulent  sales  and  billing
practices.
<PAGE>

Drug Testing

                 Drug  testing for public  sector  employees is regulated by the
National  Institute  on Drug  Abuse  ("NIDA"),  which has  established  detailed
performance  and quality  standards that  laboratories  must meet in order to be
approved to perform drug testing on employees of the Federal government, Federal
government  contractors  and certain other  entities.  To the extent that Unilab
performs such testing, it must be certified as meeting NIDA standards.  Unilab's
Tarzana (Los Angeles) laboratory is NIDA-certified.

Occupational Safety

                 In addition to its  comprehensive  regulation  of safety in the
workplace,  the Federal Occupational Safety and Health  Administration  ("OSHA")
has adopted rules that  establish  extensive  requirements  related to workplace
safety for health care employers, including clinical laboratories, whose workers
may be exposed to bloodborne pathogens.  These regulations,  among other things,
require work practice  controls,  protective  clothing and equipment,  training,
medical follow-up, vaccinations and other measures designed to minimize exposure
to, and  transmission of,  bloodborne  pathogens such as HIV and the hepatitis B
virus. OSHA has also adopted rules establishing  safety requirements for the use
of chemicals as reagents and for other purposes.

                 At the state level,  California imposes occupational safety and
health  requirements  administered  by the  California  Occupational  Safety and
Health Administration.

Food and Drug Regulation

                 The Federal Food and Drug  Administration  ("FDA")  administers
laws that require  pre-marketing  approval for medical  devices,  including test
kits used in performing clinical laboratory procedures.  The FDA's pre-marketing
approval  requirements  can affect  the  availability  of test kits to  clinical
laboratories such as Unilab.

Controlled Substances

                 The use of controlled  substances in testing for drugs-of-abuse
is regulated by the Federal Drug Enforcement Administration.

Specimen Transportation

                 Regulations  of the  Department of  Transportation,  the Public
Health Service,  and the Postal Service apply to the  transportation of clinical
laboratory specimens.

<PAGE>

Radioimmunoassay Testing

                 Radioimmunoassay  testing,  which is  performed  by  certain of
Unilab's  laboratories,  is subject to  regulation  and licensing by the Federal
Nuclear Regulatory Commission.

Other Legislation

                 BBA `97  included  several  provisions  in  addition  to  those
discussed  above that could affect  clinical  laboratory  operations  and/or the
reimbursement  for  clinical  laboratory  services.   These  include  provisions
intended to expand the  penetration  of managed  care in the  Medicare  program;
mandates for Medicare to replace cost  reimbursement  with  prospective  payment
systems for hospital  outpatient  services,  home health care services,  skilled
nursing facility  services,  and others;  and an expansion of public health care
coverage  for certain  uninsured  children  not already  covered by Medicaid and
other pre-existing public health programs.

Environmental Compliance

                 As  with   all   clinical   laboratories,   each  of   Unilab's
laboratories  must comply with the  provisions  of numerous  federal,  state and
local statutes and  regulations  relating to public health and the  environment,
including: practices and procedures regarding the proper storage and labeling of
hazardous and toxic materials or other substances  associated with the operation
of clinical  laboratories and the proper management of medical waste,  hazardous
waste and  low-level  radioactive  waste  generated  by  operation  of  clinical
laboratories;  public  disclosure  requirements  regarding certain hazardous and
toxic  materials or other  substances  associated with the operation of clinical
laboratories;  employee  training  and  notification;  environmental  protection
requirements, such as standards relating to the discharge of pollutants into the
air, water and land; emergency response and remediation or cleanup in connection
with hazardous and toxic materials or other substances associated with operation
of  clinical  laboratories;   operation  and  remediation,   if  necessary,   of
underground  storage tank sites;  the removal,  encapsulation  or disturbance of
asbestos-containing  materials  when such  materials are in poor condition or in
the event of construction,  remodeling,  renovation or demolition of a building;
and other safety and health standards.

                 As  regulated  entities,  Unilab's  facilities  are  subject to
compliance  investigations  from numerous  governmental  agencies.  From time to
time, such  inspections have resulted in a notice of violation being issued to a
laboratory in connection with certain regulatory requirements,  e.g. labeling of
regulated substances.  In each such case, Unilab has responded to the inspecting
agency and the alleged  violation has been  addressed  without the imposition of
substantial  fines or  penalties.  Unilab  is not  aware of any past or  present
violation  which it believes  could have a material  adverse effect on Unilab or
its financial conditions or results of operations.

Competition

                 The independent clinical laboratory industry in the U.S. and in
California is highly  fragmented and is  characterized  by intense  competition.
According to HCFA, there are in the neighborhood of 4,500  independent  clinical
laboratories in the U.S.,  approximately  600 of which the Company  believes are
located in California.  These  independent  clinical  laboratories fall into two
separate  categories.  The  first  are  the  smaller,  local  laboratories  that
generally  offer fewer tests and  services and have less capital than the larger
laboratories. These laboratories seek to differentiate themselves by maintaining
a close working  relationship  with their physician  clients by providing a high
level of personal and localized services.
<PAGE>

                 The second group,  which includes  laboratories such as Unilab,
consists of the larger regional or national  laboratories that provide a broader
range of tests and services.  In California,  Unilab's three largest independent
clinical  laboratory  competitors are SmithKline Beecham Clinical  Laboratories,
Inc., Bio-Cypher Laboratories,  Inc., and Laboratory Corporation of America. The
Company  believes  that it currently  has  approximately  20% of the  California
independent  clinical  laboratory  testing  market,  roughly  twice  that of its
nearest competitor and, the Company believes,  approximately quadruple the share
of its second and third largest competitors.

                 Unilab  competes  primarily  on the basis of the quality of its
testing,  reporting  and  information  services,  its  reputation in the medical
community,  price, the introduction of new testing procedures and its ability to
perform a comprehensive  range of tests.  Competition for qualified personnel is
also  intensifying  as  statutory  requirements  for the  licensing of personnel
become more stringent.  Unilab believes that its extensive California facilities
provide easy access to its clients and quick reporting of results at competitive
prices.  It is  expected  that  Unilab will be able to provide the full range of
required  testing,  either through its own testing  capabilities or by utilizing
outside reference testing services contracted from third parties.

Employees

                 As of December 31, 1998,  Unilab employed  approximately  2,600
full- and  part-time  employees,  none of whom were under  union  contract.  The
Company believes that its relations with employees are good.

