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, 1996
                                             ------------------

[ ]    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 10, 1997, 39,189,693 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 10, 1997, held by nonaffiliates of the Registrant was
       approximately $28.2 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

       Part II - Portions of the Annual Report to shareholders for the year
       ended December 31, 1996 

       Part III - Proxy Statement for Annual Meeting of Stockholders to be held
       June 17, 1997

       Page 1 of 40 pages.

<PAGE>

                                TABLE OF CONTENTS

Item                                                                       PAGE
----                                                                       ----

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

            2  Properties..................................................  19

            3  Legal Proceedings...........................................  19

            4  Submission of Matters to a Vote
               of Security Holders.........................................  22

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

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                                     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, 1996 were approximately twice the
annual sales in California of the next largest independent clinical laboratory
in that market. During 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. As of December 31, 1996, the Company
operated three centrally-located full-service laboratories, approximately 35
strategically-located short turn around ("STAT") laboratories and approximately
238 conveniently-located patient service centers ("PSC")s.

                 Unilab was created in 1988 as a spin-off of the western United
States ("U.S.") clinical laboratory business of the MetPath division ("MetPath")
of Corning Incorporated ("Corning"). Pursuant to certain transactions
consummated in November 1993 (the "Reorganization"), the Company's U.S.
operations were restructured to focus almost exclusively on California.

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. As of December 31, 1996, on an
average work day, Unilab processed approximately 31,000 patient specimens and
performed over 58,000 clinical tests.

                 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 

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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 less than 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) number and type of testing services
performed; (iii) service capability and convenience offered by the laboratory;
(iv) pricing of the laboratory's testing services; and (v) reputation of the
laboratory for the foregoing.

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

o                Independent Physicians and Physician Groups. Physician
performing testing for their patients who are unaffiliated with a pre-paid
health plan are the principal source of Unilab's clinical laboratory business.
Unilab markets its services to physicians 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 are billed either to the physician, to the
patient, or to the patient's third-party payor such as Blue Cross, Medicare and
Medicaid.

o                HMOs and Other Managed Care Groups. HMOs and other managed care
groups (which designate the laboratory to be used for tests ordered by the 
physician) 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.

o                Hospitals. Unilab provides esoteric testing for hospitals which
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.

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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.

                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. This business has 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, has come to recognize that the pricing received in relation to the
cost of services provided to managed care patients was disproportionately low,
and the Company has undertaken a concerted effort to improve the situation.
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 340 couriers, approximately 238 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 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 ensure that only qualified personnel
perform testing and (iii) testing of control specimens in order to ensure
accuracy and precision of test equipment. 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") 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.

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                 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
1996 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 99.4%, slightly better than the 1995 cumulative accuracy rate
of 99.3% and the 1994 rate of 99.2%.

Sales and Marketing

                 As of March 1, 1997, Unilab employed a full-time sales and
marketing staff of approximately 65 people. Members of the sales and marketing
staff are selected based upon their skill and experience. In addition, all sales
and marketing personnel participate in training programs developed to provide
detailed and specialized knowledge of the requirements of Unilab's varied market
segments. Compensation packages for such persons contain a significant element
of commission-based income and are designed to reward individual performance for
increasing collectible revenue through expanding the Company's client base with
the addition of quality business.

                 Unilab continuously monitors existing accounts and assesses
service levels in order to maintain client relationships and identify and
resolve any potential client dissatisfaction. Unilab's account service managers
also monitor advances in testing technologies and notify physician clients of
the availability of such advances. Compensation packages for account service
managers are designed to reward individual performance for retaining existing
client accounts.

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 eight acquisitions in California, including four since 1994 with
aggregate revenues in excess of $50 million. While the Company does not intend
to focus in the short term on growth through acquisition, Unilab may 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)

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<PAGE>

redundant marketing efforts and personnel. The Company seeks to achieve
consolidation efficiencies within six to eighteen months after completion of an
acquisition.

MLN Acquisition

                 On May 16, 1995, Unilab acquired MLN Holding Acquisition Co.,
the parent company of Medical Laboratory Network, Inc. ("MLN"), a Ventura,
California based clinical laboratory company. The acquisition of MLN, which
operated a network of one regional laboratory, five STAT laboratories and 31
PSCs in California, significantly increased Unilab's market share in several
regions of California (Ventura County, Santa Barbara County, Sonoma County and
Fresno). The operations of MLN were substantially integrated with those of the
Company during the period from June to September 1995. As a result of such
integration, the Company benefitted from annualized cost savings primarily
related to the reduction in headcount of approximately 100 employees, closure of
11 PSCs and downsizing of the main MLN laboratory in Ventura, California, the
disposition of laboratory equipment, furniture and fixtures, courier vehicles
and leasehold improvements due to the downsizing of the main MLN laboratory and
consolidation of other overlapping operations.

PathLab/Premier Acquisition

                 In January 1994, Unilab acquired Premier Laboratory Services,
Inc. ("Premier"), which operated in the San Jose/San Francisco clinical
laboratory market under the name PathLab. The consolidation of PathLab's
business into the slightly larger Unilab operations in San Jose enabled the
Company to become the largest provider of laboratory services in the San
Francisco Bay area. In addition, the Company also achieved significant operating
efficiencies by consolidating the two operations within one year of the closing
of the PathLab acquisition. These operating efficiencies arose in part from
reducing the work force, closing unnecessary facilities (including PathLab's
central testing laboratory), consolidating courier services and eliminating
overlapping operations.

