SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               AMENDMENT NO. 1 TO
                                   FORM 10-K/A


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

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

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

      For the transition period from __________ to __________

                           Commission File No. 0-22758

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

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

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

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

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

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

       Indicate by check mark whether the  Registrant  (1) has filed all reports
       required to be filed by Section 13 or 15 (d) of the  Securities  Exchange
       Act of 1934 during the  preceding 12 months (or for such  shorter  period
       that the Registrant was required to file such reports),  and (2) has been
       subject to such filing requirement for the past 90 days.
       Yes   X         No____

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

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

                       DOCUMENTS INCORPORATED BY REFERENCE

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

       Page 1 of 55 pages.


<PAGE>



                                TABLE OF CONTENTS

Item                                                                      PAGE

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

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

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

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

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

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

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

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

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

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

             11  Executive Compensation.................................  31

             12  Security Ownership of Certain Beneficial Owners
                 and Management and Directors...........................  41

             13  Certain Relationships and Transactions with Related
                 Persons................................................  45

Part IV.     14  Exhibits, Financial Statements, Financial Statement
                 Schedules and Reports on Form 8-K......................  46

Signatures       .......................................................  48



<PAGE>


                                     PART I

Item 1.          Business

General

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

Facilities and Testing

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


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

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

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

Customers

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

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

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

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

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

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


<PAGE>


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

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

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

Specimen Collection and Processing

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

Quality Assurance

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

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

Regional Operations, Sales, Service and Marketing

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

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

o Enhance medical community  awareness of Unilab's full spectrum of services;
o Promote and sell new services and technological  advances;
o Educate clients on regulatory and compliance issues that will affect the
  medical  community;  and
o Address customer needs and concerns about new testing procedures.

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

Acquisitions

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

Meris Acquisition

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

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

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

The Clinical Laboratory Industry

Overview and Trends

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

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

California Market

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

Strategy

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

Governmental Regulation

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

Federal and State Clinical Laboratory Licensing

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

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

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

Federal and State Billing and Fraud and Abuse Laws

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Professional Ethics

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

Reimbursement

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

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

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

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

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

Drug Testing

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

Occupational Safety

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

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

Food and Drug Regulation

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

Controlled Substances

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

Specimen Transportation

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


Radioimmunoassay Testing

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

Other Legislation

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

Environmental Compliance

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

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

Competition

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

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

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

Employees

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

Seasonality

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

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

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

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

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

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

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

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

(e)    Failure to properly contain costs and expenses.

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

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

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

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

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

Item 2.          Properties

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

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

Item 3.          Legal Proceedings

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

Department of Justice Settlement

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

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

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

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

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

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

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

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

CHAMPUS Settlement

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



HHS Subpoenas

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

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

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

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

Executive Officers and Key Management Personnel of the Registrant

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

Name                       Age  Position

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

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

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

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

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

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

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

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

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

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


<PAGE>


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

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

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


                                     PART II

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

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

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

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


<PAGE>




Item 6.          Selected Financial Data

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

<TABLE>
<CAPTION>

(amounts in thousands, except per share data)
<S>                                       <C>            <C>            <C>          <C>          <C>
-----------------------------------------------------------------------------------------------------------------
For the Years Ended December 31,               1998          1997           1996         1995         1994
-----------------------------------------------------------------------------------------------------------------
Revenue                                    $217,370      $214,001       $205,217     $189,042     $151,820
-----------------------------------------------------------------------------------------------------------------
Legal, acquisition and restructuring
related charges                                ----          ----         70,595        4,400        1,282
-----------------------------------------------------------------------------------------------------------------
Operating income (loss)                      24,241        14,604       (72,842)        4,539        9,137
-----------------------------------------------------------------------------------------------------------------
Loss on sale of equity investment/             ----          ----          4,529       36,499         ----
promissory note
-----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes
and extraordinary item                       10,703           536       (89,493)     (40,043)        4,515
-----------------------------------------------------------------------------------------------------------------
Income tax provision                           ----          ----           ----         ----         ----
-----------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item      10,703           536       (89,493)     (40,043)        4,515
-----------------------------------------------------------------------------------------------------------------
Extraordinary item                             ----          ----          3,451        1,732         ----
-----------------------------------------------------------------------------------------------------------------
Net income (loss)                            10,703           536       (92,944)     (41,775)        4,515
-----------------------------------------------------------------------------------------------------------------
Preferred stock dividends                       131           138            144          144          144
-----------------------------------------------------------------------------------------------------------------
Net income (loss) available to
common shareholders                          10,572           398       (93,088)     (41,919)        4,371
-----------------------------------------------------------------------------------------------------------------
Basic net income (loss) before extraordinary
item per common share                          0.26          0.01         (2.43)       (1.12)         0.12
-----------------------------------------------------------------------------------------------------------------
Basic net income (loss) per common share       0.26          0.01         (2.53)       (1.17)         0.12
-----------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding          40,665        39,926         36,831       35,918       34,904
-----------------------------------------------------------------------------------------------------------------
At December 31,
-----------------------------------------------------------------------------------------------------------------
Total assets                                142,460       118,700        125,919      196,174      196,407
-----------------------------------------------------------------------------------------------------------------
Long-term debt, net of current portion      137,170       124,285        126,120       87,207       67,660
-----------------------------------------------------------------------------------------------------------------
Shareholders' equity (deficit)             (21,367)      (32,283)       (34,688)       56,330       95,334
-----------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>


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

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

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

Item 8.          Financial Statements and Supplementary Data

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

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

                 None.



<PAGE>


                                    PART III

Item 10.         Directors and Executive Officers of the Registrant

                 In addition  to the other  information  relating  to  Executive
Officers and Key Management Personnel of the Registrant that appears at pages 23
to 26 of this Form 10-K Annual  Report,  the following  information  is provided
herein:

                  Listed  below are the names and ages of the current  directors
of the  Registrant,  the year in which  each first  became a director  and their
principal occupations for at least the past five years.

<TABLE>
<CAPTION>

Name and Age                           Principal Occupation
<S>                                <C>
Haywood D. Cochrane, Jr.- 50        Mr.  Cochrane  has been a  director  since May 1997.  He has  served as  President  and Chief
                                    Executive  Officer of Meridian  Corporate  Healthcare  since  February 1997. He was Executive
                                    Vice President,  Chief Financial  Officer and Treasurer of Laboratory  Corporation of America
                                    Holdings,  Inc. ("LabCorp") from April 1995 to November 1996 and a consultant to LabCorp from
                                    November 1996 to February 1997. Mr.  Cochrane was President,  Chief  Executive  Officer and a
                                    Director of Allied Clinical  Laboratories,  Inc.  ("Allied") from its formation in 1989 until
                                    its  acquisition by National  Health  Laboratories,  Inc.  ("NHL") in June 1994. Mr. Cochrane
                                    serves as a director of JDN Realty Corp, Pathology Corporation of America,  Sonus Corporation
                                    and Meridian Corporate Healthcare.

Kirby L. Cramer - 62                Mr. Cramer has been a member of Unilab's  Board of Directors  since March 1990. Mr. Cramer is
                                    Chairman  Emeritus  of the  Board  of  Directors  of  Hazleton  Laboratories  Corporation,  a
                                    biological  research  company.  Mr.  Cramer  served as Chief  Executive  Officer of  Hazleton
                                    Laboratories  Corporation  from 1968 through 1987 (when it was sold to Corning  Incorporated)
                                    and as Chairman of the Board of Directors of Hazleton  Laboratories  Corp.  from 1987 through
                                    1991.  Mr.  Cramer is now a  professional  director  and  currently  serves as a director  of
                                    Immunex Corp., Commerce  Bancorporation,  Landec Corporation,  Sonosite,  Inc.,  Northwestern
                                    Trust Company, and Ragen MacKenzie Group.