Seasonality

                 The Company's  operations  experience  seasonal  trends that it
believes affect all clinical  laboratory  companies.  Testing volume tends to be
lower during  holiday  seasons and  inclement  weather.  As a result,  because a
substantial  portion of the  Company's  expenses are  relatively  fixed over the
short  term,  Unilab's  operating  income as a  percentage  of revenue  tends to
decrease during the fourth quarter of each year, mainly due to the Christmas and
Thanksgiving holidays.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

         The Private  Securities  Litigation Reform Act of 1995 (the "Litigation
Reform  Act")  provides  a  "safe  harbor"  for  forward-looking  statements  to
encourage  companies to provide  prospective  information  about their companies
without  fear  of  litigation,  provided  those  statements  are  identified  as
forward-looking  and  are  accompanied  by  meaningful   cautionary   statements
identifying  important  factors  that  could  cause  actual  results  to  differ
materially  from those  projected  in the  statement.  Accordingly,  the Company
hereby identifies the following important factors that could cause the Company's
actual financial or operating results to differ materially from those projected,
forecast or estimated by the Company in forward-looking statements.

         The Company wishes to caution  investors that the following factors are
hereby  identified  as  potentially  important  factors  that  could  cause  the
Company's actual financial or operating  results to differ materially from those
projected,  forecast or estimated by the Company in  forward-looking  statements
contained in this Form 10-K.
<PAGE>

(a)       Adverse actions by governmental or other  third-party  payors,
          including   Medicare  and   Medicaid,   including   unilateral
          reduction  of fee  schedules  payable to the Company  (such as
          that proposed in President Clinton's fiscal year 2000 budget).

(b)       The  impact  of  the  Company's  compliance  with  Medicare  and 
          Medicaid  administrative  and  legal  policies,   including,
          specifically,  but without limitation,  the requirements  by Medicare
          carriers that physicians  provide  diagnosis (ICD-9)  codes  for
          certain  tests in order  for such  tests to be  deemed  "medically
          necessary"  and,  therefore, reimbursed;  the policy of HCFA to
          eliminate  Medicare  reimbursement for tests contained in certain
          commonly ordered automated  multichannel  chemistry  panels (CPT
          Series  80002-80019)  and the replacement of such panels in 1998 with
          four clinically relevant test groupings;  reimbursement based on
          demonstrable "medical necessity"; and, in connection with such
          "medical  necessity" issues and  compliance-related  recommendations
          made by governmental  representatives (including the  recommendations
          made in the OIG Model Compliance Plan for Clinical  Laboratories, 
          as amended), the Company's introduction during 1998 of a new
          requisition form for ordering chemistry tests.

(c)       Adverse implications of the Company's introduction of a new
          requisition form to meet the requirements set forth in (b) above.

(d)       Impact of  changes  in payor  mix,  including  the shift  from
          traditional,   fee-for-service   medicine  to  managed   care,
          including the increased shift of MediCal  testing  business to
          managed care.

(e)       Failure to properly contain costs and expenses.

(f)       Failure to obtain new or retain existing customers at profitable
          pricing.

(g)       Adverse results from any new governmental  investigations,  or
          liability from acquired  companies that have had  governmental
          investigations,  including in particular  significant monetary
          damages  and/or  exclusion  from  the  Medicare  and  Medicaid
          programs and/or other significant litigation.

(h)       Computer or other system  failures  that affect the ability of
          the Company to perform tests,  report test results or properly
          bill customers, including the Year 2000 issue.

(i)       Inability to obtain professional  liability insurance coverage or a
          material increase in premiums for such coverage.

(j)       Denial of CLIA  certification or other licensure of any of the
          Company's  clinical  laboratories  under  CLIA,  by  HCFA  for
          Medicare and  Medicaid  programs or other  federal,  state and
          local agencies.

Item 2.          Properties

                 Unilab's  corporate  headquarters are located in leased offices
at 18448 Oxnard  Street,  Tarzana,  California  91356.  Unilab's  major regional
laboratories  are  located in the  following  metropolitan  areas:  Los  Angeles
(Tarzana), California; San Jose, California; and Sacramento, California.
<PAGE>

                 Unilab leases its  laboratory  facilities  and PSCs. All of the
major  laboratory  facilities  have been built or  improved  for the  purpose of
providing  clinical  laboratory  testing  services.  The  Company  believes  its
facilities are suitable,  adequate and have sufficient  production  capacity for
its operations as currently conducted and as anticipated to be conducted. Unilab
believes  that if it were to lose the lease on any of its  facilities,  it could
find alternate space at competitive  market rates and relocate its operations to
such new locations.

Item 3.          Legal Proceedings

                 Unilab is a party to various legal  proceedings  arising in the
ordinary  course of its  business.  Although the ultimate  disposition  of these
proceedings  is not  determinable,  management  does not  believe  that  adverse
determinations  in any or all of such  proceedings  will have a material adverse
effect upon the  financial  condition,  liquidity  or results of  operations  of
Unilab.

Department of Justice Settlement

                 In 1991, the DOJ contacted  Unilab  concerning an investigation
of certain of its sales, marketing,  pricing and billing practices. During 1993,
Unilab learned that a "qui tam" complaint had been filed approximately two years
earlier by a former employee.

                 A qui tam action, under the Federal "whistleblower" statute, is
a private  action  brought on behalf of the U.S.  government in connection  with
claims for payments submitted to the U.S. The private individual(s) bringing the
qui tam action  may be  entitled  to 15% to 30% of any  amounts  recovered  as a
consequence  of the qui tam action.  By law, the DOJ is required to  investigate
the matters raised by the qui tam complaint to determine  whether to "intervene"
(i.e.,  pursue the action  itself) or to permit the private  plaintiff to pursue
the action.

                 In  September  1993,  Unilab  entered into  settlements,  which
included  Corning  with  regard to its  subsidiary,  MetPath,  pursuant to which
Unilab  made  payments  to the DOJ (the  "DOJ  Settlement")  and to the State of
California (the "California  Settlement" and,  together with the DOJ Settlement,
the "Settlements") to settle certain civil claims relating to the investigation.
Unilab's  portion of the  Settlements  was  approximately  $3.0  million,  which
included  approximately  $2.2 million of the DOJ  Settlement and the entire $0.5
million amount of the California Settlement.

                 By their  terms,  the  Settlements  reserved  the rights of the
government agencies involved to pursue criminal  prosecutions in connection with
certain  related  claims.  Criminal  convictions  in these  matters  could  have
resulted in mandatory  exclusion  of the Company from  Medicare and state health
programs,  including Medicaid.  In May 1995, the Company was informed by the DOJ
that its criminal investigation  concerning the allegations at issue in the 1993
investigation and in the Settlements had been closed without prosecution.