Other Significant Acquisitions

                 From April 1989 to January 1991, the Company completed the
following significant acquisitions: Y. Uchida & Co., Inc. ("Y. Uchida") (April
1989); Central Diagnostic Laboratories, Inc. ("CDL") (October 1989) and Roche
Biomedical Western Region ("Roche") (January 1991). Y. Uchida, which had
approximately $20 million in annual sales, was the Company's first significant
acquisition and formed the foundation for Unilab's San Jose operations. CDL, at
the time the largest privately-owned laboratory in the country, sold its western
operations to the Company for $91 million. CDL, based in Los Angeles, also had
support operations in Santa Rosa, California, Phoenix, Arizona and Dallas,
Texas. (The Phoenix and Dallas operations were sold in 1993). Merging the
Company's much smaller Southern California operations into CDL's resulted in
Unilab becoming the largest provider of independent laboratory testing in
Southern California. Roche, which had approximately $33 million of annual sales
in California, was based in Sacramento, California. This acquisition formed the
base for the Company's operations in the central part of California.

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<PAGE>

The Clinical Laboratory Industry

Overview and Trends

                 Unilab believes based on published industry reports that the
total U.S. clinical laboratory market during 1996 was approximately $30 billion
in annual revenue, of which the California market accounted for approximately $4
billion. 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 750
located in California. The Company believes that approximately 50% of clinical
laboratory testing revenues in California result from tests performed by
hospitals, 20% 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.

                 Clinical laboratory testing has become 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.

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 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.

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Strategy

                 Unilab's objective is to build upon its position as the largest
and lowest-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, and conduct its billing and business practices in an appropriate,
efficient, effective, and responsible manner. 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.

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 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 is likely to have little practical effect on the
Company. The new 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.
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.

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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.

                 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 twice the amount claimed. In the case of
certain 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 Workplans, targeted certain
laboratory practices for study, investigation and prosecution. Pursuant to one
such project in the fiscal 1992/1993 Workplan, 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 Workplan, 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 "Lab Scam" investigations
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 Lab Scam investigation appears to be ongoing.

                 The OIG's fiscal year 1994/1995 Workplan 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 

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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.

                 The OIG's 1996/97 Workplan 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.

                 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 as well, with similar expected benefits for
the independent laboratory industry.

                 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 compensatory
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
or 1996, it is possible that similar proposals will be introduced in 1997 in
Congress.

                 In 1996, Congress passed and the President signed into law the
Health Insurance Portability and Accountability Act of 1996, frequently referred
to as the "Kennedy-Kassebaum Act", after its principal sponsors. The law made
major changes in federal fraud and abuse laws applicable to health care
providers. First, it established a new federal program designed to 

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coordinate federal, state and local fraud and abuse control programs. The law 
permits 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. The law also expands 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. The Kennedy-Kassebaum law also significantly increases the penalties
for certain civil violations of the Medicare law and increases the offenses for
which a provider could be excluded from Medicare/Medicaid. Finally, the law
establishes a number of new criminal provisions applicable to health care fraud.
The Clinton Administration has proposed repeal of the advisory opinion
provisions and certain other provisions related to the change in the intent
standard for civil money penalties.

                 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 the vast majority of its business, has
adopted especially stringent laws of this type, including 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. 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. Unilab completed production of these documents in
February 1994.

                 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 payments are to be made in semi-annual installments over three years with
approximately $500,000 paid in 1996. In addition, 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.

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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 and effective January 1, 1996 to 76% of the median.

                 In 1997, the Clinton Administration proposed a number of new
provisions to revise government reimbursement for clinical laboratory services.
The proposal urges the adoption of a competitive bidding program for laboratory
services, which would, if adopted, effect a reduction in Medicare payments of as
much as 20% after the year 2001. In addition, the plan proposes to adopt a
national fee schedule for certain automated tests, and would add additional
tests to those for which Medicare pays on a "bundled" basis. Finally, the plan
would also require laboratories to bill nursing homes, rather than Medicare, for
laboratory tests provided to nursing home residents covered by Medicare.

                 Effective August 1, 1993, the levels of Medicare reimbursement
for certain clinical laboratory tests pursuant to the Medicare laboratory fee
schedule were affected by a substantial change in the Current Procedural
Terminology ("CPT") codes, which is the basis for billing to Medicare/Medicaid
and many private payors. The CPT code forms 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. 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. In late 1994,
HCFA issued a draft document revising Medicare policies concerning the
reimbursement of panel tests. The draft document expanded the list of clinical
laboratory tests that are considered to be parts of automated panels and are to
be reimbursed by Medicare using panel codes. In November 1995, HCFA adopted a
final revised policy on reimbursement of panel tests. As of January 1, 1996, 22
automated tests (rather than 19 tests) became reimbursable by Medicare as part
of an automated chemistry profile. An additional allowance of 50 cents per test
is authorized when more than 19 tests are billed in a profile. HCFA retains the
authority to expand in the future the list of tests included in a profile. In
addition, the new HCFA policy requires laboratory providers to submit
documentation of the

                                       14

<PAGE>

medical necessity for panel tests. Medicare will reimburse laboratories only for
the tests in a profile it determines to be medically necessary. This policy
could have an adverse effect on the revenues and operating costs of the clinical
laboratory industry, including Unilab. In a related change of policy, effective
as of March 1, 1996, HCFA eliminated its prior policy of permitting payment for
all tests contained in an automated chemistry profile when at least one of the
tests in the profile is covered. Instead, where only some of the tests in a
profile are covered, Medicare payment will not exceed the amount that would have
been paid if only the covered tests (determined on the basis of "medical
necessity") had been ordered.