William J. Gedale - 57              Mr.  Gedale has been a member of Unilab's  Board of Directors  since  September  1997.  He is
                                    currently  President and CEO of Mount Everest  Advisors,  LLC, an investment  counseling  and
                                    management  firm.  From  January  1997  to  August  1997  he was  President  of  Sheer  Asset
                                    Management,  an  investment  counseling  firm.  Previously,  from  1989 to 1994 he  served as
                                    President  and CEO of  General  American  Investors,  a New York  Stock  Exchange  closed-end
                                    investment  company  and as a Managing  Director  of John W.  Bristol  from June 1995 to June
                                    1996.  He  currently  serves  as  a  director  of  Bioreliance   Corporation,   a  biological
                                    pre-clinical  contract  research  organization.  He previously served as a director of Allied
                                    (until  its merger  with NHL) and of U.S.  Home  Health  Care.  He is a director  of New York
                                    Hospital Departmental Associates and is a trustee of the Neuroscience Research Foundation.

Richard A. Michaelson - 47          Mr.  Michaelson has been a member of Unilab's  Board of Directors  since  September  1997. He
                                    has been a Principal of Focused  Healthcare  Partners Ltd., a healthcare  investment  entity,
                                    since  January  1998.  He served as Senior Vice  President of Unilab from  September  1997 to
                                    December  1997,  Senior Vice  President-Finance,  Treasurer  and Chief  Financial  Officer of
                                    Unilab from February 1994 to September 1997, and Vice President-Finance,  Treasurer and Chief
                                    Financial  Officer of Unilab from November 1993 to February 1994. Mr.  Michaelson also served
                                    as Vice President of Unilab beginning in October 1990. Mr. Michaelson  joined MetPath,  Inc.,
                                    the clinical  laboratory  subsidiary of Corning  Incorporated that was a predecessor to Quest
                                    Diagnostics  Incorporated,  in 1980 and served as Vice  President  of  MetPath  from 1983 and
                                    Treasurer of Corning Lab Services, Inc. from 1990 through, in each case, September 1992.

Gabriel Balthazar Thomas - 57       Mr. Thomas has been a member of Unilab's  Board of Directors  since its formation in November
                                    1988. He was a Director of Unilab's  predecessor  entity from  December  1986 until  November
                                    1988. Mr. Thomas has been a consultant in  international  marketing and management since 1971
                                    and served as a  consultant  to Unilabs  Holdings  S.A.,  a Swiss  corporation  and  clinical
                                    laboratory  holding  company,  from October  1987 to May 1992.  Mr.  Thomas was  President of
                                    Unilab from 1989 through January 1992.  Mr. Thomas is a director of Decora Industries, Inc.

David C. Weavil - 48                David C.  Weavil has been  Chairman,  President  and Chief  Executive  Officer of the Company
                                    since  January 1997.  He served as Executive  Vice  President of LabCorp from the date of the
                                    April 1995  merger of Roche  Biomedical  Laboratories,  Inc.  ("RBL")  and NHL which  created
                                    LabCorp,  through  December 1996. He was  additionally  appointed Chief Operating  Officer of
                                    LabCorp in September 1995.  Previously,  Mr. Weavil served as Senior Vice President and Chief
                                    Operating  Officer of RBL from 1989 to April 1995.  From 1988 through  1989,  Mr.  Weavil was
                                    Regional Senior Vice  President-Mid-Atlantic  of RBL. Prior to that, he served as Senior Vice
                                    President and Chief Financial Officer of RBL from 1982 through 1988.

</TABLE>

         Michael B. Hoffman served as a director of the Company from October
1992 until his resignation  for personal  reasons on January 22, 1998.

Section 16(a) Beneficial Ownership Reporting Compliance

           Based upon a review of Forms 3, 4, and 5 filed with the Commission by
the Company's  directors and officers in 1998 the Company believes that all such
required forms were filed on a timely basis.

Item 11   Executive Compensation

         The following  table sets forth the annual and  long-term  compensation
paid or accrued by Unilab for  services  rendered  in all  capacities  to Unilab
during the years ended  December  31,  1998 and 1997,  as  applicable,  of those
persons who were,  at December 31, 1998,  (i) the Chief  Executive  Officer (Mr.
Weavil) and (ii) the two other Named Executive  Officers of Unilab (the Division
Presidents,  Ian Brotchie and R. Jeffrey  Lanzolatta)  whose total annual salary
and bonus for the year  ended  December  31,  1998  exceeded  $100,000  (Messrs.
Weavil,  Brotchie,  and  Lanzolatta  collectively  are referred to herein as the
"Named Executive Officers").
<TABLE>

                                                      Summary Compensation Table
                                                                                         Long Term
                                                     Annual Compensation            Compensation Awards
<CAPTION>
                                                                                         Restricted    Securities
Name and                                                                Other Annual        Stock      Underlying
Principal Position                    Year Salary ($)(3)    Bonus ($)   Compensation ($)   Award($)    Options(#)
------------------                    ---- -------------    ---------   ----------------   --------    ----------
<S>                                   <C>       <C>        <C>            <C>             <C>         <C>
David C. Weavil                        1998      $572,137   $425,000(4)    $  12,000(8)    --          250,000
  Chairman of the Board,               1997      $464,710   $200,000(5)     $139,659(9)    --          250,000
  President and Chief Executive
  Officer of Unilab(1)

Ian Brotchie                           1998      $350,523    $57,500(6)      $11,772(8)    --           50,000
  Executive VP, President
  of Northern California Division (2)

R. Jeffrey Lanzolatta                  1998     $302,113    $125,000(7)      $13,163(8)    --           50,000
  Executive VP, President
  of Southern California Division (2)

<FN>

(1)   Mr. Weavil has served as Chairman,  President and Chief Executive  Officer
      of the Company since January 20, 1997. See "Employment  Agreements;  Other
      Arrangements--"Weavil Employment Agreement".

(2)   Mr.  Brotchie has served as Executive  Vice President and President of the
      Northern California Division of the company since May 1998. Mr. Lanzolatta
      has served as  Executive  Vice  President  and  President  of the Southern
      California  Division of the Company  since May 1998.  Prior  thereto  each
      served in various other senior capacities within the Company.

(3)   Includes (i) amounts equal to 8% of cash compensation paid into a deferred
      compensation account ($66,000 and $40,000 for Mr. Weavil in 1998 and 1997,
      respectively,  $22,600  for Mr.  Brotchie  for  1998 and  $28,000  for Mr.
      Lanzolatta for 1998) and (ii) amounts accrued under the Unilab Corporation
      Executive  Retirement  Plan  ($106,137 and $24,560 for Mr. Weavil for 1998
      and 1997 respectively;  $102,923 for Mr. Brotchie for 1998 and $49,113 for
      Mr. Lanzolatta for 1998).

(4)   Mr. Weavil was paid a cash bonus of $425,000 for 1998,  based on a formula
      adopted by the Board of  Directors  tied to  pre-established  company-wide
      performance objectives.

(5)   Mr.  Weavil  was  paid a  bonus  of  $200,000  in  1997,  pursuant  to his
      employment  agreement  with the Company.  Mr. Weavil  received  payment of
      $100,000 of the bonus in shares of Unilab Common Stock at the start of his
      employment  with the  Company in January  1997.  As a result,  Mr.  Weavil
      received  228,571 shares in payment of the bonus  (calculated on the basis
      of the January 17, 1997  closing  market  price of Unilab  Common Stock of
      $0.4375 per share).  The remaining  $100,000 of the bonus was paid in cash
      in the second half of 1997.

(6)   Mr. Brotchie was paid a cash bonus of $57,500 for 1998, based on a formula
      tied in part to pre-established company-wide performance objectives and in
      part to pre-established Divisional performance objectives.

(7)   Mr.  Lanzolatta  was paid a cash bonus of  $125,000  for 1998,  based on a
      formula  tied  in  part  to   pre-established   company-wide   performance
      objectives  and  in  part  to   pre-established   Divisional   performance
      objectives.