                 The  Settlements  did not constitute an admission of wrongdoing
with respect to any issue of law or fact  arising from the civil action  brought
on behalf of the United States, that gave rise to the DOJ investigation. The DOJ
Settlement  addressed the U.S.  government's  contention  that Unilab  submitted
improper  Medicare claims for unnecessary blood tests with respect to five tests
(HDL, LDL, TIBC, PBG and serum ferritin) offered in conjunction with basic blood
chemistry   profiles.   The  California   Settlement   addressed  the  State  of
California's contention that improper MediCal claims were submitted with respect
to the same five tests.
<PAGE>

                 The  government's  allegations  involved a series of laboratory
tests  conducted  at the  time  on a  "sequential  multiple  analysis  computer"
("SMAC") for which Medicare reimbursed  laboratories on a flat fee basis for any
19 or more blood chemistry tests. The government alleged that some or all of the
five tests that were the subject of the  investigation  were added  routinely to
the SMAC for a "nominal" additional price or as part of annual  across-the-board
price increases to the physicians,  while the fact that Medicare would be billed
separately for each test at retail prices often was not revealed to the doctors.
The  government  contended  that as a result of this  marketing  approach,  some
doctors  ordered  blood  chemistry  profiles  (which  covered  the SMAC plus the
additional  tests)  even if they needed only the SMAC,  not  realizing  that the
additional tests were being billed to Medicare.

                 Unilab  historically  has made  available  to its clients  test
profiles  which provide the choice of  incorporating  as few or as many of these
additional tests in the basic blood chemistry  profile as its  physician-clients
feel appropriate for a full diagnostic evaluation.  Notwithstanding such policy,
the  government   contended  that  it  was  not  made   sufficiently   clear  to
physician-clients  the financial  consequences to the Medicare  program of their
choice in ordering such tests as "add-ons" to the basic blood chemistry profile,
thereby  resulting in physicians'  ordering certain of these tests, and Medicare
or MediCal,  as the case may be, being billed for such tests, when not medically
necessary.

                 The  government  did not question the quality,  reliability  or
validity  of any tests or test  results.  The tests  for HDL  cholesterol  (High
Density  Lipoprotein,  or "good"  cholesterol)  and LDL cholesterol (Low Density
Lipoprotein,   or  "bad"   cholesterol)  are  classic   established   diagnostic
measurements used in assessing the risk for cardiovascular  disease. TIBC (Total
Iron Binding  Capacity) and serum  ferritin (a test which Unilab  offered,  when
requested  by the  physician-client,  as a reflex  when  indicated  by  abnormal
results in other panel tests) are useful  indicators of iron  deficiency or iron
overload.  PBG (Protein Bound  Glucose),  used in  conjunction  with the glucose
test, is a test that aids in the diagnosis of diabetes,  a disease which affects
almost 10% of the general population, and can have severe detrimental effects if
not promptly  identified and treated.  While the Settlements did not require any
specific  changes to policies or practices  with regard to these  tests,  Unilab
nevertheless has re-emphasized to its clients the financial consequences to them
and to third party payors of their laboratory test choices.

CHAMPUS Settlement

                 In February  1994, as part of a joint  settlement  with MetPath
related to the same activities  that were the subject of the DOJ  Settlement,  a
payment of $1.1 million was made by MetPath to the Office of Civilian Health and
Medical Program of the Uniformed Services ("CHAMPUS") to settle all civil claims
of CHAMPUS  against  MetPath and Unilab with respect to the same issues and same
five  tests  that  were  the  subject  of  the  DOJ  Settlement  and  California
Settlement. Unilab's portion of such payment was approximately $25,000, with the
remainder  being paid by  MetPath.  As with the DOJ  Settlement  and  California
Settlement, the CHAMPUS settlement included a reservation of rights with respect
to certain criminal  prosecutions  which could result in mandatory  exclusion of
the  Company  from  Medicare  and State  health  programs  should  any  criminal
convictions  result.  The Champus  settlement,  however,  does not constitute an
admission by Unilab of any  wrongdoing  with respect to any issue of law or fact
arising from the civil action brought by the U.S.  government  that gave rise to
CHAMPUS'  inquiry.  The  Company was  informed  in May 1995 of the  government's
closure of its criminal inquiry without prosecution.
<PAGE>

HHS Subpoenas

                 In August 1993, Unilab received a subpoena from HHS in
connection with an investigation and internal review relating to the possible
submission of false or improper claims under the Medicare and Medicaid programs.
The HHS subpoena required production of a broad range of documents,  including
those relating to Unilab's  selling,  pricing and billing practices.  The HHS
subpoena concerned fourteen tests,  including the five tests that  were  the
subject  of the  civil  claims  Settlements.  Unilab  completed production  of
these  documents in February  1994.  Other  independent  clinical laboratories
received  similar  requests  for  production  as part of what  the Company
believes  to be the  industry-wide  LabScam investigation of certain practices
in the clinical laboratory industry. In July 1994, Unilab was informed that
jurisdiction  for this  investigation  had been  transferred to the United 
States  Attorney's  Office in Newark,  New Jersey.  In May 1995, the Company was
informed by the DOJ that its criminal  investigation  concerning the allegations
at issue in the 1993 HHS subpoena and in the Settlements had been closed without
prosecution.

                 In August  1995,  the  Company  received  a  subpoena  from HHS
requesting  certain  information  with respect to the  Company's  marketing  and
billing  practices  for a CBC, a  diagnostic  test which was not included in any
prior  subpoena  or the  subject  of any of  the  Settlements.  Unilab  promptly
completed  production  of all  documents  in  response to the HHS  subpoena  and
cooperated fully in the HHS investigation. The Company reached an agreement with
the Federal  government  in September  1996 to pay $4.0 million to conclude this
investigation.  The Company has one remaining payment to the U.S.  Government of
approximately  $324,000  (excluding  interest)  due on  September  1,  1999.  In
addition,  in October  1996 the  Company  paid the  California  MediCal  program
approximately  $160,000 to settle all their claims regarding the same issue. The
settlement  did not  constitute  an admission by the Company with respect to any
allegation,  issue of law or fact arising from the investigation and the Company
received  a full  civil  and  administrative  release  from  all  claims  by the
government  with respect to these  billings  through the date of the  settlement
agreement.

Item 4.          Submission Of Matters to a Vote of Security Holders

                 No matter was  submitted to a vote of security  holders  during
the fourth quarter of the year covered by this report.

