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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
                         COMMISSION FILE NUMBER 1-11343

                          CORAM HEALTHCARE CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
                  DELAWARE                                      33-0615337
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<S>                                            <C>
       (State or other jurisdiction of                         (IRS Employer
       incorporation or organization)                       Identification No.)

     1125 SEVENTEENTH STREET, SUITE 2100                           80202
              DENVER, COLORADO                                  (ZIP CODE)
  (Address of principal executive offices)
</TABLE>

       Registrant's telephone number, including area code: (303) 292-4973

          Securities registered pursuant to Section 12(b) of the Act:

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<CAPTION>
                                                         NAME OF EACH EXCHANGE ON
             TITLE OF EACH CLASS                             WHICH REGISTERED
             -------------------                         ------------------------
<S>                                            <C>
  Common Stock ($.001 par value per share)                New York Stock Exchange
</TABLE>

          Securities registered pursuant to Section 12(g) of the Act:

                                      NONE

     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 and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]  No [ ]

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

     As of March 23, 1998, there were outstanding 48,745,957 shares of the
registrant's common stock, which is the only class of voting stock of the
registrant outstanding. As of such date, the aggregate market value of the
shares of common stock held by nonaffiliates of the registrant based on the
closing price for the common stock on the New York Stock Exchange on March 23,
1998, was approximately $103.0 million.

                      DOCUMENTS INCORPORATED BY REFERENCE

     The information required by Part III is incorporated by reference from the
Registrant's definitive proxy statement to be filed with the Commission pursuant
to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report.

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                                     PART I

ITEM 1. BUSINESS.

GENERAL OVERVIEW

     Coram Healthcare Corporation, a Delaware corporation ("Coram" or the
"Company"), is a leading provider of alternate site (outside the hospital)
infusion therapy and related services in the United States, operating
approximately 100 branches located in 40 states. In addition, the Company
provides services through one branch located in the province of Ontario, Canada.
Infusion therapy involves the intravenous administration of anti-infective
therapy, chemotherapy, pain management, nutrition and other therapies. Other
services offered by the Company include mail-order pharmacy, pharmacy benefit
management, ancillary network management services and other non-intravenous
products and services.

     The Company was formed on July 8, 1994 as a result of a merger (the
"Four-Way Merger") by and among T2 Medical, Inc. ("T2 Medical"), Curaflex Health
Services, Inc. ("Curaflex"), Medisys, Inc. ("Medisys") and HealthInfusion, Inc.
("HealthInfusion"), each of which was a publicly-held national or regional
provider of home infusion therapy and related services. Each of these other
companies became and is now a wholly-owned subsidiary of the Company. This
transaction was accounted for as a pooling of interests.

     The Company has made a number of acquisitions since operations commenced,
the most significant of which was the acquisition of certain assets of the home
infusion business of Caremark, Inc., a wholly-owned subsidiary of Caremark
International, Inc. (the "Caremark Business"), effective April 1, 1995. In
addition, the Company acquired H.M.S.S., Inc. ("HMSS"), a leading regional
provider of home infusion therapies based in Houston, Texas, effective September
12, 1994. As a result of these acquisitions, the Company became a leading
provider of alternate site infusion therapy services in the United States based
on geographic service area and total revenue.

     During the nine months ended September 30, 1997, the Company provided
lithotripsy services through a controlling interest in 11 lithotripsy
partnerships as well as two wholly-owned lithotripsy entities. On August 20,
1997, the Company signed an agreement with Integrated Health Services, Inc.
("IHS") for the sale of the Company's interest in its thirteen lithotripsy
partnerships, the stock of its equipment service company and certain related
assets (the "Lithotripsy Business"). Effective September 30, 1997, the Company
completed the transaction as to all of its Lithotripsy Business other than its
interests in three lithotripsy partnerships. Pursuant to a side agreement
amending the August 20, 1997 purchase agreement, the Company's interests in the
three remaining partnerships were placed in escrow pending the satisfaction of
certain conditions. Following satisfaction of these conditions, two of the
partnerships were conveyed to IHS effective October 3, 1997. Due to the
Company's and IHS's inability to obtain the consent of the other partner to the
transfer of Coram's interest therein, the Company retained its interest in the
remaining partnership. See Note 5 to the Company's Consolidated Financial
Statements.

STATEMENT ON FORWARD LOOKING STATEMENTS

     This Annual Report on Form 10-K contains certain forward looking statements
(as such term is defined in the private Securities Litigation Reform Act of
1995) and information relating to Coram that are based on the beliefs of the
management of Coram as well as assumptions made by and information currently
available to the management of Coram. When used in this Report, the words
"estimate," "project," "believe," "anticipate," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. Such statements
reflect the current views of Coram with respect to future events based on
currently available information and are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in such
forward-looking statements. For a discussion of such risks, see Item 7. RISK
FACTORS. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Coram does
not undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

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DELIVERY OF ALTERNATE SITE HEALTHCARE SERVICES

     General. Infusion patients are primarily referred to the Company following
diagnosis of a specific disease or upon discharge from a hospital. The treating
physician will generally determine whether the patient is a candidate for home
infusion treatment. Either the patient, discharge planner, patient's physician
or a managed care payor will determine the infusion company to which a patient
is referred. Because drugs administered intravenously tend to be more potent and
complex than oral drugs, the delivery of intravenous drugs generally requires
patient training, specialized equipment and periodic monitoring by skilled
nurses and pharmacists. Most therapies require either a gravity-based flow
control device or an electro-mechanical pump to monitor the drugs. Some
therapies are administered continuously; most however, are given for prescribed
periods of time. Coram's nurses and pharmacists work with the patient's doctor
to track the patient's condition and update the therapy as necessary. The
duration of the patient's treatment may last from as little as a few days to the
lifetime of the patient.

     Branch Facilities. The delivery of infusion services is coordinated through
local or regional infusion centers or "branches," that provide the following
functions: (i) patient intake and monitoring, (ii) drug mixing and preparation
by pharmacists and pharmacy technicians, (iii) clinical pharmacy services, (iv)
nursing services, (v) materials management, including drug and supply inventory
and delivery, (vi) billing, collections and benefit verification, (vii) sales to
local referral sources, including doctors, hospitals and payors and (viii)
general management. The Company's branch facilities typically are leased and
generally consist of 1,500 to 32,000 square feet of office space in suburban
office parks, often in close proximity to major medical facilities. A typical
branch has a fully equipped pharmacy, offices for administrative personnel and a
storage warehouse. A typical branch includes a branch manager, licensed
pharmacists, pharmacy technicians, registered nurses, selling and administrative
personnel. Each branch serves the market area in which it is located, generally
within a two-hour driving radius of the patients served, as well as outlying
locations where it can arrange appropriate nursing services. Satellite branches
are also used. These smaller branches contain limited supplies and pharmacy
operations and are used as support centers to respond to patient needs in
specific geographical areas.

     In-Home Patient Care. Before accepting a patient for home infusion
treatment, the staff at the local branch works closely with the patient's
physician or clinicians and hospital personnel in order to assess the patient's
suitability for home care. This assessment process includes but is not limited
to an analysis of the patient's physical and emotional condition and of social
factors such as the safety and cleanliness of the home environment and the
availability of family members or others who can assist in the administration of
the patient's therapy, if necessary. Patient assessment also includes a
verification of a patient's eligibility and benefits package through the
patient's insurance carrier, managed care provider or governmental payor.

     When a patient's suitability for home care has been confirmed, the patient
and the patient's designated care-giver receive training and education
concerning the therapy to be administered, including proper infusion technique
and care and use of intravenous devices and other equipment used in connection
with the therapy. The environmental assessment and training are generally
performed by the Company's nurses.

     Prior to the patient receiving treatment services from the Company, the
treating physician develops the patient's plan of care and communicates it to
the local branch's clinical support team, including its nurses and pharmacists.
This team will work with the treating physician and the managed care
coordinator, if there is one, to administer the plan of care and monitor the
patient's progress. Throughout the patient's therapy, the local branch's
clinical support team will regularly provide the treating physician and the
managed care coordinator with reports on the patient's condition, maintaining an
information flow that allows the treating physician to actively manage the
patient's treatment. The treating physician always remains responsible for the
patient's care, including changing the patient's plan of care to meet the
patient's needs.

     Upon the patient's arrival home, a nurse from the local branch typically
oversees the administration of the patient's first home infusion treatment.
Thereafter, the frequency of nursing visits depends upon the particular therapy
the patient is receiving. During these subsequent visits, the nurse may check
and adjust the patient's
infusion site, intravenous lines and related equipment, obtain blood samples,
change the pump settings and/or drug administration and assess the patient's
condition and compliance with the plan of care. The patient's
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supplies and drugs are typically delivered on a weekly basis depending on the
therapy and the particular drugs being used. The treating physician and the
managed care coordinator remain actively involved in the patient's treatment by
monitoring the administration of the plan of care and revising the plan as
necessary.

PRODUCTS AND SERVICES OF THE COMPANY

     Infusion Therapy. Coram provides a variety of infusion therapies,
principally anti-infective therapy, intravenous immuno-globulin ("IVIG"),
parenteral nutrition, chemotherapy and pain management therapy. The initiation
and duration of these therapies is determined by a physician based upon a
patient's diagnosis, treatment plan and response to therapy. Certain therapies,
such as anti-infective therapy, are generally used in the treatment of temporary
conditions such as infections, while others, such as parenteral nutrition, may
be required on a long-term or permanent basis. The infusion therapies are
administered at the patient's home by the patient, the designated care-giver or
an employee or agent of the Company. In patient groups such as immune suppressed
patients (e.g., AIDS/HIV, cancer and transplant patients), antiinfective therapy
may be provided periodically over the duration of the primary disease or for the
remainder of the patient's life.