(8)   For Mr.  Weavil,  represents  the benefits from a car  allowance.  For Mr.
      Brotchie,  represents the benefits from a car allowance,  Company matching
      contributions  to the  Company's  401(k) Profit  Sharing Plan,  tax return
      preparation  fees and related tax gross-up  payments on such amounts.  Mr.
      Mr.  Lanzolatta,  represents  the  benefits  of a car  allowance,  Company
      matching  contributions  to the  Company's  401(k)  profit  sharing  plan,
      imputed  interest  on an  interest  free  loan and  related  tax  gross-up
      payments on such amounts. See "Employment Agreements".

(9)   For Mr. Weavil,  represents  the benefits from a car  allowance,  expenses
      paid by the Company related to Mr. Weavil's relocation to and residence in
      California,  the  benefit  from the  Company  providing  group  term  life
      insurance  and related tax  gross-up  payments on such  amounts  (such tax
      gross-up  payments  being $60,955 in 1997).  See  "Employment  Agreements;
      Other Arrangements -- Weavil Employment Agreement".
</FN>
</TABLE>

Option Grants

         The  following  table  sets  forth the  grants of  non-qualified  stock
options  during  the year  ended  December  31,  1998,  to the  Named  Executive
Officers:
<TABLE>

      Option Grants In Last Fiscal Year
<CAPTION>
                     No. of Securities  % of Total                         Market
                        Underlying        Options         Exercise        Price of
                          Options       Granted to           or            Date of                     Grant Date
                          Granted      Employees in      Base Price         Grant       Expiration    Present Value
Name                        (#)         Fiscal Year        ($/Sh)          ($/Sh)          Date          ($/Sh)
------                     ----         -----------        ------          ------          ----          ------
<S>                   <C>                  <C>            <C>             <C>           <C>           <C>
David C. Weavil        250,000(1)           26.3%           $1.75           $1.75        1/2008        $1.09(3)

Ian Brotchie            50,000(2)            5.3%         $2.0625         $2.0625        1/2008        $1.28(3)

R. Jeffrey Lanzolatta   50,000(2)            5.3%         $2.0625         $2.0625        1/2008        $1.28(3)
<FN>

(1)   In January 1998,  pursuant to the Company's Stock Option and Performance
      Incentive Plan and the terms of his employment
      agreement,  Mr. Weavil was granted  options to purchase  250,000 shares of
      Unilab Common Stock at an exercise  price of $1.75 per share,  the closing
      price per share of Unilab  Common Stock as reported on the American  Stock
      Exchange  on the date of the  grant.  Such  options  vested  one-fifth  on
      January 2, 1999, and are to vest,  one-fifth on January 2, 2000, one-fifth
      on January 2, 2001,  one-fifth on January 2, 2002 and one-fifth on January
      2, 2003.

(2)   In January 1998,  pursuant to the Company's  Stock Option and  Performance
      Incentive Plan, Messrs.  Brotchie and Lanzolatta were each granted options
      to purchase  50,000 shares of Unilab Common Stock at an exercise  price of
      $2.0625 per share,  the closing  price per share of Unilab Common Stock as
      reported on the American Stock Exchange on the date of the grant.  In each
      case,  25,000  shares of such  options  vested on January 28, 1999 and the
      remaining 25,000 shares are to vest on January 28, 2000.

(3)   In accordance with Securities and Exchange  Commission rules, the
      Black-Scholes  option pricing model was used to estimate
      the grant date  present  value of the  options  set forth in this  table.
      The  Company's  use of this model  should not be construed as an
      endorsement of its accuracy in valuing  options.  All option  valuation
      models,  including  Black-Scholes, require a prediction  about the future
      movement of the stock price.  The actual  value, if any, an executive may
      realize will depend on the excess of the stock price over the exercise
      price on the date the option is  exercised.  The  estimated values under
      the model are based on the following  assumptions  and  variables:
      (i) the exercise of all options  occurs at their expiration  dates,
      (ii) the weighted  one-year  historic stock price volatility of the
      Common Stock is approximately  40% and (iii) for purposes of present
      value  calculations,  the ten-year,  zero coupon  Treasury note interest
      rate at the date of grant (5.79%) was used.
</FN>
</TABLE>

Other Stock Options

            Unilab has from time to time granted  non-qualified  stock  options,
some of which  were  granted  not  pursuant  to any  formal  plan  other than an
individual  stock  option  agreement  and some of which  were  issued  under the
Company's  Stock  Option  and  Performance  Incentive  Plan,  to  its  officers,
employees, consultants and directors. As of the Record Date, non-qualified stock
options to purchase a total of 6,007,833  shares of Unilab Common Stock (some of
which have not yet vested) were outstanding.

            Effective as of January 1, 1996, the Company's stockholders approved
and adopted a Stock Option and  Performance  Incentive  Plan,  pursuant to which
certain of the  Company's  employees  may receive  grants of options to purchase
shares of Unilab  Common  Stock,  and may receive  other grants of Unilab Common
Stock in various forms (Restricted Stock, SARs, etc.). Options granted under the
Stock  Option and  Performance  Incentive  Plan have a ten year term and vest in
equal  installments  over a  vesting  period  determined  by the  Administrative
Committee of the Stock Option and Performance Incentive Plan, which is typically
one to five years.  The exercise  price is the per share price of Unilab  Common
Stock on the American  Stock Exchange (or for grants made prior to the Company's
listing on the American  Stock  Exchange on June 24, 1996, on Nasdaq/NNM) at the
close of business on the grant date.  Pursuant to this Plan, options to purchase
a total of 949,500 shares of Unilab Common Stock were issued to employees of the
Company during 1998.

            Effective as of January 1, 1996, the Company's stockholders approved
and adopted a Non-Employee  Directors  Stock Plan,  pursuant to which certain of
the Company's  directors  receive annual grants,  typically on the first trading
day of each year, of options to purchase  shares of Unilab  Common  Stock.  Such
stock  options have a ten year term and vest 50% on the date of grant and 50% on
the first  anniversary of the date of grant. The exercise price is the per share
price of Unilab Common Stock on the American Stock Exchange (or for grants prior
to the June 24, 1996 listing date on the American Stock Exchange, on Nasdaq/NNM)
at the close of business on the grant date. Pursuant to this program, options to
purchase 80,000 shares were issued to non-employee directors in January 1998.

Restricted Stock

            Unilab  has,  from  time to time,  granted  restricted  stock to its
employees. Such shares typically contain restrictions on transfer of the granted
shares of Unilab Common Stock for a two to five year period,  with forfeiture of
such shares upon earlier separation from the Company, in the Board's discretion.
As of April 5, 1999,  759,499  shares of  restricted  Unilab  Common  Stock were
outstanding,  including 150,000 shares issued to R. Jeffrey  Lanzolatta,  one of
the Named Executive  Officers  (50,000 shares granted in 1996 and 100,000 shares
granted in 1994).

Option Exercises and Fiscal Year-End Values

            The following  table reflects the options to purchase  Unilab Common
Stock that were exercised by the Named Executive Officers during the fiscal year
ended  December  31,  1998 and lists  the  number  and value of the  unexercised
options to purchase Unilab Common Stock held by the Named Executive  Officers at
December 31, 1998.
<TABLE>

         Aggregated Option Exercises In Last Fiscal Year and FY-End Option Values
<CAPTION>

                                                                         Number of
                                                                         Securities
                                                                         Underlying           Value of
                                                                         Unexercised         Unexercised
                                                                         Options at          In-the-Money
                                                                         FY-End (#)           Options at
                                                                                             FY-End ($)
                            Shares Acquired                              Exercisable/        Exercisable/
Name                        on Exercise (#)      Value Realized ($)      Unexercisable       Unexercisable
----------------------------------------------------------------------------------------------------------
<S>                               <C>                  <C>              <C>                     <C>
David C. Weavil(1)                 --                   --                50,000/450,000(1)      $96,875/543,750
Ian Brotchie(2)                    --                   --               288,750/101,250(2)      $210,000/94,375
R. Jeffrey Lanzolatta(3)           --                   --               148,750/100,250(3)      $210,656/95,031
</TABLE>

 (1)  Pursuant to Mr. Weavil's  employment  agreement he received (i) in January
      1997  options to  purchase  250,000  shares of Unilab  Common  Stock at an
      exercise  price  equal to the $0.4375 per share  closing  market  price of
      Unilab  Common  Stock on the last  trading day prior to the date of grant,
      vesting in equal installments over five years,  beginning January 1998 and
      ending  January 2002 and (ii) in January 1998 options to purchase  250,000
      shares of Unilab Common Stock at an exercise  price equal to the $1.75 per
      share  closing  market price of Unilab  Common Stock on the date of grant,
      vesting in equal installments over five years,  beginning January 1999 and
      ending January 2003.