                 Additionally, laboratory pricing practices in general have
received substantial scrutiny from the Federal government. Under its "Lab Scam"
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 and SmithKline Beecham
Clinical Laboratories, as well as the Company, have in the past year entered
into agreements with the government to settle the government's allegations of
wrongdoing, in certain cases for hundreds of millions of dollars.

                 Proposals have also been developed to procure Medicare and
Medicaid laboratory testing services through competitive bidding mechanisms. To
date, neither Congress nor the State of California has acted to mandate or
authorize such procurement methodologies. However, President Clinton's 1997
Medicare reform proposal would establish competitive bidding for clinical
laboratory services. If competitive bidding were implemented, such action could
materially adversely affect the business of Unilab.

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.

                                       14

<PAGE>

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.

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 Recent Legislation

                 Clinical laboratory legislation introduced in 1994 in both
Houses of Congress contained laboratory "direct billing" bills. These bills
would have required laboratories to bill the payor directly for all clinical
laboratory services in the nation, whether reimbursed by Medicare, Medicaid,
other federal or state programs, or private third-party payors, rather than
billing a test-ordering physician or other practitioner. Such direct billing
legislation is intended to eliminate the mark-up associated with billing doctors
who may bill patients on a mark-up basis. Such legislation has been advocated
for many years by the independent laboratory industry and is viewed by
independent laboratories as advantageous. In 1995 the House Medicare proposal
contained an all-payor direct billing provision; however that provision was not
included in the House-Senate conference report approved in late November 1995
and no similar provision has been proposed to date in 1997. If enacted, direct
billing legislation would likely be favorable for the revenues and competitive
position of Unilab.

                 Both houses of Congress introduced significant Medicare and
healthcare reform proposals in 1995 which were vetoed by President Clinton who
proposed his own Medicare reform package. As noted above, new proposals have
been made by the Clinton Administration for 1997.

                 The various legislative proposals introduced in 1995 would have
affected a wide array of laboratory services and reimbursement. While comparable
provisions have not been introduced during the 1997 session of Congress, or
proposed by the President, similar provisions could be proposed at some point in
the future. Proposals considered during 1995 included the following:

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<PAGE>

                 Lab Fee Schedule Cuts: In 1995 Under the Senate House and
Medicare proposal and the House-Senate conference report, the fee schedule cap
on laboratory reimbursement for Medicare beneficiaries would have been reduced
to 65% of the median national limitation amount beginning in 1997 and there
would have been no CPI adjustments through 2002. The President's proposal would
not have reduced the laboratory reimbursement rate below the current 76% level.
So far in 1997, no comparable cuts have been proposed.

                 POL Exemption from CLIA: The Medicare reform bill passed by the
House of Representatives in September 1995 exempted POL's from CLIA oversight
and compliance, except for PAP smear tests. A similar bill was introduced in the
Senate by Senator Hutchinson, also in 1995, but was not included in the Senate
Medicare reform bill. Subsequently, this provision was dropped in the
House-Senate conference report. No similar provision has been proposed to date
in 1997.

                 Stark Anti-Referral Legislation: In August 1995, HHS issued
formal regulations implementing the Stark law (which became effective January 1,
1992). The Stark law prohibits in many circumstances self-referral of
Medicare-covered laboratory tests by a physician to a laboratory in which the
physician has an ownership interest or with which the physician has a
compensation arrangement. The House Medicare bill passed in 1995 included a
provision that would have ended the application of the anti-referral ban for
compensation arrangements and this relaxation of the Stark anti-referral
prohibitions was included in the House-Senate conference report. The President's
1997 proposal did not relax the Stark requirement; however, some proposals being
considered in the House would enact a relaxation of the Stark requirement.

                 Coinsurance: No coinsurance proposal was included in either the
1995 or 1997 legislative proposals.

                 Competitive Bidding: No competitive bidding proposal for
clinical laboratory tests was introduced in Congress in 1995. However, the
President's 1997 Medicare reform package includes competitive bidding for
laboratory services.

                 Direct Billing: The all-payor direct billing proposal that was
included in the 1995 House Medicare proposal was dropped from the House-Senate
conference report. No similar provision has been proposed to date in 1997.

                 Fraud and Abuse: As discussed above, new fraud and abuse
provisions were enacted in 1996, as part of the Kennedy-Kassebaum Act. The
Administration's 1997 Medicare proposal would repeal certain provisions included
in that law, related to advisory opinions and the intent standard required for
civil money penalties.

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

                                       16

<PAGE>

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., as many as 750 of which are in California. These
independent clinical laboratories fall into two separate categories, the first
of which 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.