     Anti-Infective Therapy. Anti-infective therapy is the infusion of
antibacterial, anti-viral or anti-fungal medications into the patient's
bloodstream for the treatment of a variety of infectious diseases, such as
osteomyelitis (bone infections), bacterial endocarditis (infection of the heart
valves), wound infections, infections associated with AIDS and cancer and
infections of the kidneys and urinary tract. Generally, intravenous
anti-infective drugs are delivered through a peripheral catheter inserted in a
vein in the patient's arm. Anti-infective drugs are generally more effective
when infused directly into the bloodstream than when taken orally.

     Nutrition Therapy. Total parenteral nutrition therapy or "TPN" involves the
intravenous feeding of life-sustaining nutrients to patients with impaired or
altered digestive tracts due to a gastrointestinal illness or conditions such as
an intestinal obstruction or inflammatory bowel disease. The therapy is
administered through a central catheter surgically implanted into a major blood
vessel to introduce the nutrient solution into the bloodstream. The nutrient
solution may contain amino acids, dextrose, fatty acids, electrolytes, trace
minerals or vitamins. In many cases, the underlying illness or condition from
which parenteral nutrition patients suffer is recurrent in nature requiring
periodic re-hospitalization for treatment followed by resumption of parenteral
nutrition at home. Some patients must remain on parenteral nutritional therapy
for life.

     Enteral nutrition therapy is administered through a feeding tube into the
gastrointestinal tract to patients who cannot eat as a result of an obstruction
to the upper gastrointestinal tract or other medical conditions. Enteral
nutrition therapy is often administered over a long period, generally for more
than six months.

     Biotherapy. The Company provides patients with biological response
modifiers, colony stimulating factors, erythropoietin and interferons. In
addition, the Company provides growth hormone therapies.

     IVIG. IVIG therapy involves the administration of a blood derivative
product (gammaglobulins) which is administered to patients with immune
deficiencies conditions. IVIG therapy is most commonly administered to patients
with primary immune deficiencies or autoimmune disorders. Patients receiving
IVIG therapy for primary immune deficiencies usually receive the therapy for
life. Patients receiving IVIG therapy for autoimmune disorders receive the
therapy intermittently over a period of months depending on their condition.
During 1997, and continuing in 1998, the Company experienced and is experiencing
difficulties in obtaining IVIG due to a national shortage of this product. The
ongoing shortage of IVIG may adversely affect the Company's results of
operations.

     Other Therapies. The Company provides other technologically advanced
therapies such as chemotherapy, pain management, intravenous entropic therapy
for patients with congestive heart failure or for those who are awaiting cardiac
transplants, intravenous anti-coagulant therapy for prevention of blood clots
and anti-nausea therapy for chemotherapyinduced emesis. Hydration therapy is
often administered in conjunction with intravenous chemotherapy. In addition,
the Company provides other therapies for diseases such as hemophilia and
alpha-1-antititrypsin deficiency. Currently, each such therapy amounted to less
than 5% of the Company's infusion therapy net revenue for each of the fiscal
years ended December 31, 1997 and 1996. The Company

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continually evaluates new infusion therapies and intends to add therapies which
enable it to continue to provide full service to its patients and payors. For
example, the Company has developed a program and is treating pre- and
post-transplant patients. This treatment program includes proprietary patient
assessment and monitoring protocols and the delivery of a wide range of
intravenous and oral medications.

     Lithotripsy. Lithotripsy is a non-invasive technique that uses shock waves
to disintegrate kidney stones. Depending on the particular lithotripter used,
the patient is sedated using either general anesthesia or a mild sedative while
seated in a bath or lying on a treatment table. The operator of the lithotripter
machine locates the stone using fluoroscopy and directs the shock waves toward
the stone. The shock waves then fragment the stone thereby enabling the patient
to pass the fragments through the urinary tract. Because lithotripsy is non-
invasive and is provided on an outpatient basis, lithotripsy is an attractive
alternative to other more invasive techniques otherwise used in treating urinary
tract stones.

     As of December 31, 1996, Coram owned a controlling interest in 11
lithotripsy partnerships as well as two wholly-owned lithotripsy entities, a
wholly-owned lithotripter maintenance company and a lithotripsy management
company. On August 20, 1997, the Company signed an agreement with IHS, for the
sale of its Lithotripsy Business. Effective September 30, 1997, the Company
completed the transaction as to all of its Lithotripsy Business other than its
interests in three lithotripsy partnerships. Pursuant to a side agreement
amending the August 20, 1997 purchase agreement, the Company's interest in the
three remaining partnerships was placed in escrow pending the satisfaction of
certain conditions. Following satisfaction of these conditions, two of the
partnerships were conveyed to IHS effective October 3, 1997. Due to the
Company's and IHS's inability to obtain the consent of the other partner to the
transfer of Coram's interest therein, the Company retained its interest in the
remaining partnership.

     R-Net. The Resource Network or "R-Net" is a home health services provider
network and supporting management system developed by the Company in 1993.
Through R-Net the Company offers provider network development and management to
large managed care organizations such as Health Maintenance Organizations and at
risk payors seeking to arrange for a variety of alternate site services for
their enrollees under both capitated and fee-for-service arrangements. Under its
R-NET arrangements, the Company (i) coordinates the provision of alternate site
services among its network of providers; (ii) coordinates cases and utilization;
and (iii) monitors and reports outcome to its customers who are concerned with
combining cost efficiency with good clinical outcomes. As of December 31, 1997,
R-Net had approximately 17 such arrangements covering approximately three
million lives.

     Prescription Services. Coram Prescription Services ("CPS") includes a mail
order pharmacy and a pharmacy benefit management service ("PBM"). The mail order
pharmacy provides centralized distribution, compliance monitoring, patient
education, and clinical support to patients with diabetes, organ transplants,
HIV/AIDS, growth deficiencies, and other chronic conditions. The PBM provides
on-line claims administration, formulary management, and drug utilization review
services through a nationwide network of over 40,000 retail pharmacies. In
addition to Coram's field sales force, CPS' services are marketed through a
dedicated sales force to physicians, managed care organizations and other
third-party payors.

     Women's Health. The Women's Health business provides pregnancy management
services. The Women's Health services include: risk assessment and in-home
monitoring of uterine contractions; monitoring of blood pressure, heart rate,
weight, urine, protein and glucose levels; intravenous and oral drug therapy;
dietician services; integrated nursing support; diabetes management;
pregnancy-induced hypertension management; fertility management; and post-partum
follow-up.

     Asthma Care and Chronic Obstructive Pulmonary Disease ("COPD"). The Company
introduced an asthma and COPD management program. The programs, which are
marketed to managed care organizations, are designed to prevent hospitalization
and emergency room visits of patients with asthma or COPD by helping patients
and families better manage the disease.

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ORGANIZATION AND OPERATIONS

     General. The Company's alternate site infusion therapy business operations
are conducted through approximately 100 branches managed through two divisional
offices. The divisional offices provide each of its branches with key management
direction and support services. The Company's organizational structure is
designed to create operating efficiencies associated with certain centralized
services and purchasing while also promoting local decision making. The Company
believes that its decentralized approach to management facilitates high quality
local decision making, which allows it to attract and retain experienced local
managers and be responsive to local market needs.

     Operating Systems and Controls. An important factor in Coram's ability to
monitor its operating locations is its management information systems. Besides
routine revenue and cost reporting, the Company has developed a performance
model for monitoring its field operations. Actual operating results derived from
its management information systems are compared to the performance model,
enabling management to identify opportunities for increased efficiency and
productivity. The Company believes that the use of standardized, specific
performance matrices and the identification of best demonstrated practices
facilitates operating improvement.

     The Company endeavors to ensure that its local managers have the
appropriate authority and ability to perform effectively by providing them with
training, comprehensive policies and procedures and standardized systems. The
Company has designed management incentive plans that reward performance based on
revenue and earnings before interest, taxes, depreciation and amortization
("EBITDA") contribution, accounts receivable collection and inventory control.

REIMBURSEMENT OF SERVICES

     Virtually all of Coram's revenue is derived from third-party payors,
including private insurers, managed care organizations such as Health
Maintenance Organizations ("HMOs") and Preferred Provider Organizations
("PPOs"), and governmental payors such as Medicare and Medicaid. Similar to
other medical service providers, the Company experiences lengthy reimbursement
periods in certain circumstances as a result of third-party payment procedures.
Consequently, management of accounts receivable through effective patient
registration, billing, collection and reimbursement procedures is critical to
financial success and continues to be a high priority for management. The
Company has developed substantial expertise in processing claims and carefully
screening new cases to determine whether adequate reimbursement will be
available. Regional locations are generally responsible for billing and
collections, within strict guidelines. The Company believes that accounts
receivable management is best accomplished at the regional level because of
direct relationships with payors and the ability of regional personnel to
identify and react promptly to billing discrepancies.

     Private indemnity payors typically reimburse at a higher amount for a given
service and provide a broader range of benefits than governmental and managed
care payors, although net revenue and gross profits from private and other
third-party non governmental payors have been affected by the continuing efforts
to contain or reduce the costs of healthcare. An increasing percentage of
Coram's revenue has been derived in recent years from agreements with HMOs, PPOs
and other managed care providers. Although these agreements often provide for
negotiated reimbursement at reduced rates, they generally result in lower bad
debts, provide for faster payment terms and provide opportunities to generate
greater volume than traditional indemnity referrals. Reimbursement coverage is
provided through private sources, such as insurance companies, self-insured
employers and patients, and through the Medicare and Medicaid programs. The
Healthcare Financing Administration ("HCFA") has developed, for use in the
Medicare Part B program, a national fee schedule for respiratory therapy, home
medical equipment and infusion therapy which provides reimbursement at 80% of
the amount of any fee on the schedule. A substantial amount of the revenue the
Company receives from the Medicare program originates from the Part B program.
The remaining 20% co-insurance portion is not paid by Medicare. The Company
pursues secondary insurance and patients for the 20% co-insurance.