Executive Officers and Key Management Personnel of the Registrant

                 The  following  table  sets  forth  certain  information  as of
February 12, 1999 regarding the directors, executive officers and key management
personnel of Unilab.

Name                         Age   Position

David C. Weavil..............48   Chairman of the Board, President and
                                  Chief Executive Officer
Haywood Cochrane.............50   Director
Kirby L. Cramer..............62   Director
William J. Gedale............57   Director
Richard A. Michaelson........47   Director
Gabriel Balthazar Thomas.....57   Director
Mark L. Bibi.................40   Executive Vice President, Secretary and
                                  General Counsel
Ian J. Brotchie..............59   Executive Vice President and Division
                                  President, Unilab Northern California
C. Michael Hanbury...........35   Senior Vice President, Chief Scientific
                                  Officer
R. Jeffrey Lanzolatta........46   Executive Vice President and Division
                                  President, Unilab Southern California
Brian D. Urban...............36   Executive Vice President, Chief Financial
                                  Officer and Treasurer
Paul T. Wertlake.............63   Vice President, Chief Medical Officer
<PAGE>

                  David  C.  Weavil  has  been  Chairman,  President  and  Chief
Executive Officer of the Company since January 1997. He served as Executive Vice
President of Laboratory  Corporation of America  Holdings  ("LabCorp")  from the
April 1995 merger of Roche  Biomedical  Laboratories,  Inc. ("RBL") and National
Health Laboratories,  Inc. ("NHL"),  which created LabCorp, until December 1996.
He was  additionally  appointed Chief Operating  Officer of LabCorp in September
1995. Previously, Mr. Weavil served as Senior Vice President and Chief Operating
Officer of RBL from 1989 to April 1995.  From 1988 through 1989,  Mr. Weavil was
Regional Senior Vice  President-Mid-Atlantic of RBL. Prior to that, he served as
Senior Vice President and Chief Financial Officer of RBL from 1982 to 1988.

                 Haywood  Cochrane  has been a director  of Unilab  since May
1997.  He has  served as  President  and Chief  Executive Officer of Meridian 
Corporate  Healthcare since February 1997. He was Executive Vice President, 
Chief Financial Officer and Treasurer of LabCorp  from April 1995 to November
1996 and a  consultant  to LabCorp  from  November  1996 to February  1997.  Mr.
Cochrane was President,  Chief Executive Officer and a Director of Allied
Clinical  Laboratories,  Inc.  ("Allied") from its formation in 1989 until its
acquisition by NHL in June 1994. Mr. Cochrane serves as a Director of JDN
Realty Corp.,  Pathology  Corporation of America,  Sonus Corporation and
Meridian Corporate Healthcare.

                 Kirby L. Cramer has been a member of Unilab's Board of
Directors since March 1990.  Mr. Cramer is the Chairman Emeritus of the Board of
Directors of Hazleton Laboratories Corporation, a biological research company. 
Mr. Cramer served as Chief Executive Officer of Hazleton Laboratories Corp.
from 1968 through 1987, when it was sold to Corning, and as Chairman of the
Board of Directors of Hazleton Laboratories Corp. from 1987 through 1991.  Mr.
Cramer is now a professional director and currently serves as a director of
Immunex Corp., Commerce Bancorporation, Landec Corporation, Sonosite, Inc.,
Northwestern Trust Company, and Ragen MacKenzie Group.

                 William  J.  Gedale  has been a  member  of  Unilab's  Board of
Directors  since  September  1997.  He is currently  President  and CEO of Mount
Everest  Advisors,  LLC, an investment  counseling and  management  firm. He was
President  of Sheer  Asset  Management  from  January  1997 to  August  1997 and
President of Mount Everest Advisors,  LLC from July 1996 to July 1997. From June
1995 to June 1996 he was a Managing  Director  of John W.  Bristol.  Previously,
from 1989 to 1994 he served as President and CEO of General American  Investors,
a New York Stock Exchange closed-end  investment company. He currently serves as
a director  of  Bioreliance  Corporation,  a  biological  pre-clinical  contract
research  organization.  He previously served as a director of Allied (until its
merger  with NHL) and of U.S.  Home  Health  Care.  He is a director of New York
Hospital  Departmental  Associates and is a trustee of the Neuroscience Research
Foundation.

<PAGE>


                 Richard A.  Michaelson  has been a member of Unilab's  Board of
Directors since  September  1997. He has been a principal of Focused  Healthcare
Partners  Ltd., a healthcare  investment  entity,  since January 1, 1998. He was
Senior Vice President of Unilab from  September  1997 to December  1997,  Senior
Vice  President-Finance,  Treasurer and Chief  Financial  Officer of Unilab from
February 1994 to September 1997 and Vice President-Finance,  Treasurer and Chief
Financial  Officer of Unilab from November 1993 to February 1994. Mr. Michaelson
also  served  as Vice  President  of  Unilab  beginning  in  October  1990.  Mr.
Michaelson  joined MetPath (the predecessor to Quest  Diagnostics  Inc.) in 1980
and served as Vice  President of MetPath from 1983 and  Treasurer of Corning Lab
Services Inc.  from 1990 through,  in each case,  September  1992.  From 1977 to
1980, Mr. Michaelson held various financial positions at International  Business
Machines Corp.

                 Gabriel Balthazar Thomas has been a member of Unilab's Board of
Directors  since its  formation in November  1988. He was a director of Unilab's
predecessor entity from December 1986 until November 1988. Mr. Thomas has been a
consultant in international  marketing and management since 1971 and served as a
consultant to Unilabs Holdings S.A., a Swiss corporation and clinical laboratory
holding  company,  from October 1987 to May 1992.  Mr.  Thomas was  President of
Unilab  from 1989  through  January  1992.  Mr.  Thomas is a director  of Decora
Industries, Inc.

                 Mark L. Bibi has been Executive Vice  President,  Secretary and
General Counsel of Unilab since May 1998. He served as Vice President, Secretary
and General Counsel from June 1993 through April 1998. Mr. Bibi was with the New
York City law firm of  Schulte  Roth & Zabel  from May 1989  through  June 1993.
Prior  thereto,  he was with the law firm of Sullivan & Cromwell,  New York, New
York, from August 1985 to April 1989.

                 Ian J. Brotchie has been Executive Vice President and Division
President of Unilab  Northern  California  since May 1998.  He served as
Division  President of Unilab  Northern  California  from August 1997 to April
1998.  He was Division  President of Unilab San Jose from February 1994 to
August 1997.  He was President of Associated  Laboratories,  Inc. from November
1991 to September 1995. Mr.  Brotchie  served as President of Lab Concepts Inc.
from February 1990 to November 1991.  Prior thereto,  Mr. Brotchie served as
Business Development Director with SmithKline Bio-Science Laboratories in
Dublin, California from January 1989 to February 1990.