                 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 four largest independent
clinical laboratory competitors are SmithKline Beecham Clinical Laboratories,
Inc., Physicians Clinical Laboratories, Inc., Laboratory Corporation of America
(formerly National Health Laboratories) and Meris Laboratories, Inc.

                 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, 1996, Unilab employed approximately 2,200 full-time employees
and approximately 400 part-time or temporary employees, none of whom were under
union contract. The Company believes that its relations with employees are good.

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<PAGE>

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.

                   THE REORGANIZATION AND RELATED TRANSACTIONS

                 Unilab was created in 1988 as a spin-off of the western U.S.
clinical laboratory business of MetPath. Until November 1993, Unilab was managed
by MetPath and Corning owned varying percentages of Unilab common stock, at
times constituting a majority of the outstanding Unilab common stock.

                 On January 19, 1993, the Company entered into an Agreement and
Plan of Merger and Reorganization (the "Merger Agreement") with, among other
parties, Corning and Corning Lab Services, Inc., a wholly-owned subsidiary of
Corning ("CLSI"). The Merger Agreement and the transactions contemplated by an
agreement with Unilabs Holdings S.A. (Panama) ("Holdings"), which is discussed
below, were approved by shareholders of the Company at a special meeting held on
November 1, 1993 and the transactions were consummated at that date.

                 Under the Merger Agreement, the Company's shareholders
exchanged their shares of capital stock in the Company ("Old Unilab") for shares
of capital stock in MetCal Inc. ("New Unilab"). MetCal Inc. subsequently changed
its name to Unilab Corporation. New Unilab owns operations throughout the State
of California and operates full-service laboratories in Los Angeles (Tarzana),
San Jose and Sacramento, California. Corning acquired 100% ownership of the
Company's clinical laboratory operations in Denver, Dallas and Phoenix and
retained approximately $70.0 million of the Company's $95.3 million of then
outstanding long-term indebtedness. In addition, Corning transferred 100%
ownership of J.S. Pathology plc ("JSP"), a clinical laboratory in the United
Kingdom, to New Unilab.

                 Also, as part of the Reorganization, on January 19, 1993, the
Company entered into a Stock Purchase Agreement with, among others, Holdings,
whereby New Unilab and Holdings agreed to jointly participate in UGL, a new
European-based clinical laboratory company, to which New Unilab contributed 100%
of JSP and issued approximately 3.5 million shares of New Unilab common stock in
exchange for 40% of the stock of UGL. Holdings contributed 70% of Unilabs S.A.,
a Swiss limited liability clinical laboratory company, in exchange for 60% of
the stock of UGL. In March 1994, Holdings transferred its 60% ownership position
in UGL to its affiliate, UniHolding Corp., a Delaware corporation
("UniHolding"). At the time of the Company's investment in UGL, the Company's
Board of Directors reviewed a number of factors and concluded that investment in
such a venture would provide the Company with the opportunity to capitalize on
growth in the European clinical laboratory industry while limiting the expenses
that normally arise from the penetration of a new market.

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<PAGE>

                 In the summer of 1994, the Company began exploring strategic
alternatives with respect to its equity investment in UGL because it believed
that an investment in the Company's core California business and a reduction of
its leverage would be more beneficial than an equity investment in a company in
which (i) the Company had no management control, (ii) the Company had no ability
to receive any cash flow from the business and (iii) equity earnings were under
downward pressure in the short-term due to weakening results, especially in the
United Kingdom operations. On July 14, 1995, the Company agreed to sell UGL the
Company's 40 percent equity investment in UGL for $30.0 million, effective as of
June 30, 1995, payable $13 million in cash, $2 million through assumption of
debt and a $15 million promissory note. The sale resulted in a one-time non-cash
charge by the Company in 1995 of approximately $36.5 million. The purchase price
was determined in negotiations between the Company and UGL. At the time of the
negotiation of the sale of the Company's interest in UGL, Edgard Zwirn, the
Chief Executive Officer of UniHolding was a director of the Company. Mr. Zwirn
did not attend any of the meetings of the Company's Board of Directors at which
the sale of the interest in UGL was discussed. On the closing of the sale, Mr.
Zwirn resigned as a director of the Company. In November 1996, the Company sold
a 100% participation interest in the $15 million promissory note to a financial
entity for $11 million in cash. As a result of that sale, the Company took a
non-recurring charge in the fourth quarter of 1996 of approximately $4.5
million.

                 As a result of the transactions described above, substantially
all of the Company's assets and operations are now located in California.

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.

                 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.