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QUALITY ASSURANCE

     Coram has established quality improvement programs that implement service
standards and enable the Company to monitor whether the objectives of those
standards are met. As of March 23, 1998, the corporate office and 83 branches,
including related satellite locations, had been re-surveyed by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO"). Of these, 75
branches received accreditation, 30 of which were accredited with commendation,
the highest award possible. The remaining branches are either awaiting the
results of their survey or are in the process of being re-surveyed. As of
December 31, 1997, all branches were accredited.

     An integral part of Coram's quality efforts is the branch team that meets
regularly to perform, among others, the following functions:

          1. Evaluate branch programs, policies and procedures.

          2. Provide ongoing direction to the quality improvement efforts.

          3. Evaluate patient satisfaction activities and results.

          4. Assist in development of new programs or procedures to meet
             recognized needs within the branch or community which it serves.

          5. Evaluate the branch staff efforts related to professional and
     clinical issues.

          6. Identify and monitor key performance areas of operations.

     In addition, Coram's Clinical Services Department performs ongoing quality
audits of the branches to assess level of service being provided.

COMPETITION

     The alternate site healthcare market is highly competitive and is
experiencing both horizontal and vertical consolidation. Some of Coram's current
and potential competitors include (i) integrated providers of alternate site
healthcare services; (ii) hospitals; (iii) local providers of multiple products
and services for the alternate site healthcare market; and (iv) physicians,
including physicians with whom it previously had business arrangements. The
Company has experienced increased competition from hospitals and physicians who
have sought to increase the scope of services offered through their offices,
including services similar to those offered by the Company.

     The Company competes on a number of factors, including quality of care and
service, reputation within the medical community, geographical scope and price.
Competition within the alternate site healthcare delivery system has been
affected by the decision of third-party payors and their case managers to become
more active in monitoring and directing the care delivered to their
beneficiaries. Accordingly, relationships with such payors and their case
managers and inclusion within preferred provider and other networks of approved
or accredited providers may become a prerequisite to Coram's ability to continue
to serve many of its patients. Similarly, the ability of the Company and its
competitors to align themselves with other healthcare service providers may
increase in importance as managed care providers and provider networks seek out
providers who offer a broad range of services that may exceed the range of
services currently offered directly by the Company.

     Moreover, there are relatively few barriers to entry in the local markets
which Coram serves. Local or regional companies are currently competing in many
of the home healthcare markets served by the Company and others may do so in the
future. Coram also expects competitors to develop new strategic relationships
with providers, referral sources and payors, which could result in a rapid and
dramatic increase in competition. The introduction and enhancement of new
services and the development of strategic relationships by Coram's competitors
could cause a significant decline in sales, loss of market acceptance of the
Company's services and intense price competition. The Company expects to
continue to encounter increased competition in the future that could limit its
ability to maintain or increase its market share. Such increased competition
could have a

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material effect on the business, financial condition and results of operations
of the Company. See Item 7. RISK FACTORS -- "Intensely Competitive Industry."

SALES AND MARKETING

     The Company's products and services are marketed through its field sales
force, branch sales personnel and various media formats. Substantially all of
Coram's new patients are referred by physicians, medical groups, hospital
discharge planners, case managers employed by HMOs, PPOs or other managed care
organizations, insurance companies and home care agencies. The Company's sales
force is responsible for establishing and maintaining referral sources. All
sales employees receive a base salary plus incentive compensation based on
profitable revenue growth.

     The Company's network of field representatives enables it to market its
services to numerous sources of patient referrals, including physicians,
hospital discharge planners, hospital personnel, HMOs, PPOs and insurance
companies. Marketing is focused on presenting the Company's clinical expertise
tailored to the different customer interests with a specific emphasis on key
therapies. Products and services that are outside of base infusion therapy are
supported by specialty marketing and sales support personnel.

     As a result of escalating pressures to contain healthcare costs,
third-party payors are participating to a greater extent in decisions regarding
healthcare alternatives using their significant bargaining power to secure
discounts and to direct referrals of their enrollees to providers. In response,
Coram has modified its sales and development focus to aggressively pursue
agreements with third-party payors, managed care organizations and provider
networks that provide high quality, cost effective care. The Company has
recruited a dedicated sales force to enhance its efforts to market and sell its
services to managed care payors. Managed care sales representatives are deployed
in each market and at the corporate level with additional resources focused on
large national payors. The Company is currently focusing its efforts on
increasing referrals through selected managed care agreements with the goal of
being the exclusive infusion provider as well as selling specialty programs such
as nutrition, chronic care and transplant services to these key customers.
Through its R-Net product, the Company has established relationships with
managed care companies serving as an ancillary service manager for all home
health services. Under these arrangements, the Company provides some services
directly and subcontracts the services it does not provide on its own through
its network of providers.

CUSTOMERS AND SUPPLIERS

     The Company provides alternate site home healthcare services and products
to a large number of patients, and with the exception of Medicare and Medicaid
(which collectively represent 28% of net revenue for the year ended December 31,
1997), no single payor accounted for more than 5% of Coram's net revenue for the
year ended December 31, 1997. The Company purchases products from a large number
of suppliers and considers its relationships with its vendors to be good. The
Company believes that substantially all of its products are available from
alternative sources with terms consistent in all material respects to its
present agreements.

     In 1997, the Company incurred a one time purchase of approximately $11.5
million in multi-therapy infusion pumps and $4.3 million in related equipment
and supplies.

GOVERNMENT REGULATION

     General. Coram's alternate site infusion operations are subject to
extensive federal and state laws regulating, among other things, the provision
of pharmacy, home care, nursing services, health planning, health and safety,
environmental compliance and toxic waste disposal. The Company is also subject
to fraud and abuse and self referral laws, which affect its business
relationships with physicians and other healthcare providers and referral
sources and its reimbursement from government payors. Generally, all states
require infusion companies to be licensed as pharmacies and to have appropriate
state and federal registrations for dispensing controlled substances. Some
states require infusion companies to be licensed as nursing or home health
agencies and to obtain medical waste permits. In addition, certain employees of
the Company are subject to state laws and regulations governing the ethics and
professional practice of pharmacy and nursing.
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The Company may also be required to obtain certification to participate in
governmental payment programs, such as Medicare and Medicaid. Some states have
established Certificate of Need ("CON") programs regulating the establishment or
expansion of healthcare operations, including certain of Coram's operations. The
failure to obtain, renew or maintain any of the required regulatory approvals or
licenses could adversely affect the Company's business and could prevent the
location involved from offering products and services to patients. Coram's
operating results could be adversely affected, directly or indirectly, as a
result of any such sanctions. The Company believes it complies in all material
respects with these and all other applicable laws and regulations. The
healthcare services industry will continue to be subject to pervasive regulation
at the federal and state levels, the scope and effect of which cannot be
predicted. No assurance can be given that the activities of the Company will not
be reviewed and challenged or that government sponsored healthcare reform, if
enacted, will not result in a material adverse change to the Company.

     Fraud and Abuse. The Company's operations are subject to the illegal
remuneration provisions of the Social Security Act (sometimes referred to as the
"anti-kickback" statute) and similar state laws that impose criminal and civil
sanctions on persons who knowingly and willfully solicit, offer, receive or pay
any remuneration, whether directly or indirectly, in return for, or to induce,
the referral of a patient for treatment, or, among other things, the ordering,
purchasing or leasing, of items or services that are paid for in whole or in
part by federal healthcare programs. Violations of the federal anti-kickback
statute are punishable by criminal penalties, including imprisonment, fines and
exclusion of the provider from future participation in the federal healthcare
programs. Federal health care programs have been defined to include any plan or
program that provides health benefits which is funded by the United States
Government and commonly include Medicare, Medicaid and CHAMPUS, among others.
Civil suspension for anti-kickback violations can also be imposed through an
administrative process, without the imposition of civil monetary penalties. In
addition, violations of the anti-kickback statute may be prosecuted as false
claims under Medicare law, the penalties for which include return of payments
received, fines and exclusion from participation. Federal enforcement officials
may also attempt to use other general federal statutes to punish behavior
considered fraudulent or abusive, including the Federal False Claims Act, which
provides for penalties of up to $10,000 per claim plus treble damages, and
permits private persons to sue on behalf of the government. While the federal
anti-kickback statute expressly prohibits transactions that have traditionally
had criminal implications, such as kickbacks, rebates or bribes for patient
referrals, its language has been construed broadly and has not been limited to
such obviously wrongful transactions. Some court decisions state that, under
certain circumstances, the statute is also violated when one purpose (as opposed
to the "primary" or a "material" purpose) of a payment is to induce referrals.
Congress has frequently considered federal legislation that would expand the
federal anti-kickback statute to include the same broad prohibitions regardless
of payor source.

     In addition to the payment or receipt of illegal remuneration for the
referral or generation of Medicare or Medicaid business, the fraud and abuse law
covers other billing practices that are considered fraudulent (such as
presentation of duplicate claims, claims for services not actually rendered or
for procedures that are more costly than those actually rendered) or abusive
(such as claims presented for services not medically necessary based upon a
misrepresentation of fact), subject to the same remedies described above.

     Similarly, a large number of states have varying laws prohibiting certain
direct or indirect remuneration between healthcare providers for the referral of
patients to a particular provider, including pharmacies and home health
agencies. Possible sanctions for violation of these laws include loss of
licensure and civil and criminal penalties.