                  C. Michael  Hanbury,  Ph.D.,  Senior Vice  President and Chief
Scientific Officer, has been with the Company since April 1998. Prior to joining
Unilab,  from April 1996 to April 1998, Dr. Hanbury managed  Regulatory  Affairs
for Roche Diagnostics,  Inc., an international  diagnostic company  representing
their  interests  to the US  Food  and  Drug  Administration  for a  variety  of
molecular  diagnostic tests for infectious disease.  Prior thereto,  Dr. Hanbury
served from  September 1994 to March 1996 as National  Technical  Director of an
international  clinical  diagnostic  manufacturer  and as a clinical chemist for
Roche  Biomedical  Labs from  April 1988 to  September  1994.  Dr.  Hanbury is a
registered  clinical  pathologist  with over 14 years  experience  in laboratory
services and in vitro diagnostic manufacturing.

<PAGE>

                 R. Jeffrey  Lanzolatta  has been  Executive  Vice President and
Division  President of Unilab Southern  California  since May 1998. He served as
Division  President of Unilab Southern  California from July 1996 to April 1998.
He was Senior Vice President,  Sales and Marketing of Unilab Southern California
from  December  1994 to July  1996.  He  served  as Vice  President,  Sales  and
Marketing  for Unilab from  November  1993 to December  1994.  He served as Vice
President,  Sales and  Marketing of MetWest from January 1993 to November  1993.
Prior  thereto Mr.  Lanzolatta  served as Regional  Vice  President  and General
Manager of MetWest's Southern  California  operations from July 1990 to December
1992. From April 1990 to June 1990, Mr.  Lanzolatta  served as Director of Sales
and Marketing for MetWest's Northern California  operations.  Mr. Lanzolatta was
Vice President,  Business  Development of International  Clinical  Laboratories'
Western Operations from July 1985 through January 1989.

                 Brian  D.  Urban  has  been  Executive  Vice  President,  Chief
Financial  Officer and  Treasurer  of Unilab  since May 1998.  He served as Vice
President,  Chief  Financial  Officer and Treasurer from September 1997 to April
1998.  He was Vice  President  and  Controller  of Unilab from  November 1993 to
September 1997. Mr. Urban served as Assistant  Controller of Unilab from October
1992 to November 1993. He was Manager of External Reporting of MetPath from July
1992 to October 1992. Prior thereto, Mr. Urban was senior audit manager at Price
Waterhouse where he worked from November 1986 to July 1992.

                 Paul T. Wertlake,  M.D., has been Vice  President and Chief
Medical  Officer of the Company since January 1994.  Since October 1989, Dr.
Wertlake has served as the Senior Medical Officer for Southern  California and
Medical  Director of Unilab's  Tarzana Laboratory.  Prior thereto, Dr. Wertlake
has served in the academic, hospital and reference laboratory sectors.


                                     PART II

Item 5.          Market for the Registrant's Common Equity and Related
                 Stockholder Matters

                 Market  information  for  the  Registrant's   common  stock  is
contained  in Note 14  (Unaudited  Quarterly  Financial  Data)  of the  Notes to
Consolidated Financial Statements at page 30 of the Company's 1998 Annual Report
to shareholders, and such information is incorporated herein by reference.

                 The  Company's  common  stock  trades  on  the  American  Stock
Exchange under the symbol "ULB". As of February 12, 1999,  there were 40,729,293
shares of Common Stock outstanding held by 2,940 holders of record.

                 The Company has not paid any cash dividends with respect to its
common stock and does not expect to do so in the foreseeable future.


<PAGE>


Item 6.          Selected Financial Data

                 The selected  financial  data for each of the five years in the
period ended December 31, 1998 is as follows:

<TABLE>
(amounts in thousands, except per share data)
----------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended December 31,               1998          1997           1996         1995         1994
----------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>            <C>          <C>          <C>

Revenue                                    $217,370      $214,001       $205,217     $189,042     $151,820
----------------------------------------------------------------------------------------------------------
Legal, acquisition and restructuring
related charges                                ----          ----         70,595        4,400        1,282
----------------------------------------------------------------------------------------------------------
Operating income (loss)                      24,241        14,604       (72,842)        4,539        9,137
----------------------------------------------------------------------------------------------------------
Loss on sale of equity investment/             ----          ----          4,529       36,499         ----
promissory note
----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes
and extraordinary item                       10,703           536       (89,493)     (40,043)        4,515
----------------------------------------------------------------------------------------------------------
Income tax provision                           ----          ----           ----         ----         ----
----------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item      10,703           536       (89,493)     (40,043)        4,515
----------------------------------------------------------------------------------------------------------
Extraordinary item                             ----          ----          3,451        1,732         ----
----------------------------------------------------------------------------------------------------------
Net income (loss)                            10,703           536       (92,944)     (41,775)        4,515
----------------------------------------------------------------------------------------------------------
Preferred stock dividends                       131           138            144          144          144
----------------------------------------------------------------------------------------------------------
Net income (loss) available to
common shareholders                          10,572           398       (93,088)     (41,919)        4,371
----------------------------------------------------------------------------------------------------------
Basic net income (loss) before extraordinary
item per common share                          0.26          0.01         (2.43)       (1.12)         0.12
----------------------------------------------------------------------------------------------------------
Basic net income (loss) per common share       0.26          0.01         (2.53)       (1.17)         0.12
----------------------------------------------------------------------------------------------------------
Weighted average shares outstanding          40,665        39,926         36,831       35,918       34,904
----------------------------------------------------------------------------------------------------------
At December 31,
----------------------------------------------------------------------------------------------------------
Total assets                                142,460       118,700        125,919      196,174      196,407
----------------------------------------------------------------------------------------------------------
Long-term debt, net of current portion      137,170       124,285        126,120       87,207       67,660
----------------------------------------------------------------------------------------------------------
Shareholders' equity (deficit)             (21,367)      (32,283)       (34,688)       56,330       95,334
----------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>


Note:     The variations in the year-to-year  comparisons are due primarily to
          the acquisition of substantially  all of the assets of Meris
          Laboratories,  Inc.,  effective November 5, 1998, the acquisition of
          MLN Holding Acquisition Co., effective May 16, 1995 and the
          acquisition of Premier Laboratory Services,  Inc.,  effective
          January 24, 1994. In addition,  see Notes 4, 5 and 7 of the  Notes to
          Consolidated  Financial  Statements  at page __ of the  Company's
          1998  Annual  Report  to shareholders  for a more detailed discussion
          of the legal and acquisition related charges, restructuring charges
          and loss on sale of promissory  note recorded in 1996, and such 
          information is incorporated  herein by reference.  The $4.4 million 
          legal  charge  recorded  in 1995  relates  to a  settlement and legal
          fees paid in  connection  with a lawsuit regarding the company's 
          sales,  marketing and distribution of a product designed for use in
          connection with pap smears. The $36.5 loss on the sale of equity 
          investment  recorded in 1995  relates to the sale of a 40% equity 
          investment  the  Company had in a European laboratory  company.  The
          $1.3 million acquisition related charges recorded in 1994 relates to
          the closure of Unilab patient service centers and related  facilities
          and reduction in the Unilab workforce  incurred in connection with
          the Premier acquisition.