                                       19

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Trylon Arbitration

                 Unilab, MetWest Inc., formerly a wholly-owned subsidiary of
Unilab ("MetWest") and certain unnamed persons or entities were named as
defendants in The Trylon Corporation v. MetWest Inc., Unilab Corporation and
Does 1 through 30, filed on or about December 8, 1993 in the Superior Court of
the State of California for the County of Los Angeles. The plaintiff alleged
that MetWest and Unilab breached a contract, and the implied covenants of good
faith and fair dealing in connection with that contract with respect to the
sales, marketing and distribution by MetWest and Unilab of Blue-White Speculite
Lightsticks, a Trylon product designed for use in connection with PAP smears to
screen for cervical cancer and precancerous conditions in women. Plaintiff
sought an unspecified amount of damages. In February 1994, the case was referred
to arbitration before the American Arbitration Association in Los Angeles County
in accordance with the arbitration clause of the contract between the parties.
The Company recorded a $1.2 million non-recurring charge during the first
quarter of 1995 related to the expected cost, consisting primarily of legal
fees, of resolving such matter. In September 1995, the arbitrator rendered an
award in favor of Trylon of approximately $437,000. In November 1995, the
arbitrator reduced the award to Trylon to approximately $374,000 (comprised of
approximately $313,000 principal award plus interest of approximately $61,000)
and granted Trylon's request for reimbursement of legal fees of approximately
$1.4 million. The Company's appeal of that award of legal fees was rejected by
the California Superior Court. The Company took an approximately $2.0 million
nonrecurring charge in the fourth quarter of 1995, reflecting the costs
associated with the conclusion of this arbitration, including the amount of the
principal award plus the legal fees of counsel for Trylon and 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 was 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.

                                       20

<PAGE>

                 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 has 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 addresses 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 addresses the State of
California's contention that improper MediCal claims were submitted with respect
to the same five tests.

                 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 and continues to make 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 profile component test choices.

                                       21

<PAGE>

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 includes 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.

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 concerns 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 have received similar
requests for production as part of what the Company believes to be an
industry-wide 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
investigation 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 payments are to be made in semi-annual installments over
three years with approximately $500,000 paid in 1996. In addition, 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.

                                       22

<PAGE>

Executive Officers and Key Management Personnel of the Registrant

                 The following table sets forth certain information as of
January 20, 1997 regarding the directors, executive officers and key management
personnel of Unilab.

Name                       Age   Position
----                       ---   --------
David C. Weavil.............46   Chairman of the Board, President and
                                 Chief Executive Officer
Kirby L. Cramer.............60   Director
Michael B. Hoffman..........46   Director
Walker Lewis................52   Director
Thomas O. Pyle..............56   Director
Gabriel B. Thomas...........55   Director
Mark L. Bibi................38   Vice President, Secretary and General Counsel
Ian J. Brotchie.............57   Division President, Unilab San Jose
Michael Danley..............42   Division President, Unilab Santa Barbara
R. Jeffrey Lanzolatta.......44   Division President, Unilab Southern California
Richard A. Michaelson.......45   Senior Vice President-Finance, Treasurer and
                                 Chief Financial Officer
Ralph Monterosa.............48   Division President, Unilab Sacramento
Brian D. Urban..............34   Vice President and Controller
Paul T. Wertlake............61   Vice President, Chief Medical Officer
                              
                  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") since the
April 1995 merger of Roche Biomedical Laboratories, Inc. ("RBL") and National
Health Laboratories, Inc., which created LabCorp. He was 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.

                 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 Corporation (a subsidiary of Corning and formerly Hazleton
Laboratories Corp.), 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 also currently serves as a
director of each of Immunex Corp., Commerce Bancorporation, Advanced Technology
Laboratories, Inc., Northwestern Trust Company, Intellicoat Corp., and
Pharmaceutical Product Development, Inc.

                                       23

<PAGE>

                 Michael B. Hoffman has been a member of Unilab's Board of
Directors since October 1992. Mr. Hoffman has been a General Partner of The
Blackstone Group, an investment banking firm, since 1989. From 1982 through
1989, Mr. Hoffman served as a Partner and as Co-head of Mergers and Acquisitions
at Smith Barney, Harris Upham & Co. Mr. Hoffman also currently serves as a
director of Harvard Industries.

                 Walker Lewis has been a member of Unilab's Board of Directors
since September 1994. Mr. Lewis has been a Senior Advisor to Dillon, Read & Co.
Inc., a brokerage and investment banking firm, since December 1994. Mr. Lewis
served as Managing Director, Strategic Services of Kidder, Peabody & Co.,
Incorporated, a brokerage and investment banking firm, from April 1994 to
December 1994. Prior thereto, Mr. Lewis served as President of Avon North
America and Executive Vice President of Avon Products, Inc., a consumer products
company, and was a member of the Office of the Chairman of such company from
March 1992 through January 1994. Mr. Lewis served as Chairman of Mercer
Management Consulting, Inc., a wholly-owned subsidiary of Marsh & McLennan, from
August 1991 until February 1992. For more than two years prior thereto, he
served as Chairman of Strategic Planning Associates, which was merged into
Mercer Management Consulting in August 1991. Mr. Lewis also serves as a director
of Owens Corning Fiberglass and American Management Systems.

                 Thomas O. Pyle has been a member of Unilab's Board of Directors
since February 1995. Mr. Pyle has been a Senior Advisor on health care to Boston
Consulting Group from January 1995 to the present and from 1992 to 1993. Mr.
Pyle was a consultant to MetLife Insurance Co. and Chief Executive Officer of
MetLife Health Care from October 1993 to September 1994. Prior thereto, Mr. Pyle
was a Special Consultant to the White House on health care issues from February
1993 to April 1993. Mr. Pyle was the Chairman of Interstudy, a research
organization, from March 1992 to March 1993. Mr. Pyle was the Chief Executive
Officer of the Harvard Community Health Plan from 1978 through November 1991. He
is currently a director of Millipore Corporation, Amisys, Lincare Holdings and
several private companies.