     Prohibition on Physician Referrals. Under the Omnibus Budget Reconciliation
Act of 1993 ("Stark II"), it is unlawful for a physician to refer patients for
certain designated health services reimbursable under the Medicare or Medicaid
program to an entity with which the physician has a financial relationship.
While infusion therapy is not itself listed as a "designated health service,"
specific components are as follows: outpatient prescription drugs, parenteral
and enteral nutrition, equipment and supplies, durable medical equipment and
home health services. A "financial relationship" under Stark II is defined
broadly as an ownership or investment interest in, or any type of compensation
arrangement in which remuneration flows between the physician and the provider.
The entity is prohibited from claiming payment under the Medicare or Medicaid
programs for services rendered pursuant to a prohibited referral and is liable
for the refund of
                                        8
<PAGE>   10

amounts received pursuant to prohibited claims. The entity can also receive
civil penalties of up to $15,000 per improper claim and can be excluded from
participation in the Medicare and Medicaid programs. Comparable provisions
applicable to clinical laboratory services became effective in 1992. Stark II
provisions which may be relevant to the Company became effective on January 1,
1995. Because of its broad language, Stark II may be interpreted by the Office
of Inspector General ("OIG") of the Department of Health and Human Services
("HHS") to apply to Coram's operations. Stark II is broadly written and at this
point, only proposed regulations have been issued to clarify its meaning and
application. Regulations for a predecessor law, Stark I, were published in
August 1995 and remain in effect, but provide little guidance on the application
of Stark II to the infusion therapy business. While the proposed Stark II
regulations do not have the force and effect of law, they provide some guidance
as to what may be included in the final version. Issued on January 9, 1998, the
proposed regulations purport to define previously undefined key terms, clarify
prior definitions and create new exceptions for certain "fair market value"
transactions, de minimis compensation arrangements and discounts, among others.
It is unclear when these regulations will be finalized and until such time, they
cannot be relied upon in structuring transactions. However, a failure to comply
with the provisions of Stark II (or the Stark I regulations) could have a
material adverse effect on the Company.

     A large number of the states in which Coram operates have enacted some form
of physician self-referral law that regulates ownership interests in or
compensation arrangements between physicians and the healthcare service
providers to which they refer patients. These laws vary from measures that
require physicians to disclose their financial interests to outright
prohibitions similar to Stark II. In most cases, state physician self-referral
laws apply to all payors, government and private. The Company believes that most
state laws are inapplicable to the businesses it operates or contain exemptions
that appear to be applicable to its operations. Where state law does apply, the
Company has restructured its business arrangements or implemented other methods
for complying and maintaining compliance with such laws.

     Medicare and Healthcare Reform. As part of the Balanced Budget Act of 1997,
Congress made numerous changes that affect the participation of Part A certified
home health agency providers and Part B suppliers like the Company in the
Medicare program.

     As of January 1, 1998, providers of home health services and suppliers of
durable medical equipment would be required, as a condition of their
participation in Part A and Part B of the Medicare program, to post surety bonds
in the minimum amount of $50,000. The bonds would be used to secure such
entities' performance and compliance with Medicare program rules and
requirements. The regulations applicable to Medicare certified home health
providers, as originally published, would require each Medicare certified home
health provider to obtain a surety bond in an amount equal to the greater of 15%
of the annual amount Medicare paid to the provider in the prior year (up to a
maximum of $3,000,000) or $50,000. Under the regulations, each such home health
provider was required to obtain and deliver the necessary surety bond by
February 27, 1998. The deadline, however, was extended because HCFA learned that
some home health agencies were not able to obtain the necessary surety bonds in
time to meet the February deadline. The Company understands that HCFA is
reviewing the bonding requirements and has stated that it will not take any
action to terminate or withhold federal financial participation with respect to
any home health agency that has not yet furnished a surety bond until its
bonding rules become final. HCFA has further indicated that the new compliance
date will be sixty days after the publication of the final rule and has
requested that all home health agencies that have been unable to secure the
necessary bond must notify their fiscal intermediary of this fact by March 31,
1998 so HCFA can make an accurate assessment of the number of home health
agencies without bonds. The Company believes, based upon currently available
information derived from its discussions with surety bond brokers and
organizations that issue surety bonds, that the necessary bonds will not be
generally available to home health providers until HCFA revises its bonding
requirements in a way that clarifies and/or limits the types of liabilities that
will be covered by the bonds. As of March 23, 1998, the Company had not obtained
the necessary bonds for its eleven Medicare certified home health providers and
has notified the appropriate fiscal intermediaries of this fact.

     The Company understands that HCFA will be issuing separate surety bond
regulations applicable to Part B durable medical equipment suppliers. If the
regulations applicable to Part B suppliers are similar to those published for
Part A providers, the Company would be required to post bonds for each of its
branches
                                        9
<PAGE>   11

that participate in the Part B program in the same amounts as those described
above for Part A home health service providers. Virtually all of the Company's
branch offices participate as suppliers in the Part B Medicare program. Similar
bonding requirements are being required by state Medicaid programs. If the
Company is required to post surety bonds under the Medicare and Medicaid
programs for each of its Part A home health agency providers and Part B durable
medical equipment supplier locations, the Company would be forced to obtain
bonds in the minimum face amount of approximately $12.0 million. If the Company
is not able to obtain all of the necessary bonds, it would have to cease its
participation in the Medicare and Medicaid programs.

     Congress has also reduced reimbursement for oxygen and oxygen related
therapies by 25% effective January 1, 1998, with an additional 5% reduction to
occur effective January 1, 1999. In addition, Congress has initiated a freeze on
both consumer price index updates for payments for durable medical equipment and
"reasonable charge" payments for parenteral and enteral nutrients, supplies and
equipment for the next five years. Congress has also initiated the
implementation of a prospective payment system for home health services for cost
reporting periods beginning on or after October 1, 1999 and certain
demonstration projects for competitive bidding of, at a minimum, oxygen and
oxygen equipment, through December 31, 2002. While the details of the
prospective payment and competitive bidding systems are unclear, there can be no
assurance that adoption of these systems, and the reductions and freezes
described above, will not result in a material decrease in the amount of
reimbursement the Company receives from the Medicare program for the services it
currently provides and any other home health or related oxygen, durable medical
equipment or home infusion services the Company may acquire in the future.

     Further, statutes or regulations may be adopted which would impose
additional requirements in order for Coram to be eligible to participate in the
federal and state payment programs. Such new legislation or regulations may
adversely affect its business operations. There is significant national concern
today about the availability and rising cost of healthcare in the United States.
It is anticipated that new federal and/or state legislation will be passed and
regulations adopted to attempt to provide broader and better healthcare and to
manage and contain its cost. The Company is unable to predict the content of any
legislation or what, if any, changes may occur in the method and rates of its
Medicare and Medicaid reimbursement or in other government regulations that may
affect its businesses, or whether such changes, if made, will have a material
adverse effect on its business, financial position and results of operations.

     State Laws Regarding Fee Splitting, Provision of Medicine and
Insurance. The laws of many states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from practicing medicine.
These laws vary from state to state and are enforced by the courts and by
regulatory authorities with broad discretion. Although Coram believes its
operations as currently conducted are in material compliance with existing
applicable laws, certain aspects of the Company's business operations have not
been subject to state or federal regulatory interpretation. There can be no
assurance that review of the Company's business by courts or regulatory
authorities will not result in determinations that could adversely affect the
operations of the Company or that the healthcare regulatory environment will not
change so as to restrict its existing operations or its expansion.

     Most states have laws regulating insurance companies and HMOs. The Company
is not qualified in any state to engage in the insurance or HMO business but has
registered one of its subsidiaries as a risk taking preferred provider
organization in one state due to proposed activities under an R-NET relationship
with a licensed insurance organization. As managed care penetration increases,
state regulators are beginning to scrutinize the practices of and relationships
among third-party payors, medical service providers and entities providing
management and administrative services to medical service providers, especially
with respect to risk sharing arrangements by and among such providers, and
whether risk bearing entities are subject to insurance or HMO regulation. The
Company believes that its practices are consistent with those of other
healthcare companies and do not constitute licensable HMO or insurance
activities. To the extent such licenses may be required, the Company will make
the necessary filings and registrations to achieve compliance with applicable
law. However, given the limited regulatory history with respect to such
practices, there can be no assurance that states requiring licensure will not
attempt to assert jurisdiction. If the states pursue actions against the Company
and/or its customers, the Company may be compelled to restructure or refrain
from engaging in certain business practices.
                                       10
<PAGE>   12

     Pharmacies and Home Health Agencies. All of Coram's pharmacies are licensed
in the states in which they are located. All of these pharmacies also have
Controlled Substances Registration Certificates issued by the Drug Enforcement
Administration of the United States Department of Justice. Many states in which
the Company operates also require home infusion companies to be licensed as home
health agencies. The failure of a branch facility to obtain, renew or maintain
any required regulatory approvals or licenses could adversely affect the
existing operations of that branch facility.

     Other Regulations. Coram's operations are subject to various state
hazardous waste disposal laws. The laws currently in effect do not classify most
of the waste produced during the provision of the Company's services to be
hazardous, although disposal of non-hazardous medical waste is also subject to
regulation. OSHA regulations require employers of workers who are occupationally
exposed to blood or other potentially infectious materials to provide those
workers with certain prescribed protections against bloodborne pathogens. The
regulatory requirements apply to all healthcare facilities, including the
Company's branches, and require employers to make a determination as to which
employees may be exposed to blood or other potentially infectious materials and
to have in effect a written exposure control plan. In addition, employers are
required to provide hepatitis-B vaccinations, personal protective equipment,
infection control training, post-exposure evaluation and follow-up, waste
disposal techniques and procedures, and engineering and work practice controls.
Employers are also required to comply with certain record-keeping requirements.
The Company believes it is in material compliance with the foregoing laws and
regulations.