(2) Mr. Brotchie has received the following stock options:
<TABLE>
<CAPTION>

           Date of          Exercise            Vested at                       Unvested
            Grant             Price             12/31/98         Value          12/31/98           Value
         <S>                <C>                <C>          <C>                  <C>           <C>

          1/25/94            $6.1125             100,000      $       0                0        $       0
          1/1/95                4.50              18,750              0            6,250                0
          5/1/95              5.1875              50,000              0                0                0
          4/28/97              0.625              45,000         78,750           45,000           78,750
          4/28/97              0.625              75,000        131,250                0                0
          1/28/98             2.0625                   0              0           50,000           15,625
                                              ----------     ----------           ------           ------
                                                 288,750       $210,000          101,250          $94,375
<FN>

      Mr.  Brotchie also received on January 4, 1999 options to purchase 50,000
shares at an exercise price of $2.3125,  vesting one half on January 4, 2000
and one half on January 4, 2001.
</FN>
</TABLE>

(3) Mr. Lanzolatta has received the following stock options:
<TABLE>
<CAPTION>

           Date of          Exercise            Vested at                       Unvested
            Grant             Price             12/31/98         Value         at 12/31/98         Value
<S>     <C>    <C>    <C>    <C>    <C>    <C>

          2/25/94             $5.625             $20,000      $       0                0        $       0
          1/1/95                4.50               5,250              0            1,750                0
          2/27/96             2.1875               3,500            656            3,500              656
          4/28/97              0.625              45,000         78,750           45,000           78,750
          4/28/97              0.625              75,000        131,250                0                0
          1/28/98             2.0625                   0              0           50,000           15,625
                                              ----------     ----------           ------           ------
                                                 148,750       $210,656          100,250          $95,031
<FN>

      Mr.  Lanzolatta also received on January 4, 1999  options to  purchase
50,000 shares at an  exercise price of $2.3125, vesting one half on January 4,
2000 and one half on January 4, 2001.
</FN>
</TABLE>

Executive Retirement Plan

      Effective as of January 1, 1995, the Company's  stockholders  approved the
adoption of the Executive  Retirement  Plan (the "SERP").  The SERP provides for
issuance to certain selected officers and other senior executives of the Company
("Executives")  of up to  1,000,000  shares in the  aggregate  of Unilab  Common
Stock.  Shares of Unilab Common Stock to be issued in  connection  with the SERP
will be made available from treasury or authorized and unissued shares of Unilab
Common Stock. An Executive  participating  in the SERP is entitled to receive an
annual allocation of Awards.  An Award is a unit of measurement  equivalent to a
share of Unilab Common Stock. The number of Awards allocated each year will have
a fair  market  value  equal to the annual  expense of a  projected  single life
annuity  commencing at age 65, providing an Executive with a benefit equal to 2%
of the  Executive's  "Final  Compensation"  multiplied by the number of years of
service (not to exceed 25) (the "Target  Benefit").  For purposes of determining
the annual expense under the SERP, an Executive's  "Final  Compensation"  equals
the  projected  average  compensation  of the  Executive  for the 5  consecutive
calendar  years  preceding and including the  Executive's  attainment of age 65.
Initially,   based  on  recommendations  from  the  actuary  for  the  SERP,  an
Executive's compensation will be projected to increase at the rate of 5 1/2% per
year.

      As soon as practicable following the death, disability or retirement of an
Executive  after  attaining age 65 (the "Payment  Date"),  the Executive (or his
Beneficiary,  as the case may be) will be issued a certificate  or  certificates
for a number of shares of Common  Stock equal to the vested  number of Awards in
the Account of the Executive.  In addition,  an Executive shall be entitled to a
distribution  of his Account upon his  termination of employment for Good Reason
or without  Cause (as defined in the SERP),  in each case only after a Change in
Control.  Any  other  amounts  in  an  Account,  other  than  Awards,  shall  be
distributed in a single cash lump sum payment.

      During 1998,  five of the Company's  executives  participated in the SERP.
David C. Weavil, the Company's  Chairman,  President and Chief Executive Officer
during  1998,  received  a  1998  contribution  to the  SERP  from  the  Company
equivalent to $106,137.  The other two Named Executive  Officers,  Ian Brotchie,
Executive Vice President and President of the Northern  California  Division and
R. Jeffrey  Lanzolatta,  Executive  Vice President and President of the Southern
California  Division,  received  1998  contributions  to the SERP  equivalent to
$102,923  and  $49,113,  respectively.  The other two  participants  in the SERP
received  aggregate 1998  contributions  to the SERP equivalent to $94,419.  The
amount of such  Awards was  calculated  on the date of  issuance  of the Awards,
utilizing the common stock price  valuation as of such date.  Since the price of
Unilab  Common  Stock  increased  between the date of issuance  and December 31,
1998,  the value of the Awards also  increased.  In light of an increase  during
1997 of the Company's  Common Stock price,  the Board limited the maximum number
of Awards to be  granted  annually  to all  participants  in the SERP to 200,000
Awards in the aggregate.

Employment Agreements; Other Arrangements

                 Weavil  Employment  Agreement.  On January 20, 1997, Unilab and
David C. Weavil  entered into an employment  agreement  (the "Weavil  Employment
Agreement") pursuant to which he serves as Chairman of the Board,  President and
Chief Executive Officer of Unilab.  The term of the Weavil Employment  Agreement
initially ended on January 19, 1998, and automatically renewed and will continue
to renew for successive one-year periods unless one party thereto gives at least
a six month  notice  of  termination  before  the end of the  current  term (the
"Employment  Period").  Mr.  Weavil  receives an annual base salary of $400,000,
subject to upward adjustment at the Board of Directors'  discretion.  Mr. Weavil
received upon execution of the Weavil Employment  Agreement a bonus of $100,000,
which was paid in shares of Unilab Common Stock.  In payment of this bonus,  Mr.
Weavil  received  228,571 shares of Unilab Common Stock,  calculated by dividing
$100,000 by $0.4375,  the closing market price of Unilab Common Stock on January
17, 1997, the last trading day prior to Mr. Weavil's commencement of employment.
Mr. Weavil was also  eligible to receive,  and did receive,  an additional  1997
cash  bonus  of  $100,000  when  Unilab  met  certain   performance   objectives
pre-established  by the Board of Directors of Unilab. Mr. Weavil received a cash
bonus  of  $425,000  in  1998,  based  on  a  pre-established  formula  tied  to
Company-wide  performance.  The Weavil  Employment  Agreement also provides that
Unilab  will  establish  for Mr.  Weavil a deferred  compensation  account to be
credited  annually with an additional  amount equal to 8% of Mr.  Weavil's total
cash  compensation  (inclusive of all bonuses) for that year.  Mr. Weavil earned
$66,000 in deferred  compensation  during 1998. The Weavil Employment  Agreement
also  provides  for  Mr.  Weavil's  participation  in  the  Company's  Executive
Retirement Plan.
                 Pursuant to the terms of the Weavil Employment  Agreement,  Mr.
Weavil  purchased  from the Company on January 20, 1997 $500,000  worth of newly
issued  shares of Unilab  Common  Stock based on the  January  17, 1997  closing
market price of $0.4375.  Accordingly,  Mr. Weavil purchased 1,142,857 shares of
Unilab  Common Stock at that time.  Mr. Weavil was granted  demand  registration
rights with respect to such shares, as well as the 228,571 shares he received in
payment of his $100,000  bonus noted in the  preceding  paragraph.  The $500,000
utilized by Mr.  Weavil to purchase  such shares was borrowed  from the Company.
The repayment of $250,000 of such borrowed funds was due 180 days after the date
of loan (i.e.,  by July 20,  1997),  was unsecured and bore interest at 6%. That
note was repaid in full by Mr.  Weavil on July 20, 1997.  Repayment of the other
$250,000 of such funds is due five years  after  issuance  (i.e.  by January 20,
2002),  is secured  by the  shares of Unilab  Common  Stock  purchased  from the
proceeds thereof and bears interest at 6%.