                 Gabriel B. Thomas has been a member of Unilab's Board of
Directors since December 1986. Mr. Thomas has been a consultant in international
marketing and management since 1971 and served as a consultant to Unilabs
Holdings S.A. from October 1987 to May 1992. Mr. Thomas served as President of
Unilab from 1989 through January 1992. Since 1985, Mr. Thomas has served as a
consultant to Frankfurt Consult, the merger/acquisition subsidiary of BHF-Bank,
Frankfurt, Germany and is also currently a director of Decora Industries, Inc.

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

                 Ian J. Brotchie has been Division President of Unilab San Jose
since February 1994. He was President of PathLab 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.

                                       24

<PAGE>




                 Michael M. Danley became Division President of the newly
created Unilab Santa Barbara division in June 1996. Prior thereto he served as
Vice President of Client Integration and Marketing, Unilab Southern California,
from May 1995 to June 1996. Mr. Danley was Director of Sales, Marketing and
Managed Care for Mayo Laboratory Network and its successor, Medical Laboratory
Network, during 1994 and until it was acquired by Unilab in May 1995. He held
the position of Regional Laboratory Manager at Mayo Laboratory Network in 1992
and 1993. Before that he was President and CEO of Medical Arts Laboratories in
Santa Barbara from 1981 until it was sold in 1991 to Mayo Laboratory Network.

                 R. Jeffrey Lanzolatta has been Division President, Unilab
Southern California since July 1996. 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.

                 Richard A. Michaelson has been Senior Vice President-Finance,
Treasurer and Chief Financial Officer of Unilab since February 1994 and served
as 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 in 1980 and
served as Vice President of MetPath from 1983 and Treasurer of CLSI from 1990
through, in each case, September 1992. From 1977 to 1980, Mr. Michaelson held
various financial positions at International Business Machines Corp.

                 Ralph Monterosa has been Division President, Unilab Sacramento
since February 1994. Prior thereto, he was Director, Sales and Marketing for
Allied Clinical Laboratories in Sacramento, California from January 1993 to
February 1994 and served as General Manager of Allied's San Diego, California
laboratory operations from 1991 to December 1992. From 1987 to 1991 Mr.
Monterosa was Senior Vice President, Operations of the Northern Region of Roche
Biomedical Laboratories.

                 Brian D. Urban has been Vice President and Controller of Unilab
since November 1993. 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.

                                       25

<PAGE>
                                     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 15
(Unaudited Quarterly Financial Data) of the Notes to Consolidated Financial
Statements at page 23 of the Company's 1996 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 10, 1997, there were 39,189,693 shares of Common
Stock outstanding held by 858 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.



                                       26

<PAGE>



Item 6.          Selected Financial Data

The selected financial data for each of the five years in the period ended
December 31, 1996 is as follows:

(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
For the Years Ended December 31,               1996          1995           1994       1993           1992
----------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>            <C>          <C>          <C>     
Revenue                                     205,217      $189,042       $151,820     $207,399     $213,924
----------------------------------------------------------------------------------------------------------
Legal, acquisition and restructuring
related charges                              70,595         4,400          1,282        5,612       90,377
----------------------------------------------------------------------------------------------------------
Operating income (loss)                     (72,842)        4,539          9,137       12,117      (89,594)
----------------------------------------------------------------------------------------------------------
Loss on sale of equity investment/            4,529        36,499           ----         ----         ----
promissory note
----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting change                 (89,493)      (40,043)         4,515        6,711      (97,916)
----------------------------------------------------------------------------------------------------------
Income tax provision                           ----          ----           ----          200        2,221
----------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item
and cumulative effect of accounting
change                                      (89,493)      (40,043)         4,515        6,511     (100,137)
----------------------------------------------------------------------------------------------------------
Extraordinary item                            3,451         1,732           ----         ----         ----
----------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change         ----          ----           ----         ----        2,121
----------------------------------------------------------------------------------------------------------
Net income (loss)                           (92,944)      (41,775)         4,515        6,511      (98,016)
----------------------------------------------------------------------------------------------------------
Preferred stock dividends                       144           144            144           20        1,607
----------------------------------------------------------------------------------------------------------
Net income (loss) available to
common shareholders                         (93,088)      (41,919)         4,371        6,491      (99,623)
----------------------------------------------------------------------------------------------------------
Net income (loss) before extraordinary
item and cumulative effect of accounting
change per common share                       (2.43)        (1.12)          0.12         0.15        (2.59)
----------------------------------------------------------------------------------------------------------
Net income (loss) per common share            (2.53)        (1.17)          0.12         0.15        (2.54)
----------------------------------------------------------------------------------------------------------
Weighted average shares outstanding          36,831        35,918         35,069       44,219       39,159
----------------------------------------------------------------------------------------------------------
At December 31,
----------------------------------------------------------------------------------------------------------
Total assets                                125,919       196,174        196,407      134,106      125,458
----------------------------------------------------------------------------------------------------------
Long-term debt, net of current portion      126,120        87,207         67,660       31,659       81,393
----------------------------------------------------------------------------------------------------------
Shareholders' equity (deficit)              (34,688)       56,330         95,334       78,339        8,890
----------------------------------------------------------------------------------------------------------
</TABLE>