Item 7.        Management's Discussion and Analysis of Financial Condition and
               Results of Operations

               "Management's  Discussion and Analysis" at pages 12 through 15
of the Company's 1998 Annual Report to  shareholders is incorporated herein by
reference.

Item 8.         Financial Statements and Supplementary Data

                The Company's consolidated financial statements,  together with
the report  thereon of Arthur  Andersen  LLP ("AA")  dated  February  12,  1999,
appearing  on pages  16  through  31 of the  Company's  1998  Annual  Report  to
shareholders,  are incorporated  herein by reference.  With the exception of the
aforementioned  information in this Item 8 and the  information  incorporated by
reference in Items 5, 6 and 7, the 1997 Annual Report to  shareholders is not to
be deemed filed as part of this Form 10-K Annual Report.

Item 9.         Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure

                None.

<PAGE>
                                    PART III

Item 10.         Directors and Executive Officers of the Registrant

                 Information  relating to  directors of the  Registrant  will be
contained in a definitive  Proxy  Statement  involving the election of directors
which the  Registrant  will file with the  Securities  and  Exchange  Commission
pursuant to Regulation  14A not later than 120 days after December 31, 1998, and
such information is incorporated herein by reference.  Certain other information
relating to Executive  Officers and Key  Management  Personnel of the Registrant
appears at pages 23 to 26 of this Form 10-K Annual Report.

Item 11.         Executive Compensation

                 Information   relating  to  executive   compensation   will  be
contained in the Proxy  Statement  referred to above in "Item 10.  Directors and
Executive  Officers of the  Registrant",  and such  information is  incorporated
herein by reference.

Item 12.         Security Ownership of Certain Beneficial Owners and Management
                 and Directors

                 Information   relating   to  security   ownership   of  certain
beneficial  owners and  management  and directors will be contained in the Proxy
Statement referred to above in "Item 10. Directors and Executive Officers of the
Registrant", and such information is incorporated herein by reference.

Item 13.         Certain Relationships and Transactions with Related Persons

                 Information relating to certain  relationships and transactions
with related persons will be contained in the Proxy Statement  referred to above
in "Item 10.  Directors  and  Executive  Officers of the  Registrant",  and such
information is incorporated herein by reference.


<PAGE>

                                     PART IV

Item 14.       Exhibits, Financial Statements, Financial Statement Schedules
               and Reports on Form 8-K
                                                      Reference
                                           ----------------------------------
                                              Form 10-K      Annual Report to
                                             Annual Report     Shareholders

                                               Page                Page
(a)(1) Index to Financial Statements:
Incorporated by reference to the 1998
Annual Report to shareholders:

Statements of Operations for the
years ended December 31, 1998,
1997, 1996                                      ---                  16

Balance Sheets at
December 31, 1998 and 1997                      ---                  17

Statements of Shareholders'
Equity (Deficit) for the years ended
December 31, 1998, 1997, 1996                   ---                  18

Statements of Cash Flows for
the years ended December 31,
1998, 1997, 1996                                ---                  20

Notes to Financial Statements                   ---                  21

Report of Independent Public Accountants        ---                  31

(2) Index to Financial Statement Schedule:

Report of Independent Public Accountants
on Financial Statement Schedule                 33                   ---

II - Valuation and Qualifying
Accounts for the years ended
December 31, 1998, 1997 and 1996                34                   ---

The  financial  statement  schedule  should  be read  in  conjunction  with  the
financial  statements  incorporated  by  reference  in Item 8 of this  Form 10-K
Annual Report. Schedules other than those listed above have been omitted because
of the absence of the  conditions  under which they are  required or because the
information required is shown in the financial statements or the notes thereto.


<PAGE>

(3)          Exhibits required to be filed by Item 601 of Regulation S-K.


             The  information  called for by this paragraph is  incorporated
             herein by reference to the Exhibit Index of this report.

(b)          Reports on Form 8-K

             The following current Reports on Form 8-K were filed during the
             fourth quarter of 1998.

             Current Report on Form 8-K,  dated October 29, 1998,  regarding
             Items 5 and 7.

             Current Report on Form 8-K, dated November 16, 1998,  regarding
             Items 5 and 7.

             Additionally, the Company filed the following Current Report on
             Form 8-K during the first quarter of 1999:

             Amendment to Current  Report on Form 8-K(A),  dated January 18,
             1999, regarding Items 2 and 7.


<PAGE>


                                    SIGNATURE


Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  Unilab
Corporation  has duly  caused this  amendment  to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated:     3/24/99                    UNILAB CORPORATION
                    


                                      By:       /s/    Brian D. Urban      
                                      Name:    Brian D. Urban
                                      Title:   Executive Vice President,
                                               Chief Financial Officer and
                                               Treasurer


<PAGE>



              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES



To Unilab Corporation

We have audited in accordance with generally  accepted auditing  standards,  the
balance sheets as of December 31, 1998 and 1997,  and the related  statements of
operations,  shareholders' equity (deficit) and cash flows for each of the three
years in the period  ended  December 31, 1998  included in Unilab  Corporation's
annual report to  shareholders  incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 12, 1999. Our audits were made for
the purpose of forming an opinion on the basic financial  statements  taken as a
whole. The schedule listed in Item 14a(2) for the years ended December 31, 1998,
1997 and 1996 is the responsibility of the Company's management and is presented
for purposes of complying with the Securities  and Exchange  Commission's  rules
and is not  part of the  basic  financial  statements.  This  schedule  has been
subjected  to the  auditing  procedures  applied  in  the  audits  of the  basic
financial statements and, in our opinion, fairly states in all material respects
the  financial  data  required to be set forth  therein in relation to the basic
financial statements taken as a whole.