                 Also pursuant to the Weavil  Employment  Agreement,  on January
20, 1997,  Mr. Weavil was granted  options to purchase  250,000 shares of Unilab
Common Stock at an exercise price of $0.4375. the closing market price of Unilab
Common Stock on January 17, 1997.  Such options  vested 20% on January 20, 1998,
and 20% on January  20,  1999,  and will vest 20% on January  20,  2000,  20% on
January  20,  2001  and  20% on  January  20,  2002.  Additionally,  the  Weavil
Employment  Agreement  provided for Mr.  Weavil to be granted on January 2, 1998
options to purchase  250,000  shares of Unilab Common Stock at an exercise price
equal to the closing  market  price of Unilab  Common  Stock on such date.  Such
options were granted on January 2, 1998 at an exercise price of $1.75 per share.
Such options vest in equal installments over five years, beginning on January 2,
1999 and ending on January 2, 2003.

                 In the event that Mr. Weavil's  employment is terminated by the
Company without Cause (as defined in the Weavil Employment Agreement) and not in
association  with a Change of  Control  (as  defined  in the  Weavil  Employment
Agreement), Mr. Weavil will receive 18 months of continued compensation (salary,
bonus and deferred compensation) and continued benefits coverage. Mr. Weavil has
agreed not to compete with the Company for 18 months  following  termination  of
employment without Cause and not in association with a Change of Control.

                 The Weavil  Employment  Agreement  also  provides  for  certain
payments to Mr. Weavil upon his termination or resignation following a Change of
Control  of Unilab  (as  defined  in the  Weavil  Employment  Agreement).  If in
association with a Change of Control, Mr. Weavil resigns his employment for Good
Reason or his employment is terminated  without Cause,  then he becomes entitled
to  receive  a lump sum in cash  equal to two times Mr.  Weavil's  annual  total
compensation (inclusive of cash bonuses and deferred compensation).

                  Brotchie Employment Agreement. On January 25, 1994, Unilab and
Ian J. Brotchie entered into an employment  agreement (the "Brotchie  Employment
Agreement")  pursuant  to which he  initially  served as  President  of Unilab's
wholly-owned  subsidiary,  Associated  Laboratories,  Inc. Mr. Brotchie has been
Executive Vice President and President,  Northern California Division, since May
1998. The term of the Brotchie  Employment  Agreement initially ended on January
25, 1996 and  automatically  renewed and will  continue to renew for  successive
one-year periods,  unless one party thereto gives at least a six-month notice of
termination  before the end of the current term (the "Employment  Period").  The
Brotchie  Employment  Agreement initially provided for a base salary of $175,000
per year,  which has since been increased to $225,000 per year. Mr.  Brotchie is
also  entitled to an annual bonus of up to 60% of his base salary and  incentive
compensation,  as  determined in the sole  discretion of the Company's  Board of
Directors or its  designee.  Mr.  Brotchie  received a cash bonus of $57,500 for
1998.

                  In the event that Mr.  Brotchie's  employment is terminated by
the Company without Cause (as defined in the Brotchie Employment  Agreement) and
not in  association  with a  Change  of  Control  (as  defined  in the  Brotchie
Employment  Agreement),  Mr.  Brotchie  will  receive  24  months  of  continued
compensation  (salary and bonus) and continued benefits  coverage.  Mr. Brotchie
has agreed not to compete with the Company for 24 months  following  termination
of employment without Cause and not in association with a Change of Control.

                  The Brotchie  Employment  Agreement  also provides for certain
payments to Mr. Brotchie upon his termination or resignation  following a Change
of Control. If in association with a Change of Control, Mr. Brotchie resigns his
employment  for Good  Reason or is  terminated  without  Cause,  then he becomes
entitled to receive a lump sum payment equal to two times Mr.
Brotchie's annual total compensation (inclusive of cash bonuses).

                  Lanzolatta Employment Agreement.  On November 11, 1993, Unilab
and R. Jeffrey Lanzolatta entered into an employment  agreement (the "Lanzolatta
Employment  Agreement)  pursuant to which he initially served as Vice President,
Sales and  Marketing.  Mr.  Lanzolatta  has been  Executive  Vice  President and
President,  Southern  California  Division,  since  May  1998.The  term  of  the
Lanzolatta  Employment  Agreement  initially  ended  on  November  11,  1994 and
automatically  renewed  and will  continue  to  renew  for  successive  one-year
periods,  unless  one  party  thereto  gives  at  least a  six-month  notice  of
termination  before the end of the current term (the "Employment  Period").  The
Lanzolatta Employment Agreement initially provided for a base salary of $145,000
per year, which has since been increased to $225,000 per year. Mr. Lanzolatta is
also entitled to an annual bonus in an amount  determined in the sole discretion
of the Company's Board of Directors or its designee.  Mr. Lanzolatta  received a
cash bonus of $125,000 for 1998.

                  In the event that Mr. Lanzolatta's employment is terminated by
the Company  without Cause (as defined in the Lanzolatta  Employment  Agreement)
and not in  association  with a Change of Control (as defined in the  Lanzolatta
Employment  Agreement),  Mr.  Lanzolatta  will  receive  12 months of  continued
compensation (salary and bonus) and continued benefits coverage.  Mr. Lanzolatta
has agreed not to compete with the Company for 12 months  following  termination
of employment without Cause and not in association with a Change of Control.

                  The Lanzolatta  Employment Agreement also provides for certain
payments to Mr.  Lanzolatta  upon his  termination  or  resignation  following a
Change of Control.  If in association with a Change of Control,  Mr.  Lanzolatta
resigns his employment for Good Reason or is terminated  without Cause,  then he
becomes  entitled  to  receive  a  lump  sum  payment  equal  to two  times  Mr.
Lanzolatta's annual total compensation (inclusive of cash bonuses).

Compensation Committee
Report on Executive Compensation

                                   Philosophy

                 The Company has developed an overall  compensation  program and
specific compensation plans which are designed to enhance corporate performance,
and thus  stockholder  value, by aligning the financial  interests of executives
with those of its  stockholders.  In pursuit of these  overall  objectives,  the
structure  and scope of the  Company's  compensation  program  are  designed  to
attract key  executives  to the Company and retain the best  possible  executive
talent;  to reinforce  and link  executive  and  stockholder  interests  through
equity-based  plans;  and to  provide a  compensation  package  that  recognizes
individual performance in conjunction with overall corporate performance.



                 Principal Components of Executive Compensation

                 The principal elements of the Company's executive  compensation
program  consist of both annual and long-term  programs and include base salary,
annual cash and/or stock bonus if performance  objectives are achieved,  and, at
appropriate  intervals,  long-term  incentive  compensation in the form of stock
option grants and/or  awards of restricted  stock.  Such stock option grants and
restricted  stock  awards  are  issued  to the  Company's  executives  and other
employees  under the Stock Option and  Performance  Incentive  Plan. The Company
also provides medical and other fringe benefits  generally  available to Company
employees  and,  for  certain  of its  selected  senior  executives,  a deferred
compensation plan and the SERP.

                 Base salaries for  executives  are determined by evaluating the
responsibilities of the position held and the experience of the individual, with
reference to the  competitive  marketplace  for  executive  talent,  including a
comparison to base salaries for positions having comparable  responsibilities at
other companies in the clinical  laboratory  industry  (including certain of the
companies  included  in the  index  used  for the  Performance  Graph  contained
herein).  In addition to comparing base salary  compensation of other companies,
consideration  is given to the relative  overall  corporate  performance  of the
Company in relation to its  competitors  in the industry,  with the objective of
achieving  standards and setting base executive salaries in the Company somewhat
above the market rate paid for comparable  positions in the clinical  laboratory
industry.  In July 1996 at the request of the Company's Chief Executive  Officer
at the time,  with the  backing of the  Compensation  Committee,  the  Company's
senior executives  voluntarily  accepted a 10% reduction in base salary in light
of the Company's disappointing 1996 financial performance. With one exception (a
raise given in connection with a promotion),  base salaries of senior executives
have been frozen since that time.