                                       27

<PAGE>



Note:            The variations in the year-to-year comparisons are due
                 primarily to 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 8 of the Notes to Financial
                 Statements at page 16 of the Company's 1996 Annual Report to
                 shareholders for a more detailed discussion of the legal and
                 acquisition related charges and loss on sale of equity
                 investment/promissory note recorded in 1996, 1995 and 1994, and
                 such information is incorporated herein by reference. The $5.6
                 million legal charge recorded in 1993 relates to a settlement
                 reached with the U.S. Government and State of California into
                 certain of the Company's sales, marketing and billing
                 practices. The $90.4 million restructuring charge recorded in
                 1992 relates to the write-off of certain customer lists,
                 covenants not-to-compete and goodwill, write-offs and
                 additional reserves for estimated uncollectible accounts
                 receivable and a reserve for operational and managerial
                 restructuring expenses. Furthermore, due to the Reorganization,
                 the Company's results of operations, assets and liabilities
                 from November 10, 1993 primarily include the California
                 operations and the Company's 40% equity interest in UGL (until
                 its disposition effective June 30, 1995) and are not comparable
                 to the Company's results of operations, assets and liabilities
                 prior to November 10, 1993, which include the results of the
                 non-California operations and do not include UGL.

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

                 "Management's Discussion and Analysis" at pages 4 through 8 of
the Company's 1996 Annual Report to shareholders is incorporated herein by
reference.

Item 8.          Financial Statements and Supplementary Data

                 The Company's financial statements, together with the report
thereon of Arthur Andersen LLP ("AA") dated February 17, 1997, appearing on
pages 9 through 25 of the Company's 1996 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 1996 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.

                                       28

<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, 1996, 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 25 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.

                                       29

<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 1996
Annual Report to shareholders:

Statements of Operations
for the years ended December 31, 1996,
1995, 1994                                        ---                9

Balance Sheets at
   December 31, 1996 and 1995                     ---               10

Statements of Shareholders'
Equity (Deficit) for the years ended
December 31, 1996, 1995, 1994                     ---               11

Statements of Cash Flows
for the years ended December 31,
1996, 1995, 1994                                  ---               13

Notes to Financial Statements                     ---               14
  
Report of Independent Public Accountants          ---               25

(2) Index to Consolidated Financial
Statement Schedule:

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

II - Valuation and Qualifying
Accounts for the years ended
   December 31, 1996, 1995 and 1994                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.

                                       30

<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

                No Current Reports on Form 8-K were filed during the fourth
                quarter of 1996.

                                       31

<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:      3/28/97                       UNILAB CORPORATION



                                          By:      /s/ Brian D. Urban
                                                   --------------------
                                          Name:    Brian D. Urban
                                          Title:   Vice President and Controller




                                       32

<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, 1996 and 1995, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1996 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 17, 1997. 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, 1996,
1995 and 1994 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 17, 1997



                                       33

<PAGE>

                                                                     Schedule II


                                                  UNILAB CORPORATION 
                                         VALUATION AND QUALIFYING ACCOUNTS
                                              (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                        Amount
                                       Balance at     Charged to       Acquired                      Balance
                                        Beginning      Costs and        through                       End of
                                        of Period      Expenses      Acquisitions     Deductions      Period
                                        ---------      --------      ------------     ----------      ------
<S>                                       <C>           <C>             <C>           <C>              <C>
FOR THE YEAR ENDED
------------------
DECEMBER 31, 1994;
------------------
Allowance for doubtful accounts           $ 5,904       $ 8,287         $ 1,291       $ (9,654)        $5,828

FOR THE YEAR ENDED
------------------
DECEMBER 31, 1995;
-----------------
Allowance for doubtful accounts           $ 5,828       $12,017         $   200       $ (9,591)        $8,454

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

</TABLE>


                                       34

<PAGE>

                                    Index
                                    -----

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

2.1           Agreement and Plan of Merger and Reorganization, dated as of
              January 19, 1993, among Corning Incorporated, Corning Lab
              Services, Inc. UL Sub Inc., the Company, MetWest Inc. and MetCal
              Inc. (Incorporated by reference to Exhibit No. 10.1 to the
              Company's Current Report on Form 8-K dated January 19, 1993).

2.2           Stock Purchase Agreement, dated December 20, 1993, by and among
              Premier Laboratory Services, Inc., the stockholders of Premier and
              the Company (Incorporated by Reference to Exhibit 2.1 to the
              Company's Current Report on Form 8-K dated January 3, 1994).

2.3           Stock Purchase Agreement, dated as of April 13, 1995, among MLN
              Equity Ltd., Paul Beyer, Paribas Principal Inc., MLN Holding
              Acquisition Co., MLN Holding, Inc., Medical Laboratory Network,
              Inc., and the Company (Incorporated by reference to Exhibit No.
              2.1 to the Company's Current Report on Form 8-K dated May 24,
              1995).

2.4           Stock Purchase Agreement, dated as of June 30, 1995, by and
              between the Company, Unilabs Group Limited and UniHolding Corp.
              (Incorporated by Reference to Exhibit No. 2.1 to the Company's
              Current Report on Form 8-K dated July 27, 1995).

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).

                                       35

<PAGE>

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).