ARTHUR ANDERSEN LLP
Los Angeles, California
February 12, 1999


<PAGE>
<TABLE>

                                                                Schedule II


                       UNILAB CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                             (Amounts in thousands)
<CAPTION>
                                      Balance at       Charged to                       Balance
                                       Beginning        Costs and                       End of
                                       of Period        Expenses        Deductions      Period

<S>                                     <C>             <C>            <C>             <C>
FOR THE YEAR ENDED
DECEMBER 31, 1996;
Allowance for doubtful accounts          $ 8,454         $14,180        $(13,296)       $9,338

FOR THE YEAR ENDED
DECEMBER 31, 1997;
Allowance for doubtful accounts          $ 9,338         $15,663        $(15,182)       $9,819

FOR THE YEAR ENDED
DECEMBER 31, 1998;
Allowance for doubtful accounts          $ 9,819         $15,662        $(14,668)      $10,813
</TABLE>


<PAGE>


                                      Index

Exhibit No.                       Description

 2.1      Asset Purchase  Agreement,  dated as of September 16, 1998, by and
          between Unilab  Corporation,  as Buyer, and Meris Laboratories,  Inc.
          Debtor and  Debtor-in-Possession,  as Seller  (Incorporated by
          reference to Exhibit 2.1 to the Company's Amendment on Form 8-K(A)
          dated January 18, 1999).

 2.2      $14 million  Convertible  Subordinated  Note, dated November 5, 1998,
          payable by Unilab Corporation  to Meris  Laboratories,  Inc. 
          (Incorporated by reference to Exhibit 2.2 to the Company's Amendment
          on Form 8-K(A) dated January 18, 1999).

 2.3      Registration Rights Agreement, dated November 5, 1998, by and between
          Unilab Corporation and Meris Laboratories,  Inc.  (Incorporated  by
          reference to Exhibit 2.3 to the Company's  Amendment on Form
          8-K(A) dated January 18, 1999).

 3.1      Amended and Restated  Certificate of  Incorporation  of the Company 
          (Incorporated  by Reference to Exhibit 3.1 to the Company's
          Registration Statement on Form S-1, dated November 30, 1993).

 3.2      Amendment to the  Company's  Certificate  of  Incorporation,  dated
          May 14, 1996  (Incorporated  by Reference to Exhibit 3.1 to the
          Company's  Quarterly Report on Form 10-Q for the Quarter ended June
          30, 1996, dated August 6, 1996).

 3.3      Second  Amended  and  Restated  By-laws  of  the  Company, as amended 
          as of  February  27,  1996 (Incorporated  by Reference to Exhibit 3.1
          to the Company's  Current Report on Form 8-K dated March 19, 1996).

 4.1      Rights  Agreement dated as of February 25, 1994,  between the Company
          and Mellon  Securities  Trust Company as Rights Agent  (Incorporated
          by Reference to Exhibit 4.1 to the Company's  Current Report
          on Form 8-K dated March 1, 1994).

4.2       Amended and Restated  Rights  Agreement dated as of March 15, 1996
          between the Company and Chemical Mellon  Shareholder  Services as
          Rights  Agent  (Incorporated  by  Reference  to Exhibit 4.2 to the
          Company's Amendment No. 1 to Registration Statement on Form 8-A dated
          March 18, 1996).

4.3       Indenture, dated as of March 14, 1996, with respect to the 11% Senior
          Notes due 2006,  between the Company and Marine  Midland  Bank,  as
          Trustee  (Incorporated  by  reference to Exhibit 4.2 to the Company's
          Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996,
          dated May 1, 1996).
<PAGE>

10.1      Healthcare  Receivables  Purchase Agreement dated as of July 31, 1996
          between the Company and Daiwa  Healthco-2  LLC  (Incorporated  by
          Reference to Exhibit 10.1 to the Company's Quarterly Report on 10-Q
          for the Quarter ended September 30, 1996, dated November 4, 1996).

10.2      Consulting  Agreement,  dated as of  September  17,  1997,  between
          the  Company  and  Richard  A. Michaelson  (Incorporated by reference
          to Exhibit 10.15 to the Company's Annual Report on Form 10-K
          for the year ended December 31, 1997).

10.3      Amendment No. 1, dated as of September 17, 1997,  to the Stock Option
          Agreement  dated as of April 28,  1997,  between the Company and
          Richard A.  Michaelson  (Incorporated  by  reference to Exhibit
          10.15 to the Company's Annual Report on Form 10-K for the year ended
          December 31, 1997).

10.4      Amendment No. 1, dated as of September 17, 1997, to the Stock Option
          Agreement,  dated as of April 28, 1997, between the Company and
          Richard A.  Michaelson  (Incorporated  by  reference to Exhibit
          10.15 to the Company's Annual Report on Form 10-K for the year ended
          December 31, 1997).

10.5      Amendment  No. 1, dated as of  September  17,  1997,  to the Stock 
          Option  Agreement,  dated as of February  27, 1996,  between the
          Company and Richard A.  Michaelson  (Incorporated  by reference to
          Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year
          ended December 31, 1997).

10.6      Amendment No. 1, dated as of September 17, 1997, to the Stock Option
          Agreement,  dated as of May 1, 1995, between the Company and Richard
          A. Michaelson  (Incorporated by Reference to Exhibit 10.19 to
          the Company's annual Report on form 10-K for the year ended
          December 31, 1997).

10.7      Amendment  No. 1, dated as of  September  17,  1997,  to the Stock
          Option  Agreement,  dated as of January 1, 1995, between the Company
          and Richard A.  Michaelson  (Incorporated  by  Reference  to Exhibit
          10.20 to the Company's Annual Report on Form 10-K for the year ended
          December 31, 1997).

10.8      Amendment  No. 1, dated as of  September  17,  1997,  to the Stock
          Option  Agreement,  dated as of February  25, 1994,  between the
          Company and Richard A.  Michaelson  (Incorporated  by Reference to
          Exhibit 10.21 to the company's Annual Report on form 10-K for the year
          ended December 31, 1997).
<PAGE>

10.9      Amendment  No. 1, dated as of  September  17,  1997,  to the Stock 
          Option  Agreement,  dated as of October 20,  1992,  between the
          Company and Richard A.  Michaelson  (Incorporated  by  Reference to
          Exhibit 10.22 to the Company's Annual Report on form 10-K for the
          year ended December 31, 1997).