                 The Company's  executive  officers and other key persons may be
eligible for an annual cash and/or stock bonus under their individual employment
agreements.  Individual  performance objectives formulated by Company management
are recommended by the Chief Executive  Officer for approval by the Compensation
Committee or the Board and are awarded upon the discretionary  recommendation of
the CEO.  Eligible  executives  may  receive  bonus  awards  based upon  certain
percentages  of base salary at threshold and maximum  levels  appropriate to the
nature of their position in the Company.  Whether any bonus is awarded,  and, if
so, the amount thereof  depends upon actual  performance  against  predetermined
individual and corporate  objectives  established by the CEO or the Compensation
Committee.  Cash bonuses were awarded for 1998 on the basis of a formula tied to
company performance and/or divisional performance to each of the Named Executive
Officers and certain other senior officers of the Company.

                 Awards of stock  options  and  restricted  stock have been made
periodically  to executive  officers and certain other  employees of the Company
upon  consultation  with and  recommendation  of the Chief Executive Officer and
approval of the Compensation Committee,  which may, under certain circumstances,
be submitted for ratification by the Board of Directors.  Such options have been
granted with an exercise  price equal to the market value of Unilab Common Stock
on the date of  grant.  The  purpose  of these  awards  has  been to  provide  a
meaningful  equity interest in the Company to Company employees in a format that
is designed to retain and align the financial  interests of these employees with
those of  stockholders.  The Board and the Compensation  Committee  believe that
this program has been and will be instrumental in focusing the Company's  senior
management  on  building  long-term  value  for  stockholders.  It has  been the
practice of the Company to make grants of stock options with a staggered vesting
schedule and  forfeiture  of shares if not exercised  within a specified  period
following  separation  from the Company's  employ.  The restricted  stock grants
similarly  contain  certain  restrictions  on vesting and  transfer  tied to the
recipient's  continued  employment by the Company.  These  restrictions on stock
option awards and restricted  stock grants are designed to encourage  recipients
to remain in the  Company's  employ in order to recognize  the full value of the
awards.  The term over which these restrictions have applied typically is one to
five  years in the case of stock  options  and two to five  years in the case of
restricted  stock.  To date,  only stock options and restricted  stock have been
granted under the Stock Option and  Performance  Incentive  Plan;  however,  the
Compensation  Committee  expects that other forms of  equity-based  compensation
permitted under that plan may also have similar restrictions.

                 In  addition,  the Company  provides  health care  benefits and
profit sharing for senior  executives  and other key persons on terms  generally
available to all Company  employees.  The Compensation  Committee  believes that
such  benefits are  comparable  to those  offered by other  clinical  laboratory
companies. The value of perquisites,  as determined in accordance with the rules
of the Securities and Exchange  Commission  relating to executive  compensation,
did not  exceed  $50,000 or 10% of the total  salary and bonus of any  executive
officer in the last fiscal year.

                 Since no executive officer of the Company received compensation
for  purposes of Section  162(m) of the  Internal  Revenue  Code in excess of $1
million during 1998, the Compensation  Committee presently  anticipates that all
compensation  paid to executive  officers will qualify for  deductibility  under
Section  162(m),  which limits in certain  circumstances  the  deductibility  of
compensation in excess of $1 million paid to certain executive officers,  except
for  "performance-based  compensation" which complies with requirements  imposed
under Section 162(m).

                     Chief Executive Officer's Compensation

                  For 1998, David C. Weavil,  the Chairman,  President and Chief
Executive  Officer of the Company during such period,  was paid a base salary of
$400,000,  as specified in his employment agreement and the same as in 1997. The
Compensation Committee considered Mr. Weavil's salary to be appropriate in light
of (i) the need to  recruit  Mr.  Weavil  in  January  1997  with an  attractive
compensation  package,  (ii) Mr.  Weavil's  compensation  at his prior employer,
(iii) the  compensation  of other senior  executives in the clinical  laboratory
industry  and (iv) the fact that the base  salary  was the same as Mr.  Weavil's
base salary in 1997. Mr. Weavil  received a $425,000 cash bonus in March 1999 in
consideration   for  1998   performance.   Mr.  Weavil  also  received  deferred
compensation equal to 8% of his 1998 cash compensation (valued at $66,000), plus
participation in the Company's Executive  Retirement Plan (valued at $106,137 in
1998), which brought his annual cash compensation for 1998 to $997,139. Pursuant
to his Employment Agreement, Mr. Weavil also received in January 1998 options to
purchase 250,000 shares of Unilab Common Stock at an exercise price of $1.75 per
share,  the then  current  market  price.  Pursuant  to the terms of the  Weavil
Employment Agreement,  Mr. Weavil purchased from the Company on January 20, 1997
$500,000  worth of newly  issued  shares of  Unilab  common  stock  based on the
January 17,  1997  closing  market  price of $0.4375.  Accordingly,  Mr.  Weavil
purchased  1,142,857  shares of Unilab Common Stock at that time. Mr. Weavil was
granted demand  registration  rights with respect to such shares, as well as the
228,571  shares he  received  in payment of his  $100,000  bonus.  The  $500,000
utilized by Mr.  Weavil to purchase  such shares was borrowed  from the Company.
The repayment of $250,000 of such borrowed funds was due 180 days after the date
of loan (i.e., by July 20, 1997),  was unsecured and bore interest at 6% and was
repaid on time.  Repayment of the other $250,000 of such funds is due five years
after  issuance  (i.e. by January  20,2002),  is secured by the shares of Unilab
Common Stock purchased from the proceeds  thereof and bears interest at 6%. Such
compensation  and bonus  structure  were  determined  pursuant  to Mr.  Weavil's
Employment Agreement,  described above under the caption "Employment Agreements;
Other Arrangements -- Weavil Employment Agreement".

                  Under the terms of Mr. Weavil's  Employment  Agreement,  bonus
payments for 1998 and beyond are to be determined in the discretion of the Board
of Directors or the  Compensation  Committee.  The Committee  based Mr. Weavil's
1998 bonus on the Company's  ability to meet or exceed  certain  pre-established
financial parameters.  Since the Company's performance in 1998 substantially met
the parameters previously  established by the Board, Mr. Weavil received a bonus
of $425,000 in March 1999.

   Compensation of Other Named Executive Officer and Key Management Personnel

                  The Company has also entered into  employment  agreements with
the Company's other Named Executive Officers and other key management personnel.
Each  agreement  provides  a  base  salary  plus  potential  bonus,  if  certain
performance  objectives are achieved,  and other  incentive  compensation at the
discretion  of  the  Chief  Executive  Officer  (approved  by  the  Compensation
Committee, in the case of the Company's other Named Executive Officers).

                  The Compensation  Committee  believes that  significant  stock
ownership,  through grants of stock options,  restricted stock, loans to finance
the  purchase  of  Common  Stock  and  other  forms  of  equity-based  incentive
compensation  that would be  permitted  under the Stock  Option and  Performance
Incentive  Plan,  are a major  incentive in aligning the interests of employees,
including  senior  management,  and  stockholders.  The  Compensation  Committee
therefore  intends to  continue  to explore  various  methods of  assuring  such
commonality of interest in the Company's long-term performance.

                                         Kirby L. Cramer (Chairman)
                                         Gabriel B. Thomas
                                         Members of the Compensation Committee


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

Ownership of Management and Directors

         The  following  table sets forth  certain  information  known to Unilab
regarding  the  beneficial  ownership of Unilab Common Stock as of April 5, 1999
by: (i) each of Unilab's  directors and Named Executive Officers (see "Executive
Compensation" for definition of Named Executive  Officer) and (ii) all directors
and executive officers as a group. For purposes of this table, a person or group
of persons is deemed to have "beneficial  ownership" of any shares as of a given
date which such person has the right to acquire  within 60 days after such date.
For purposes of computing  the  percentage  of  outstanding  shares held by each
person or group of persons named below on a given date,  any security which such
person or persons  have the right to  acquire  within 60 days after such date is
deemed to be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage  ownership of any other person.  Except as noted below,
each person has full voting and investment power over the shares indicated.