10.1          Amended and Restated Stock Purchase Agreement, dated as of June
              30, 1993, by and between the Company and MetCal Inc. and Unilabs
              Holdings S.A. (Panama) (Incorporated by Reference to Exhibit 10.2
              to the Company's Form S-1 Registration Statement dated November
              30, 1993).

10.2          Credit Agreement, Dated as of March 14, 1996, among the Company,
              various Banks and Banque Paribas, as Agent (Incorporated by
              Reference to Exhibit 10.1 to the Company's Quarterly Report on
              Form 10-Q for the Quarter ended March 31, 1996, dated May 1,
              1996).

10.3          Termination and Release Agreement, dated as of December 20, 1996,
              among the Company, various Banks and Banque Paribas, as agent,
              terminating the Credit Agreement, dated as of March 14, 1996 among
              the Company, various banks and Banque Paribas, as Agent.

10.4          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).

10.5          Employment Agreement, dated as of November 10, 1993 between
              Richard A. Michaelson and the Company (Incorporated by Reference
              to Exhibit No. 10.7 to the Company's Form S-1 Registration
              Statement dated November 30, 1993).

                                       36

<PAGE>

10.6          Stock Option Agreement, dated as of October 20, 1992, between the
              Company and Richard A. Michaelson (Incorporated by Reference to
              Exhibit No. 10.9 to the Company's Annual Report on Form 10-K dated
              April 13, 1993).

10.7          Stock Option Agreement, dated as of February 25, 1994 between the
              Company and Richard A. Michaelson (Incorporated by reference to
              Exhibit 10.11 to the Company's Annual Report on Form 10-K dated
              March 11, 1996).

10.8          Stock Option Agreement, dated as of January 1, 1995, between the
              Company and Richard A. Michaelson (Incorporated by reference to
              Exhibit 10.12 to the Company's Annual Report on form 10-K dated
              March 11, 1996). 

10.9          Stock Option Agreement, dated as of May 1, 1995, between the
              Company and Richard A. Michaelson (Incorporated by reference to
              Exhibit 10.13 to the Company's Annual Report on Form 10-K dated
              March 11, 1996).

10.10         Restricted Stock Agreement, dated as of May 1, 1995, between the
              Company and Richard A. Michaelson (Incorporated by reference to
              Exhibit 10.14 to the Company's Annual Report on Form 10-K dated
              March 11, 1996).

10.11         Stock Option Agreement, dated as of February 27, 1996, between the
              Company and Richard A. Michaelson (Incorporated by Reference to
              Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
              the Quarter ended March 31, 1996, dated May 1, 1996).

10.12         Employment Agreement, dated as of January 20, 1997 between David
              C. Weavil and the Company.

10.13         Stock Option Agreement, dated as of January 20, 1997 between David
              C. Weavil and the Company.

10.14         Promissory Note, dated January 20, 1997, payable by David C.
              Weavil to the Company.

10.15         Secured Promissory Note, dated January 20, 1997, payable by David
              C. Weavil to the Company.

10.16         Stock Option Agreement, dated as of February 27, 1996, between the
              Company and Andrew H. Baker (Incorporated by reference to Exhibit
              10.2 to the Company's Quarterly Report on Form 10-Q for the
              Quarter ended March 31, 1996, dated May 1, 1996).

                                       37

<PAGE>

10.17         Letter Agreement, dated January 20, 1997, between Andrew H. Baker
              and the Company.

10.18         Restricted Stock Agreement, dated as of January 20, 1997, between
              Andrew H. Baker and the Company.

10.19         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.

10.20         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.

10.21         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.

10.22         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.

10.23         Non-Compete Agreement, dated as of January 20, 1997, between
              Andrew H. Baker and the Company.

10.24         Consulting Agreement, dated as of January 20, 1997, between the
              Company and Hartill Ltd.

10.25         General Assignment and Assumption, dated as of November 10, 1993,
              by and among the Company, MetWest and MetCal Inc. (Incorporated by
              Reference to Exhibit No. 10.3 to the Company's Forms S-1
              Registration Statement dated November 30, 1993).

10.26         Stockholders' Agreement, dated as of November 10, 1993, by and
              among MetCal Inc., Unilabs Holdings S.A. (Panama) and Unilabs
              Group Limited (Incorporated by Reference to Exhibit No. 10.4 to
              the Company's Form S-1 Registration Statement dated November 30,
              1993).

10.27         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).

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10.28         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).

10.29         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).

10.30         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).

10.31         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).

10.32         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).

10.33         Participation Agreement, dated as of November 7, 1996, by and
              between the Company and Donaldsosn, Lufkin and Jenrette Securities
              Corporation.

13.1          Annual Report to Shareholders

21.1          Subsidiaries of the Company

22.1          Proxy Statement, dated April ___, 1997, for Annual Meeting of
              Stockholders held on June 17, 1997.

24.1          Power of Attorney of David C. Weavil

24.2          Power of Attorney of Kirby L. Cramer

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24.3          Power of Attorney of Michael B. Hoffman

24.4          Power of Attorney of Walker Lewis

24.5          Power of Attorney of Thomas O. Pyle

24.6          Power of Attorney of Gabriel B. Thomas

99.1          Press Release, dated March 3, 1997, announcing fourth quarter and
              full year 1996 earnings results.

27            Financial Data Schedule
                                       40