     In September 1994 T2 Medical, one of the Company's subsidiaries, entered
into a settlement agreement with the United States (the "T2 OIG Settlement
Agreement") settling claims arising out of an investigation by the OIG into
certain operations of T2 Medical, which occurred prior to the Four-Way Merger.
T2 Medical, in expressly denying liability, agreed to a civil order which
enjoins it from violating federal anti-kickback and false claims laws related to
Medicare/Medicaid reimbursement. The T2 OIG Settlement Agreement imposes certain
restrictions upon the types of relationships that T2 Medical may have with
referring physicians and imposes a five year reporting obligation upon T2
Medical. During 1994 and the first quarter of 1995, the Company restructured or
terminated a large number of relationships with physicians in order to meet the
requirements of the T2 OIG Settlement Agreement, Stark II and Coram's own
compliance standards. The Company has implemented measures to ensure compliance
with the T2 OIG Settlement Agreement and has engaged Richard P. Kusserow, the
former Inspector General of the Department of Health and Human Services, as a
consultant to assist the Company in its continued development and administration
of its compliance program. The Company's internal regulatory compliance review
program is intended to deal with compliance issues under the T2 OIG Settlement
Agreement and with other legal, regulatory and ethical compliance issues.
However, no assurance can be made that in the future Coram's business
arrangements, present or past (or those of its predecessors or divested
subsidiaries, affiliates or partnerships), will not be the subject of an
investigation or prosecution by a federal or state governmental authority. Such
investigation could result in any, or any combination, of the penalties
discussed above depending upon the agency involved in such investigation and
prosecution.

     The Company regularly monitors legislative developments and would seek to
restructure a business arrangement if it was determined that any of its business
relationships placed it in material noncompliance with any statute. The
healthcare service industry will continue to be subject to substantial
regulation at the federal and state levels, the scope and effect of which cannot
be predicted by the Company. Any loss by the Company of its various federal
certifications, its authorization to participate in the Medicare and Medicaid
programs or its licenses under the laws of any state or other governmental
authority from which a substantial portion of its revenues are derived would
have a material adverse effect on its business. See Item 7. RISK
FACTORS -- "Governmental Regulation."

EMPLOYEES

     As of December 31, 1997, Coram had approximately 2,800 full-time equivalent
employees. None of the Company's employees is currently represented by a labor
union or other labor organization. Approximately 40% of the employees are nurses
and pharmacists, with the remainder consisting primarily of sales and

                                       11
<PAGE>   13

marketing, reimbursement, financial and systems professionals. The Company
believes that its employee relations are good.

ITEM 2. PROPERTIES.

     The Company's headquarters are located in Denver, Colorado and consist of
approximately 20,000 square feet of office space leased through August, 1999. As
of March 23, 1998, the Company had approximately 100 branch facilities
throughout the United States and Canada, totaling approximately 1.0 million
square feet of facility space currently in use with monthly rental of this space
aggregating approximately $0.9 million, net of approximately 0.05 million square
feet and $0.08 million for subleased space, respectively. The loss of the lease
on any one facility will not materially effect the Company.

ITEM 3. LEGAL PROCEEDINGS.

     On November 21, 1995, a suit captioned William Hall and Barbara Lisser v.
Coram Healthcare Corporation, James W. Sweeney, Patrick Fortune, and Sam Leno,
No 1:95-CV-2994(WHB) was filed in the United States District Court for the
Northern District of Georgia on behalf of a purported class of plaintiffs who
were entitled to receive warrants pursuant to the settlement of In re T2
Medical, Inc. Shareholder Litigation. Plaintiffs filed an Amended Class Action
Complaint on February 28, 1996, in which they allege that the Defendants made
false and misleading statements that caused a fraud on the market and
artificially inflated the price of the Company's stock during the period from
August 1994 through August 1995. Such Complaint alleges violations of Section
10(b) of the Securities Act of 1934, and Rule 10b-5 promulgated thereunder,
against all of the Defendants. The Complaint also alleges controlling person
liability against the individual defendants under Section 20(a) of the
Securities and Exchange Act, and further alleges fraud by all of the Defendants
under Georgia law. Finally, Plaintiffs allege a breach of the covenant of good
faith and fair dealing by all Defendants. Plaintiffs seek compensatory damages
reflecting the difference in value between the warrants as issued pursuant to
the settlement of In re T2 Medical, Inc. Shareholder Litigation with the trading
price of the Company's common stock at its actual price and the same number of
warrants at the same exercise price with the Company's stock trading at its
alleged true value. The Defendants filed a Motion to dismiss the Amended Class
Action Complaint on March 13, 1996. The Court granted the Company's Motion to
Dismiss the Complaint on February 12, 1997. The Plaintiffs have appealed the
dismissal to the Eleventh Circuit Court of Appeals. The Company opposed the
appeal. The Eleventh Circuit held oral argument on November 18, 1997, but the
Court has not yet ruled on the appeal.

     The Company intends vigorously to defend itself in the matter described
above. Nevertheless, due to the uncertainties inherent in litigation, the
ultimate disposition of the matter described in the preceding paragraph cannot
presently be determined. Accordingly, except for the settlement of the
Shareholder Litigation described in Note 12 to the Company's Consolidated
Financial Statements and charges recorded for various litigation settlements
that are not individually material to the Company, no provision for any loss
that may result upon resolution of any suits or proceedings has been made in the
Company's Consolidated Financial Statements. An adverse outcome could be
material to the financial position, results of operations and liquidity of the
Company.

     In September 1995, as amended on October 6, 1995, the Company filed suit
against Caremark (the "Caremark Litigation") in the San Francisco Superior
Court. The Caremark Litigation and other related issues arose out of the
acquisition of certain assets of Caremark's home infusion business in 1995. On
June 30, 1997, the Company entered into a settlement with Caremark. Under the
terms of the settlement, Junior Subordinated Pay-In-Kind Notes issued by the
Company in such acquisition totaling approximately $100.0 million principal and
$20.0 million accrued interest were canceled with all payments due thereunder
forgiven. Additionally, Caremark agreed to pay $45.0 million in cash which was
received on September 2, 1997. Of the $45.0 million cash received, $3.6 million
was placed in escrow pending reconciliation of certain lockbox issues. As a
result the Company recorded income from litigation settlement of $156.8 million
during the second quarter of 1997. See Note 3 to the Company's Consolidated
Financial Statements.

                                       12
<PAGE>   14

     On July 7, 1997, the Company filed suit against Price Waterhouse LLP in the
Superior Court of San Francisco, California, seeking damages in excess of $165.0
million. As part of the settlement of the Caremark Litigation, Caremark assigned
and transferred to the Company all of Caremark's claims and causes of action
against Caremark's auditors, Price Waterhouse LLP, related to the lawsuit. This
assignment of claims includes claims for damages sustained by Caremark in
defending and settling its lawsuit with the Company. Price Waterhouse has moved
to dismiss the Company's lawsuit on several grounds. The Company has responded.
However, there can be no assurance that the Company will succeed in its
opposition to the motion to dismiss and there can be no assurance of any
recovery from Price Waterhouse LLP. See Note 3 to the Company's Consolidated
Financial Statements.

     The Company is also a party to various other legal actions arising out of
the normal course of its business. Management believes that the ultimate
resolution of such other actions will not have a material adverse effect on the
Company's financial position, results of operations and liquidity of the
Company. Nevertheless, due to the uncertainties inherent in litigation, the
ultimate disposition of these actions cannot presently be determined.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
        MATTERS.

     The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "CRH". The following table sets forth the high and low
sale prices of the Common Stock as reported on the New York Stock Exchange
Composite Tape for the periods indicated:

<TABLE>
<CAPTION>
                                                                HIGH          LOW
                                                                ----          ---
<S>                                                           <C>           <C>
CALENDAR YEAR 1996
First Quarter...............................................     6 3/8         4 1/8
Second Quarter..............................................     5 5/8         3 7/8
Third Quarter...............................................     4 1/2         2 3/4
Fourth Quarter..............................................     5 3/8         3 3/4
CALENDAR YEAR 1997
First Quarter...............................................     5 7/8         3 3/4
Second Quarter..............................................     4             1 1/4
Third Quarter...............................................     5 3/16        3 1/8
Fourth Quarter..............................................     5             2 3/4
CALENDAR YEAR 1998
First Quarter through March 23, 1998........................     3 3/8         2 1/8
</TABLE>

     As of March 23, 1998, there were 5,957 record holders of the Company's
Common Stock. On March 23, 1998, the last reported sale price of the Common
Stock on the New York Stock Exchange was $2.3125 per share.

     The Company has not paid or declared any cash dividends on its capital
stock since its inception and is currently precluded from doing so under its
borrowing agreements. The Company currently intends to retain all future
earnings for use in the operation of its business. Accordingly, the Company does
not anticipate paying cash dividends on its common stock in the foreseeable
future. The payment of any future dividends will depend upon, among other
things, the terms of its borrowing agreements, future earnings, operations,
capital requirements, the general financial condition of the Company,
contractual restrictions and general business conditions.

     The Company did not sell any of its equity securities in the three months
ended December 31, 1997 that were not registered under the Securities Act of
1933, as amended.

                                       13
<PAGE>   15

ITEM 6. SELECTED FINANCIAL DATA.

     The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Historical financial data for the Company prior to the
July 1994 Four-Way Merger is based on the combined financial data of the
predecessor entities, and may not be comparable on a year-to-year basis. Amounts
are in thousands except per share data.