10.10     Amendment No. 1, dated as of September 17, 1997, to the  Restricted
          Stock  Agreement,  dated as of  May 1, 1995,  between the Company and
          Richard A. Michaelson  (Incorporated  by Reference to Exhibit
          10.23 to the Company's Annual Report on Form 10-K for the year ended
          December 31, 1997).

10.11     Employment  Agreement,  dated as of January  20,  1997  between 
          David C.  Weavil  and the  Company (Incorporated  by Reference to
          Exhibit  10.12 to the Company's  Annual  Report on Form 10-K,  dated
          March 21, 1997).

10.12     Stock  Option  Agreement,  dated as of January  20,  1997  between
          David C. Weavil and the Company (Incorporated by Reference to Exhibit
          10.13 to the Company's  Annual  Report on Form 10-K,  dated
          March 21, 1997).

10.13     Promissory  Note,  dated  January 20,  1997, payable  by David C.
          Weavil to the  Company  (Incorporated  by Reference to Exhibit 10.14
          to the Company's Annual Report on Form 10-K, dated March 21, 1997).

10.14     Secured  Promissory  Note,  dated  January  20,  1997,  payable by
          David C.  Weavil to the  Company (Incorporated  by Reference to
          Exhibit  10.15 to the Company's  Annual  Report on Form 10-K,  dated
          March 21, 1997).

10.15     Letter  Agreement,  dated  January 20, 1997,  between  Andrew  H. 
          Baker  and the  Company (Incorporated  by Reference to Exhibit 10.17
          to the Company's Annual Report on Form 10-K, dated March 21, 1997).

10.16     Restricted Stock Agreement,  dated as of January 20, 1997,  between
          Andrew H. Baker and the Company (Incorporated  by  Reference to
          Exhibit  10.18 to the  Company's  Annual  Report on Form 10-K dated
          March 21, 1997).

10.17     Amendment  No. 1, dated as of January 20, 1997, to Stock Option 
          Agreement  dated as of October 20, 1992,  between Andrew H. Baker
          and the Company  (Incorporated  by Reference to Exhibit 10.19 to the
          Company's Annual Report on Form 10-K, dated March 21, 1997).

<PAGE>

10.18     Amendment  No. 1, dated as of January 20, 1997, to Stock Option 
          Agreement,  dated as of January 1, 1995,  between  Andrew H. Baker
          and the Company with respect to options to purchase  120,000 shares
          of Unilab Common Stock  (Incorporated  by Reference to Exhibit 10.20
          to the Company's Annual Report on Form 10-K, dated March 21, 1997).

10.19     Amendment  No. 1, dated as of January 20, 1997 to Stock  Option 
          Agreement,  dated as of January 1, 1995,  between Andrew H. Baker and
          the Company with respect to options to purchase 60,000 shares of
          Unilab Common Stock  (Incorporated  by Reference to Exhibit 10.21 to
          the Company's Annual Report on Form 10-K, dated March 21, 1997).

10.20     Amendment No. 1, dated as of January 20, 1997, to Stock Option
          Agreement,  dated as of February 27, 1996,  between Andrew H. Baker
          and the Company  (Incorporated  by Reference to Exhibit 10.22 to the
          Company's Annual Report on Form 10-K, dated March 21, 1997).

10.21     Non-Compete  Agreement,  dated as of January  20,  1997,  between 
          Andrew H. Baker and the  Company (Incorporated  by  Reference to
          Exhibit  10.23 to the  Company's  Annual  Report on Form 10-K dated
          March 21, 1997).

10.22     Consulting  Agreement,  dated as of  January  20,  1997,  between the 
          Company  and  Hartill  Ltd. (Incorporated  by Reference to Exhibit
          10.24 to the Company's  Annual  Report on Form 10-K,  dated
          March 21, 1997).

10.23     Form of Employee  Stock  Option  Agreement  (Incorporated  by
          Reference to Exhibit No. 10.5 to the Company's Form S-1 Registration
          Statement dated November 30, 1993).

10.24     Form of Key Management  Personnel  Employment  Agreement
          (Incorporated by Reference to Exhibit No. 10.5 to Amendment No. 1,
          dated December 23, 1993, to the Company's Form S-1 Registration
          Statement  dated November 30, 1993).

10.25     Settlement  Agreement,  dated  September  13, 1993,  by and among the
          United  States  Department of Justice,  the  Office of  Inspector 
          General of the United  States  Department  of Health and Human
          Services;  MetPath, a division of Corning Lab Services Inc; MetWest
          Inc.; the Company;  and C. Jack  Dowden (Incorporated by Reference to
          Exhibit No. 99.2 to the Company's  Current Report on Form 8-K
          dated September 13, 1993).

10.26     Settlement  Agreement,  dated September 22, 1993, by and among the
          State of California;  MetPath, a division of Corning Lab Services, 
          Inc.; MetWest Inc.; the Company and C. Jack Dowden (Incorporated
          by Reference to Exhibit No. 99.1 to the Company's  Current  Report on
          Form 8-K dated  September 27, 1993).
<PAGE>

10.27     Settlement  Agreement,  dated as of February 17, 1994, by and among
          the United States Department of Justice;  the Office of the Civilian
          Health and Medical Program of the Uniformed Services;  MetPath
          Inc; and the Company  (Incorporated by Reference to Exhibit 10.18 to
          the Company's Annual Report on Form 10-K dated March 30, 1994).

10.28     Settlement  Agreement,  dated  September 19, 1996,  among the Company,
          Corning Inc., the Office of Inspector  General of the  Department of
          Health and Human  Services,  the State of  California  and
          certain other  governmental  entities  (Incorporated  by Reference to
          Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
          Quarter Ended September 30, 1996, dated November 4, 1996).

10.29     Participation  Agreement,  dated as of November 7, 1996, by and
          between the Company and Donaldson, Lufkin and Jenrette Securities 
          Corporation  (Incorporated by Reference to Exhibit 10.33 to Annual
          Report on Form 10-K, dated March 21, 1997).

13.1      Selected portions of Annual Report to Shareholders

21.1      Subsidiaries of the Company

22.1      Proxy Statement, dated _____ __, 1999, for Annual Meeting of
          Stockholders held on June 17, 1999.

24.1      Power of Attorney of David C. Weavil

24.2      Power of Attorney of Haywood Cochrane

24.3      Power of Attorney of Kirby L. Cramer

24.4      Power of Attorney of William Gedale

24.5      Power of Attorney of Richard Michaelson

24.6      Power of Attorney of Gabriel B. Thomas

99.1      Press  Release,  dated  February 4, 1999,  announcing  fourth quarter
          and full year 1998  earnings results.