                                    Number of Shares of         Percent of
Name and Address                    Unilab Common Stock     Unilab Common Stock
Name and Address                    Beneficially Owned     Beneficially Owned(1)

David C. Weavil                         1,495,928(2)                 3.6%
Haywood D. Cochrane, Jr.                   70,265(3)                 *
Kirby L. Cramer                         1,075,622(4)                 2.6%
William Gedale                              7,751(5)                 *
Richard A. Michaelson                     745,024(6)                 1.8%
Gabriel B. Thomas   120,934(7)                  *
All Directors and Executive Officers
   Of Unilab as a Group (10 persons)       4,931,924                11.4%
---------------
* less than 1%

<TABLE>
<CAPTION>
<S>   <C>
(1)   Calculated  pursuant  to  Rule  13d-3  promulgated  under  the  Securities
      Exchange  Act of 1934,  as  amended  (the  "Exchange  Act"),  and based on
      40,707,673  shares of Unilab Common Stock  outstanding  as of the April 5,
      1999.

(2)   Mr. Weavil is Chairman,  President and Chief  Executive  Officer of the Company.  Pursuant to the terms of an Employment
      Agreement  dated  January 20, 1997 between David C. Weavil and Unilab,  Mr.  Weavil (a) purchased  $500,000 of Common Stock
      from the Company at the closing  market price of the Common Stock on January 17, 1997  ($0.4375),  with funds borrowed from
      the Company  (half of which have been paid back to the  Company,  including  accrued 6%  interest  thereon),  resulting  in
      ownership of 1,142,857  shares and (b) received  228,571  shares  ($100,000 of stock issued at the January 17, 1997 closing
      price  ($0.4375))  as a partial  payment  of his 1997  bonus.  During  1998 and 1997 Mr.  Weavil  donated  18,000 and 7,500
      shares,  respectively,  to charity.  Pursuant to his Employment Agreement, Mr. Weavil has also received options to purchase
      250,000  shares at the January 17, 1997  closing  price of $0.4375 per share,  100,000  shares of which have vested and are
      included in this  ownership  calculation,  and options to purchase  250,000  shares at the January 2, 1998 closing price of
      $1.75, 50,000 of which have vested.  See "Employment Agreements; Other Arrangements -- Weavil Employment Agreement".

(3)   Mr. Cochrane is a director of the Company.  Includes a presently  exercisable  option to purchase 10,000 shares at $0.75
      per share,  which expires in June 2007, a presently  exercisable option to purchase 10,000 shares at $1.75 per share, which
      expires in January 2008 and a presently  exercisable  option to purchase  5,000 shares at $2.3125 per share,  which expires
      in January  2009.  Also  includes 953 shares  received in pro rata  payment of second  quarter 1997  director  fees,  4,444
      shares  received in payment of third quarter 1997 director  fees,  3,077 shares  received in payment of fourth quarter 1997
      director fees,  2,857 shares  received in payment of first quarter 1998 director fees,  3,721 shares received in payment of
      second  quarter 1998 director  fees,  4,324 shares  received in payment of third quarter 1998 director  fees,  5,161 shares
      received in payment of fourth quarter 1998 director fees,  4,324 shares  received in payment of first quarter 1999 director
      fees and 3,404 shares received in payment of second quarter 1999 director fees.  See "Compensation of Directors".

(4)   Mr.  Cramer is a director of the Company.  Includes a presently  exercisable  option to purchase  10,000 shares at $2.00
      per share,  which  expires in July 2000,  a presently  exercisable  option to purchase  30,000  shares at $6.125 per share,
      which expires in March 2003, a presently  exercisable  option to purchase  10,000 shares at $6.00 per share,  which expires
      in November 2003, a presently  exercisable  option to purchase 20,000 shares at $4.50 per share,  which expires in December
      2004, a presently  exercisable  option to purchase  20,000  shares at $2.625 per share,  which  expires in January  2006, a
      presently  exercisable  option to purchase  20,000  shares at $0.50 per share,  which  expires in January 2007, a presently
      exercisable  option to  purchase  20,000  shares  at $1.75  per  share,  which  expires  in  January  2008 and a  presently
      exercisable  option to purchase  10,000 shares at $2.3125 per share,  which expires in January  2009.  Also includes  6,667
      shares  received in payment of fourth quarter 1996 director fees,  10,000 shares  received in payment of first quarter 1997
      director fees,  8,000 shares received in payment of second quarter 1997 director fees,  4,444 shares received in payment of
      third quarter 1997 director  fees,  3,077 shares  received in payment of fourth  quarter 1997 director  fees,  3,721 shares
      received in payment of second quarter 1998 director fees,  4,324 shares  received in payment of third quarter 1998 director
      fees,  5,161 shares  received in payment of fourth  quarter 1998 director fees,  4,324 shares  received in payment of first
      quarter  1999  director  fees and 3,404  shares  received in payment of second  quarter  1999  director  fees.  Mr.  Cramer
      purchased  500,000  shares of Common  Stock from the  Company on April 4, 1997 at a per share  purchase  price equal to the
      closing  market price on such date of $0.5625.  Such shares were purchased  pursuant to the Directors  Stock Purchase Plan.
      See "Compensation of Directors".

(5)   Mr. Gedale is a director of the Company.  Includes a presently  exercisable  option to purchase 10,000 shares at $1.6875
      per share,  which expires in September 2007, a presently  exercisable  option to purchase 10,000 shares at $1.75 per share,
      which expires in January 2008,  and a presently  exercisable  option to purchase  5,000 shares at $2.3125 per share,  which
      expires in January  2009.  Also  includes  3,721 shares  received in payment of second  quarter  1998  director  fees.  Mr.
      Gedale received 4,324 shares  received in payment of third quarter 1998 director fees,  5,161 shares received in payment of
      fourth  quarter 1998 director fees,  4,324 shares  received in payment of first quarter 1999 director fees and 3,404 shares
      received in payment of second  quarter 1999  director  fees. He sold 5,161 shares on December 14, 1998 in open market sales
      transactions at a sales price of $2.0625 per share,  4,000 shares on October 12, 1998 in open market sales  transactions at
      a sales price of $1.8125 per share,  2,162  shares on July 9, 1998 in open market  sales  transactions  at a sales price of
      $2.50 per share,  1,160  shares on April 20, 1998 in open market sales  transactions  at a sales price of $2.6875 per share
      and 4,324  shares on January  4, 1999 in open  market  sales  transactions  at a sales  price of  $2.3125  per  share.  See
      "Compensation of Directors".

(6)   Mr.  Michaelson is a director of and consultant to the Company (see "Certain  Relationships  and Transactions  with Related
      Parties").  He served as Senior Vice  President of the Company until  December 31, 1997.  Includes a presently  exercisable
      option to purchase  50,000 shares at $5.625 per share,  which expires in February 2004, a presently  exercisable  option to
      purchase  35,000  shares at $4.50 per share,  which  expires in January  2005, a presently  exercisable  option to purchase
      150,000 shares at $5.1875 per share,  which expires in May 2005, a presently  exercisable  option to purchase 35,000 shares
      at $2.1875 per share,  which expires in February 2006, a presently  exercisable option to purchase 200,000 shares at $0.625
      per share which expires in April 2007, a presently  exercisable  option to purchase 10,000 shares at $1.75 per share, which
      expires in January 2008 and a presently  exercisable  option to purchase  5,000 shares at $2.3125 per share,  which expires
      in  January  2009.  Also  includes  29,090  shares  received  in  partial  payment  of salary  for the months of August and
      September  1996.  Additionally,  includes  3,721 shares  received in payment of second  quarter 1998 director  fees,  4,324
      shares  received in payment of third quarter 1998 director  fees,  5,161 shares  received in payment of fourth quarter 1998
      director fees,  4,324 shares  received in payment of first quarter 1999 director fees and 3,404 shares  received in payment
      of second quarter 1999 director fees. See  "Compensation of Directors" and "Certain  Relationships  and  Transactions  with
      Related Persons".