<TABLE>
<CAPTION>
                                                                         FISCAL YEAR ENDED DECEMBER 31,
                                                           ----------------------------------------------------------
                                                             1997        1996        1995         1994         1993
                                                           --------    --------    ---------    ---------    --------
<S>                                                        <C>         <C>         <C>          <C>          <C>
INCOME STATEMENT DATA:
Net revenue..............................................  $464,385    $521,969    $ 602,585    $ 450,496    $462,304
Cost of service..........................................   328,781     361,688      459,710      313,182     285,023
                                                           --------    --------    ---------    ---------    --------
  Gross profit...........................................   135,604     160,281      142,875      137,314     177,281
Operating expenses:
  Selling, general and administrative expenses...........    93,167     104,261      133,037       81,907      75,706
  Provision for estimated uncollectible accounts.........    16,209      29,045       68,912       36,817      29,751
  Amortization of goodwill...............................    13,586      15,259       15,307        8,971       7,824
  Charge for long-lived assets and acquired receivables:
    Goodwill and other long-lived assets (1).............        --          --      166,373           --          --
    Valuation of acquired receivables (2)................        --          --       37,000           --          --
  Merger expenses (3)....................................        --          --           --       28,500       2,868
  Provision for (income from) litigation
    settlements(4).......................................  (156,792)     27,875           --       23,220          --
  Restructuring costs, net (5)...........................        --          --        6,158       95,500       1,600
                                                           --------    --------    ---------    ---------    --------
        Total operating expense..........................   (33,830)    176,440      426,787      274,915     117,749
                                                           --------    --------    ---------    ---------    --------
Operating income (loss)..................................   169,434     (16,159)    (283,912)    (137,601)     59,532
  Interest income........................................     2,242       1,497        1,531        2,469       3,746
  Interest expense (6)...................................   (75,026)    (78,767)     (49,741)      (7,414)     (3,916)
  Gain on sale of business (7)...........................    26,744          --           --           --          --
  Termination fee (8)....................................    15,182          --           --           --          --
  Other income (expense), net............................     1,517       2,115       (2,117)         865       7,862
                                                           --------    --------    ---------    ---------    --------
Income (loss) before income taxes and minority
  interests..............................................   140,093     (91,314)    (334,239)    (141,681)     67,224
  Income tax expense (benefit)...........................     7,550     (13,998)     (11,154)     (26,231)     28,848
  Minority interest in net income of consolidated joint
    ventures.............................................     7,283       7,698       10,964       12,622       9,715
                                                           --------    --------    ---------    ---------    --------
Net income (loss)........................................  $125,260    $(85,014)   $(334,049)   $(128,072)   $ 28,661
                                                           ========    ========    =========    =========    ========
Earnings (loss) per common share.........................  $   2.64    $  (2.05)   $   (8.39)   $   (3.32)   $   0.76
                                                           ========    ========    =========    =========    ========
Earnings (loss) per common share--assuming dilution......  $   2.30    $  (2.05)   $   (8.39)   $   (3.32)   $   0.76
                                                           ========    ========    =========    =========    ========
Cash dividends per common share (9)......................        --          --           --           --          --
BALANCE SHEET DATA:
Cash and cash equivalents................................  $108,950    $ 15,375    $  26,735    $  30,134    $ 50,980
Working capital (deficit)................................   (11,620)   (132,529)      37,422       83,811     124,992
Total assets.............................................   516,820     545,309      687,849      576,439     555,877
Long-term debt, net of current portion (10)..............   150,428     266,641      439,309      119,726      40,156
Stockholders' equity (deficit)...........................   125,026     (21,482)      18,040      322,261     438,872
</TABLE>

---------------

     The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128, Earnings Per
Share ("Statement 128"). For further discussion of earnings per share and the
impact of Statement 128, see the notes to the Company's Consolidated Financial
Statements.

 (1) In 1995, Coram recorded an impairment loss of $166.4 million related to its
     home infusion business, of which $158.1 million related to goodwill and
     $8.3 million related to other long-lived assets.

 (2) In 1995, Coram reduced the valuation of the acquired receivables related to
     the Caremark Business by an aggregate of $37.0 million, as certain
     receivables for services rendered prior to the acquisition date of April 1,
     1995 were determined to be uncollectible.

 (3) Coram recorded merger costs of $28.5 million in 1994 related to the
     Four-Way Merger. This included executive severance payments directly
     related to the merger based on the respective employment agreements,
     investment banking fees, consulting, legal and accounting fees and other
     costs incurred as a direct result of the Four-Way Merger.

                                       14
<PAGE>   16

 (4) In 1994, the $23.2 million provision for litigation settlements represents
     the cash and non-cash costs of settling certain litigation matters which
     arose prior to the Four-Way Merger. The $27.9 million provision for
     litigation settlements in 1996 includes a non-cash provision of $25.6
     million and a cash provision of $0.3 million related to an agreement to
     settle certain stockholder class actions and certain derivative litigation.
     The $156.8 million income from litigation settlement recorded in 1997
     relates to the settlement of a lawsuit against Caremark resulting from the
     purchase of the Caremark Business in 1995.

 (5) As a result of the Four-Way Merger, Coram initiated a merger and
     restructuring plan (the "Coram Consolidation Plan") during 1994 to reduce
     operating costs, improve productivity and gain efficiencies through
     consolidation of redundant infusion centers and corporate offices,
     reduction of personnel and elimination or discontinuance of investments in
     certain joint ventures and other non-infusion facilities. The estimated
     cost to complete the Coram Consolidation Plan of $95.5 million was recorded
     in the third quarter of 1994.

 (6) Interest expense increased significantly in 1995 due to increased
     borrowings to finance the acquisition of the Caremark Business and other
     acquisitions, merger costs and other working capital requirements, as well
     as the related amortization of deferred financing costs and warrants.

 (7) In 1997, the Company sold its Lithotripsy Business to IHS. Accordingly the
     Company recorded a gain on sale of its Lithotripsy Business of $26.7
     million.

 (8) In 1997, the Company received $21.0 million from the termination of a
     merger agreement with IHS. As a result, the Company recorded other income
     of $15.2 million, representing the $21.0 million termination fee less
     related costs.

 (9) Excludes dividends paid by predecessor entities prior to the July 1994
     Four-Way Merger.

(10) On October 13, 1995, two major lenders of the Company, who issued credit in
     connection with the acquisition of the Caremark Business, agreed to
     restructure major terms of their debt agreements. As a result of the
     restructuring, the maturity date was shortened. In March 1996, Coram
     reclassified a portion of the long term balance to current. The current
     portion of long term debt was $150.2 million, $198.0 million, $67.1
     million, $5.9 million and $28.8 million at December 31, 1997, 1996, 1995,
     1994 and 1993, respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

     This Annual Report on Form 10-K contains certain forward looking statements
(as such term is defined in the private Securities Litigation Reform Act of
1995) and information relating to Coram that are based on the beliefs of the
management of Coram as well as assumptions made by and information currently
available to the management of Coram. When used in this Report, the words
"estimate," "project," "believe," "anticipate," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. Such statements
reflect the current views of Coram with respect to future events based on
currently available information and are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in such
forward-looking statements. For a discussion of such risks, see "Risk Factors."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Coram does not undertake any
obligation to release publicly any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

BACKGROUND

     Business Strategy. The Company's business strategy is focused on the basic
factors that could lead to profitability: revenue generation programs, cost
reduction, quality improvement and cash collections. The Company continues to
focus on business relationships where it can assure high quality of care and
operate profitably. The Company is continuing to emphasize marketing efforts
aimed at improving its therapy mix and physician relationships and also has
continued the development of its specialty programs such as provider
                                       15
<PAGE>   17

network development and management for managed care payors, disease-state
carve-outs (i.e., vertical integration along disease-specific categories),
transplant programs, mail order prescription and pharmacy benefit management
services and women's health programs. Cost reduction efforts have focused on
field consolidation, reduction of corporate expenses, assessment of poorly
performing branches and a review of branch efficiencies. Delivery of quality
service is being closely monitored through an internal task force, more rigorous
reporting and independent patient satisfaction surveys gathered throughout the
year. Further, management continues to concentrate on reimbursement through an
emphasis on improving billing and cash collections and continued assessment of
systems support for reimbursement. While management believes the implementation
of its business strategy has improved operating performance, no assurances can
be given as to its ultimate success.

     The settlement of the Caremark Litigation, completion of the sale of the
Lithotripsy Business and the termination of the proposed merger with IHS, have
now permitted management of the Company to focus on operations and strategic
alternatives for the Company to enable the Company to realize its potential in
the changing market for alternate site infusion therapy services. In addition,
other events that impacted the Company in 1997 or which may impact the Company
in the future include: (i) repayment and termination of the Senior Credit
Facility in January 1998 thereby reducing interest expense; and (ii) a six-month
extension to September 30, 1998 for the payment of deferred interest and fees
related to the Rollover Note, provided that the Company and the Holders of the
Rollover Note reach an agreement in principle for its restructuring by April 13,
1998 (See Exhibit 10.40). Future strategic alternatives currently being
considered by the Company include, among others, (i) the pursuit of
opportunities in its core alternate site infusion therapy business, including
consolidation with or acquisition of other companies in its core business or in
businesses complimentary to the Company's core business and (ii) completion of
the refinancing of its debt instruments to reduce interest expense. From time to
time, the Company evaluates potential acquisitions in markets that permit the
Company to grow its local or regional business either through its core infusion
therapy business or through complimentary home health services such as
respiratory therapy and durable medical equipment. Combined, management believes
these factors have improved and will continue to improve the Company's financial
prospects, improve and stabilize relationships with payors and referral sources,
and improve its position within the home healthcare industry. There can be no
assurance that any restructuring of the Company's debt obligations will be
consummated or that other strategic alternatives, pursued by the Company, will
be available on commercially acceptable terms to the Company.

     Factors Affecting Recent Operating Results. The most significant factors
affecting the Company's operating performance and financial condition are as
follows:

          (i) settlement of the Caremark Litigation for $165.0 million in 1997.
     See Notes 3 and 12 to the Company's Consolidated Financial Statements.
     Through 1995 and 1996, the Company suffered a loss of revenues from
     under-performance of the Caremark Business compared to original
     expectations, a negative impact on revenue referral sources and employee
     morale throughout the Company. In addition, the Company incurred
     substantial indebtedness to acquire the Caremark Business, which it
     expected to service primarily through the operating income and cash flow of
     the Caremark Business. With the settlement of the litigation, the Company
     is now focused on its operations to realize its potential in the changing
     market for alternate site infusion therapy services;

          (ii) sale of the Lithotripsy Business in the third quarter of 1997
     allowing the Company to substantially reduce its debt obligations and its
     contingent liabilities associated with the Company's former commitments to
     its partners in the Lithotripsy Business thereby further improving its
     financial position. See Note 5 to the Company's Consolidated Financial
     Statements;

          (iii) distractions in its revenue generation programs in the first
     half of 1997 during the pendency of the IHS Merger which was terminated
     April 4, 1997. See Note 4 to the Company's Consolidated Financial
     Statements;

          (iv) ongoing pricing pressure in the Company's core infusion business
     as a result of a continuing shift in payor mix from private indemnity
     insurance to managed care and governmental payors and intense competition
     among infusion providers;
                                       16
<PAGE>   18

          The following table sets forth the approximate percentages of the
     Company's net revenue attributable to private indemnity insurance and other
     payors, managed care organizations and Medicare and Medicaid programs
     ("governmental payors"), respectively, for the years ended December 31,
     1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                              1997     1996     1995
                                                              -----    -----    -----
        <S>                                                   <C>      <C>      <C>
        Private Indemnity Insurance and Other Payors........   27%      33%      40%
        Managed Care Organizations..........................   45%      40%      36%
        Medicare and Medicaid Programs......................   28%      27%      24%
                                                              ----     ----     ----
                  Total.....................................  100%     100%     100%
                                                              ====     ====     ====
</TABLE>

          (v) technological advances in the development of new medical
     treatments for complex diseases that reduce the need for certain infusion
     therapy services provided by the Company. For example, oral drugs such as
     protease inhibitors have assisted persons living with HIV and AIDS to
     remain healthier longer. Since the second quarter of 1996, the Company
     estimates that it has lost approximately $40.0 million of annualized
     revenue from the transition of HIV multiple therapy patients from
     intravenous therapy to oral medications; and

          (vi) increased competition from hospitals and physicians who have
     sought to increase the scope of services they offer through their
     facilities and offices, including services similar to those offered by the
     Company or who have entered into risk bearing relationships with
     third-party payors pursuant to which they have been delegated control over
     the provision of a wide variety of healthcare services, including the
     services offered by the Company.

     Management believes that the Company's financial position and its standing
within the home healthcare industry improved in the year ended December 31, 1997
primarily through the stabilization of relationships with payors and referral
sources. Additionally, management believes that its focus on its operations and
strategic alternatives for the Company will facilitate a recovery in future
periods. However, there can be no assurance that the improvement will continue
or that factors noted above would not have an adverse effect on the financial
position, results of operations and liquidity of the Company.

                                       17
<PAGE>   19

  Results of Operations

     The following table shows certain items as a percentage of the Company's
net revenue for the periods indicated.

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                              1997     1996     1995
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Net revenue.................................................  100.0%   100.0%   100.0%
Cost of service.............................................   70.8     69.3     76.3
                                                              -----    -----    -----
Gross profit................................................   29.2     30.7     23.7
Operating expenses:
  Selling, general and administrative expenses..............   20.1     20.0     22.1
  Provision for estimated uncollectible accounts............    3.5      5.6     11.4
  Amortization of goodwill..................................    2.9      2.9      2.5
  Charges for long-lived assets and acquired receivables:
     Goodwill and other long-lived assets...................     --       --     27.6
     Valuation of acquired receivables......................     --       --      6.2
  Provision for (income from) litigation settlement.........  (33.8)     5.3       --
  Restructuring costs, net..................................     --       --      1.0
                                                              -----    -----    -----
          Total operating expenses..........................   (7.3)    33.8     70.8
                                                              -----    -----    -----
Operating income (loss).....................................   36.5     (3.1)   (47.1)
Other income (expenses):
  Interest expense..........................................  (16.2)   (15.1)    (8.2)
  Termination fee...........................................    3.3       --       --
  Gain on sale of business..................................    5.8       --       --
  Other income (expense), net...............................    0.8      0.7     (0.1)
                                                              -----    -----    -----
Income (loss) before income taxes and minority interests....   30.2    (17.5)   (55.4)
  Income tax expense (benefit)..............................    1.6     (2.7)    (1.9)
  Minority interests in net income of consolidated joint
     ventures...............................................    1.6      1.5      1.8
                                                              -----    -----    -----
Net income (loss)...........................................   27.0%   (16.3)%  (55.5)%
                                                              =====    =====    =====
</TABLE>

  1997 Compared to 1996

     As previously discussed in "Factors Affecting Recent Operating Results,"
the Company sold its Lithotripsy Business in 1997. During the years ended
December 31, 1997 and 1996, the Lithotripsy Business provided the following to
the Company's operations (in millions):

<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                              --------------
                                                              1997     1996
                                                              -----    -----
<S>                                                           <C>      <C>
Net revenue.................................................  $37.3    $49.7
Gross profit................................................   23.5     27.4
Operating income............................................   17.6     21.8
</TABLE>

     Net Revenue. Net revenue decreased $57.6 million or 11.0%, from $522.0
million in 1996 to $464.4 million 1997. The decrease is due primarily to a 9.1%
decrease in patient census as well as a continued shift in payor mix from
private insurance to managed care. See "Factors Affecting Recent Operating
Results."

     Gross Profit. Gross profit decreased $24.7 million from $160.3 million or a
gross margin of 30.7% in 1996 to $135.6 million or a gross margin of 29.2% in
1997. The decrease is due primarily to the decrease of $57.6 million in net
revenue described above offset by a decline in cost of service of $32.9 million.
See "Factors Affecting Recent Operating Results."

     Selling, General and Administrative Expenses. SG&A decreased $11.1 million
or 10.6%, from $104.3 million in 1996 to $93.2 million in 1997. Excluding the
effects of nonrecurring gains on the disposal of

                                       18
<PAGE>   20

non-core businesses and on the conversion of certain debentures totaling $3.0
million in 1996, SG&A expense decreased $14.1 million or 13.1%. The improvement
is due primarily to the Company's continuing strategy to reduce unnecessary
corporate and field administrative costs.

     Provision for Estimated Uncollectible Accounts. The provision for estimated
uncollectible accounts was $16.2 million or 3.5% of net revenue in 1997 compared
to $29.1 million or 5.6% of net revenue in 1996. The decrease is due primarily
to the Company's concentrated collection efforts over the past year.

     Amortization of Goodwill. Amortization of goodwill decreased $1.7 million
or 11.0%, from $15.3 million in 1996 to $13.6 million in 1997. The decrease in
amortization is due to the sale of the Company's Lithotripsy Business in 1997.
See "Factors Affecting Recent Operating Results" and Note 5 to the Company's
Consolidated Financial Statements.

     Provision for (Income From) Litigation Settlement. During the year ended
December 31, 1997, the Company recorded income from litigation settlement, net
of related costs, of $156.8 million in connection with the settlement of the
Caremark Lawsuit. During the year ended December 31, 1996, the Company recorded
a non-cash provision of $25.6 million and a cash provision of $0.3 million in
connection with an agreement to settle certain shareholder class action and
certain derivative litigation ("the Shareholder Litigation"). Under the
agreement, the Company was required to issue 5.0 million freely tradable shares
of common stock of which 1.5 million shares were issued March 11, 1997 and 3.5
million shares were issued November 28, 1997. Additionally, a $2.0 million
charge was recorded in 1996 related to various other litigation settlements. See
Notes 3 and 12 to the Company's Consolidated Financial Statements.

     Operating Income (Loss). The Company recorded operating income of $169.4
million for the year ended December 31, 1997 compared to an operating loss of
$16.2 million for the year ended December 31, 1996. The increase is due
primarily to non-recurring income of $156.8 million from litigation settlement
recorded in 1997 and the non-recurring provision for shareholder litigation of
$27.9 million recorded in 1996.

     Interest Expense. Interest expense decreased by $3.8 million or 4.7%, from
$78.8 million for the year ended December 31, 1996 to $75.0 million for the year
ended December 31, 1997. The decline is due primarily to a decrease in interest
related to the Junior Subordinated Pay-In-Kind notes issued in connection with
the acquisition of the Caremark Business. In June 1997, pursuant to the
settlement of the Caremark Litigation, the Junior Subordinated Pay-In-Kind Notes
totaling approximately $100.0 million in principal and $20.0 million accrued
interest were canceled. Additionally in January 1998, the Company repaid in full
all principal, interest and related fees totaling approximately $80.1 million
due under the Senior Credit Facility. Interest on the Senior Credit Facility for
the years ended December 31, 1997 and 1996 was $11.3 million and $16.4 million,
respectively. See "Factors Affecting Recent Operating Results" and Notes 3 and 8
to the Company's Consolidated Financial Statements.

     Gain On Sale of Business. In the year ended December 31, 1997, the Company
recorded a gain on the sale of business, net of related costs, of $26.7 million
in connection with the sale of its Lithotripsy Business. See "Factors Affecting
Recent Operating Results" and Note 5 to the Company's Consolidated Financial
Statements.

     Termination Fee. The Company recorded termination fee income, net of
related costs, of $15.2 million in the year ended December 31, 1997 in
connection with the termination of the proposed merger with IHS. See "Factors
Affecting Recent Operating Results" and Note 4 to the Company's Consolidated
Financial Statements.

     Income Tax Expense (Benefit). During 1997, the Company recorded income tax
expense of $7.6 million compared to an income tax benefit of $14.0 million in
1996. The 1997 income tax expense is related to the gain on the sale of the
Lithotripsy Business and income from settlement of the Caremark Litigation. The
1996 benefit was based on an estimate of 1996 carryback benefits available.

     Net Income (Loss). Net income for the year ended December 31, 1997 was
$125.3 million compared to a net loss of $85.0 million for the year ended
December 31, 1996. As discussed above, the change in net

                                       19
<PAGE>   21

income is due to non-recurring items totaling $198.7 million in 1997 and $27.9
million in 1996 as well as the change resulting from normal operations.

  1996 COMPARED TO 1995

     Net Revenue. Net revenue for the year ended December 31, 1996, decreased by
$80.6 million or 13.4%, from $602.6 million in 1995 to $522.0 million in 1996.
The decrease in revenue is due primarily to losses suffered from the
under-performance of the Caremark Business and ongoing pricing pressures. See
"Factors Affecting Recent Operating Results." Also contributing to the decrease
in net revenue was the sale or discontinuance of non-strategic or unprofitable
businesses which contributed $42.5 million in net revenue in 1995 compared with
$2.7 million in 1996. In addition, management fees have also decreased from
approximately $7.6 million in 1995 to approximately $1.6 million in 1996 as a
result of the Company's termination of physician arrangements and certain
businesses since 1994 while maintaining only those relationships that met both
the Company's own compliance criteria and applicable legal requirements.