(7)   Mr. Thomas is a director of the Company.  Includes a presently  exercisable  option to purchase  10,000 shares at $6.00 per
      share,  which expires in November 2003, a presently  exercisable option to purchase 20,000 shares at $4.50 per share, which
      expires in December 2004, a presently  exercisable  option to purchase 20,000 shares at $2.625 per share,  which expires in
      January 2006, a presently  exercisable  option to purchase 20,000 shares at $0.50 per share, which expires in January 2007,
      a  presently  exercisable  option to  purchase  20,000  shares at $1.75 per share,  which  expires  in  January  2008 and a
      presently  exercisable  option to purchase 10,000 shares at $2.3125 per share, which expires in January 2009. Also includes
      3,721 shares  received in payment of second quarter 1998 director fees,  4,324 shares  received in payment of third quarter
      1998 director  fees,  5,161 shares  received in payment of fourth  quarter 1998  director  fees,  4,324 shares  received in
      payment of first  quarter 1999  director fees and 3,404 shares  received in payment of second  quarter 1999 director  fees.
      See "Compensation of Directors".
</TABLE>

Ownership of Certain Beneficial Owners

           The following table sets forth certain information,  to the knowledge
of Unilab, regarding the beneficial ownership of Unilab Common Stock as of April
5, 1999 by all  stockholders  known by Unilab (based on public  filings with the
Commission,  except as otherwise noted) to be the beneficial owners of more than
5% of the outstanding shares of Unilab Common Stock. For purposes of this table,
a person or group of persons  is deemed to have  "beneficial  ownership"  of any
shares as of a given date which such  person has the right to acquire  within 60
days after such date.  For purposes of computing the  percentage of  outstanding
shares held by each person or group of persons named above on a given date,  any
security  which such person or persons  has the right to acquire  within 60 days
after such date is deemed to be outstanding, but is not deemed to be outstanding
for the purpose of  computing  the  percentage  ownership  of any other  person.
Except as noted below, each person has full voting and investment power over the
shares indicated.

                                              Number         Percent of
                                           of Shares of      Common Stock
Name and Address of                       Common Stock       Beneficially
Beneficial Owner                       Beneficially Owned      Owned(1)

Rockefeller & Co., Inc.                    3,550,514(2)           8.7%
30 Rockefeller Plaza
New York, NY  10112

Andrew H. Baker                            2,716,228(3)           6.7%
c/o Focused Healthcare Partners, Ltd.
401 Hackensack Avenue
Hackensack, NJ  07601
--------------------

(1)   Calculated  pursuant to Rule 13d-3 promulgated under the Exchange Act and
      based on 40,707,673 shares of Unilab Common Stock outstanding as of
      April 5, 1999.

(2)   As reported in Schedule 13G, Amendment No. 3 filed with the Commission on
      February 12, 1999

(3)   Mr. Baker is the former Chairman, President and Chief Executive Officer of
      the Company.  Represents  2,176,238 shares directly or indirectly owned by
      Mr.  Baker (of which  18,069  shares  are  directly  owned by Mr.  Baker's
      spouse) and beneficial  ownership of 540,000 shares issuable upon exercise
      of fully  vested and  presently  exercisable  options to  purchase  Unilab
      Common  Stock.  Based on Company  records,  a Form 4 filed by Mr. Baker on
      January 30, 1997 and a Schedule 13D filed by Mr.
      Baker on April 16, 1997.

Item 13.         Certain Relationships and Transactions with Related Persons

Indebtedness of Management

      In connection  with the hiring of David Weavil as the Company's  Chairman,
President and Chief  Executive  Officer in January 1997,  the Company loaned Mr.
Weavil $500,000,  which Mr. Weavil used to acquire 1,142,857 newly issued shares
of Unilab Common Stock,  valued at the January 17, 1997 closing  market price of
$0.4375.  $250,000 of such amount due was  unsecured and bore interest at 6% and
was repaid on schedule on July 20, 1997.  Repayment of the other $250,000 is due
on January 20, 2002, is secured by the shares of Unilab  Common Stock  purchased
with the proceeds thereof and bears interest at 6%.

      R. Jeffrey Lanzolatta,  one of the Named Executive Officers, is party to a
secured  demand  promissory  note  dated  December  17,  1996,  in the amount of
$50,000,  reflecting the Company's  advance to Mr. Lanzolatta of $50,000 against
future bonus payments.  Under the promissory note,  interest will be paid at the
prime rate of Citibank,  N.A. if the principal  sum is not paid when due.  These
amounts are secured by 150,000 shares of restricted Unilab common stock owned by
Mr. Lanzolatta.

Transactions with Related Persons

           The  Company  retains one of its  directors,  Richard A. Michaelson,
as a  consultant  to assist in  structuring  and negotiating  significant
corporate  transactions, such as acquisitions.  Mr. Michaelson was paid $60,000
in 1998 under the terms of his consulting agreement.



<PAGE>




                                     PART IV

Item 14.       Exhibits, Financial Statements, Financial Statement Schedules
               and Reports on Form 8-K

                                                            Reference
                                               -------------------------------
                                                  Form 10-K    Annual Report to
                                                Annual Report    Shareholders

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

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

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

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

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

Notes to Financial Statements                         ---              21

Report of Independent Public Accountants              ---              31

(2) Index to Financial Statement Schedule:

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

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


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


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


<PAGE>


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

(b)         Reports on Form 8-K

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

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

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

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

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


<PAGE>


                                    SIGNATURE


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

Dated:           10/25/99                   UNILAB CORPORATION



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



<PAGE>


              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES



To Unilab Corporation

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





ARTHUR ANDERSEN LLP
Los Angeles, California
February 12, 1999


<PAGE>




                    Schedule II

<TABLE>

                                               UNILAB CORPORATION AND SUBSIDIARIES
                                                VALUATION AND QUALIFYING ACCOUNTS
                                                     (Amounts in thousands)

<CAPTION>


                                       Balance at     Charged to                     Balance
                                        Beginning      Costs and                     End of
                                        of Period      Expenses      Deductions      Period
<S>                                     <C>            <C>         <C>             <C>

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

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

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

</TABLE>

<PAGE>
<TABLE>

                                Index
<CAPTION>
Exhibit No.       Description
<S>             <C>
 2.1             Asset Purchase Agreement,  dated as of September 16, 1998, by and between Unilab Corporation,
                 as  Buyer,  and  Meris  Laboratories,   Inc.  Debtor  and  Debtor-in-Possession,   as  Seller
                 (Incorporated  by  reference to Exhibit 2.1 to the  Company's  Amendment on Form 8-K(A) dated
                 January 18, 1999).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10.8             Amendment No. 1, dated as of September 17, 1997, to the Stock Option  Agreement,  dated as of
                 February 25, 1994,  between the Company and Richard A. Michaelson  (Incorporated by Reference
                 to Exhibit 10.21 to the company's  Annual Report on form 10-K for the year ended December 31,
                 1997).
10.9             Amendment No. 1, dated as of September 17, 1997, to the Stock Option  Agreement,  dated as of
                 October 20, 1992,  between the Company and Richard A. Michaelson  (Incorporated  by Reference
                 to Exhibit 10.22 to the Company's  Annual Report on form 10-K for the year ended December 31,
                 1997).

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

13.1             Selected portions of Annual Report to Shareholders

21.1             Subsidiaries of the Company

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

24.1             Power of Attorney of David C. Weavil

24.2             Power of Attorney of Haywood Cochrane

24.3             Power of Attorney of Kirby L. Cramer

24.4             Power of Attorney of William Gedale

24.5             Power of Attorney of Richard Michaelson

24.6             Power of Attorney of Gabriel B. Thomas

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

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