     Gross Profit. Gross profit for the year ended December 31, 1996 increased
by $17.4 million, from $142.9 million or a gross margin of 23.7% in 1995 to
$160.3 million or a gross margin of 30.7% in 1996. Approximately $13.0 million
of the improvement is due to the decrease in total drugs and supplies expense
from 36.1% of net revenue in 1995 to 33.9% of net revenue in 1996. The remaining
improvement is due to a reduction in clinical service expense.

     Selling, General and Administrative Expenses. SG&A expenses decreased $28.7
million from $133.0 million for the year ended December 31, 1995 to $104.3
million for the year ended December 31, 1996. The decrease is due primarily to
the Company's continuing strategy to reduce unnecessary corporate and field
administrative costs, offset by excess legal expenses and collection agency fees
recorded during 1996 of $6.9 million and $4.7 million, respectively. In
addition, the Company recorded $10.2 million of non-recurring charges in 1995,
consisting of a $1.4 million loss on disposal of branch, $2.0 million loss on
the sale of a non-core business, $3.4 million transaction expenses related to
the termination of a proposed merger with Lincare Holdings Inc. and $3.4 million
loss on payment of a prior credit facility.

     Provision For Estimated Uncollectible Accounts. The provision for estimated
uncollectible accounts was $29.0 million, or 5.6% of net revenue for the year
ended December 31, 1996 compared with $68.9 million, or 11.4% of net revenue for
the year ended December 31, 1995. The decrease is due primarily to a special
charge recorded in the third quarter of 1995 of $20.0 million. The remaining
decrease in the provision is due to the Company's concentrated collection
efforts during 1996. In the third and fourth quarters of 1996, management
implemented a program whereby collection teams comprised of external collection
agencies were engaged to concentrate on collecting accounts greater than 90 days
old. The increased cash collection effort resulted in increased cash collection
calls, commitments for payment and charges to the Company's established
reserves. The Company's allowance for uncollectible accounts was $40.3 million,
or 27.4% of gross accounts receivable at December 31, 1996 compared to $63.8
million or 29.3% of gross accounts receivable at December 31, 1995. See Note 2
to the Company's Consolidated Financial Statements.

     Charge for Long-Lived Assets and Acquired Receivables. During 1995, the
Company recorded an impairment loss of $166.4 million related to its home
infusion business ($158.1 million related to goodwill and $8.3 million related
to long-lived assets). In addition during 1995, the Company reduced the
valuation of the acquired receivables related to the Caremark acquisition by an
aggregate of $37.0 million. See Notes 2 and 3 to the Company's Consolidated
Financial Statements.

     Provision for (Income From) Litigation Settlements. During 1996, the
Company recorded a non-cash provision of $25.6 million and a cash provision of
$0.3 million in connection with the Shareholder Litigation settlement.
Additionally, a $2.0 million charge was recorded in 1996 related to various
other litigation settlements. See Note 12 to the Company's Consolidated
Financial Statements.

     Restructuring Costs. During 1995, the Company recorded a pre-tax charge of
$25.8 million for estimated costs related to the Caremark Business Consolidation
Plan. The charge was offset by the $18.2 million benefit recorded to
restructuring costs related to the Coram and Caremark Consolidation Plans in the
fourth quarter

                                       20
<PAGE>   22

of 1995 and a $1.4 million benefit recorded in the first quarter related to the
sale of the Company's interest in Pediatric Partners, Inc., doing business as
Kids Medical Club ("Kids Medical") as part of the Coram Consolidation Plan. The
Company did not record any restructuring costs or benefits in 1996.

     Operating Loss. The Company recorded an operating loss of $16.2 million for
the year ended December 31, 1996, compared with a $283.9 million operating loss
for the year ended December 31, 1995. Eliminating the effects of the $27.9
million provision for litigation settlements recorded in 1996 and the $20.0
million charge to provision for estimated uncollectible accounts, the $203.4
million charge for long-lived assets and acquired receivables and the
restructuring costs of $6.2 million recorded in 1995, the Company had operating
income of $11.1 million in 1996 compared to an operating loss of $54.3 million
in 1995. This improvement is due primarily to the increase in gross profit of
$17.4 million, the decrease in SG&A of $28.7 million and the decrease in the
provision for estimated uncollectible accounts (net of the $20.0 million
mentioned above) of $19.9 million.

     Interest Expense. Interest expense increased $29.1 million, from $49.7
million in 1995 to $78.8 million in 1996. The increase is due primarily to a
full year of interest incurred on the Caremark acquisition debt, the interest
compounding effects of the Junior Subordinated Pay-In-Kind Notes (the "Junior
Subordinated PIK Notes") and a Rollover Note issued in place of the Bridge Note
when the Bridge Note was not repaid on its due date (the "Rollover Note"),
amortization of warrants, as well as the reduction in the amortization period of
deferred debt costs, offset by the reduction of the principal amount of the
Senior Credit Facility. Of the $78.8 million interest expense recorded during
1996, $61.1 million was non-cash in nature.

     Income Tax Benefit. During the year ended December 31, 1996, the Company
recorded an income tax benefit of $14.0 million, as compared with an $11.2
million benefit in 1995. The 1996 and 1995 benefits were based on carryback
benefits available in relation to estimated pre-tax results for the year,
exclusive of any significant unusual items.

     Minority Interest in Net Income of Consolidated Joint Ventures. Minority
interest expense decreased $3.3 million, from $11.0 million in 1995 to $7.7
million in 1996. The decrease is due to the sale of one lithotripsy joint
venture, the purchase of the minority interest in another lithotripsy joint
venture and the sale of the Company's interest in Kids Medical in 1995.
Additionally, the Company completed the purchase of certain minority interests
in two lithotripsy joint ventures during 1996.

     Net Loss. Net loss for the year ended December 31, 1996 was $85.0 million
as compared with a $334.0 million loss for the year ended December 31, 1995. As
discussed above, the change in net loss is due to non-recurring items totaling
$27.9 million in 1996 and $209.6 million in 1995 as well as the change resulting
from normal operations.

                                       21
<PAGE>   23

QUARTERLY RESULTS (UNAUDITED)

     The following summarizes selected quarterly financial information with
respect to the Company's operations for the last eight fiscal quarters. Amounts
are in thousands, except per share data.

<TABLE>
<CAPTION>
                                           1997 QUARTER ENDED                          1996 QUARTER ENDED
                               ------------------------------------------   -----------------------------------------
                               DEC. 31    SEPT. 30    JUNE 30    MAR. 31    DEC. 31    SEPT. 30   JUNE 30    MAR. 31
                               --------   --------   ---------   --------   --------   --------   --------   --------
<S>                            <C>        <C>        <C>         <C>        <C>        <C>        <C>        <C>
Net revenue..................  $105,039   $119,516   $ 118,115   $121,715   $126,029   $131,206   $133,109   $131,625
Cost of service..............    81,090     82,926      83,040     81,725     85,788     86,591     91,150     98,159
                               --------   --------   ---------   --------   --------   --------   --------   --------
Gross profit.................    23,949     36,590      35,075     39,990     40,241     44,615     41,959     33,466
Operating expenses:
  Selling, general and
    administrative
    expenses.................    22,960     23,729      22,826     23,652     25,878     26,530     26,576     25,277
  Provision for estimated
    uncollectible accounts...     3,682      4,135       4,104      4,288      6,696      6,766      6,831      8,752
  Amortization of goodwill...     2,766      3,611       3,597      3,612      3,580      3,619      3,759      4,301
  Provision for (income from)
    litigation settlements...        --         --    (156,792)        --     15,125        250     12,500         --
                               --------   --------   ---------   --------   --------   --------   --------   --------
        Total operating
          expense............    29,408     31,475    (126,265)    31,552     51,279     37,165     49,666     38,330
                               --------   --------   ---------   --------   --------   --------   --------   --------
Operating income (loss)......    (5,459)     5,115     161,340      8,438    (11,038)     7,450     (7,707)    (4,864)
Other income (expenses):
  Interest expense...........   (19,503)   (15,797)    (18,230)   (21,496)   (20,010)   (19,175)   (20,553)   (19,029)
  Termination fee............        --         --      15,182         --         --         --         --         --
  Gain on sale of business...     8,772     17,972          --         --         --         --         --         --
  Other income, net..........     1,365        690       1,057        647      1,403        645        914        650
                               --------   --------   ---------   --------   --------   --------   --------   --------
Income (loss) before income
  taxes and minority
  interests..................   (14,825)     7,980     159,349    (12,411)   (29,645)   (11,080)   (27,346)   (23,243)
  Income tax expense
    (benefit)................     4,175      3,125         201         49          2     (1,347)    (5,237)    (7,416)
  Minority interest in net
    income of consolidated
    joint
    ventures.................       226      2,552       2,377      2,128      1,928      2,279      1,417      2,074
                               --------   --------   ---------   --------   --------   --------   --------   --------
Net income (loss)............  $(19,226)  $  2,303   $ 156,771   $(14,588)  $(31,575)  $(12,012)  $(23,526)  $(17,901)
                               ========   ========   =========   ========   ========   ========   ========   ========
Earnings (loss) per common
  share......................  $  (0.39)  $  $0.05   $    3.29   $  (0.31)  $  (0.75)  $  (0.28)  $  (0.58)  $  (0.44)
                               ========   ========   =========   ========   ========   ========   ========   ========
Earnings (loss) per common
  share -- assuming
  dilution...................  $  (0.39)  $   0.04   $    2.99   $  (0.31)  $  (0.75)  $  (0.28)  $  (0.58)  $  (0.44)
                               ========   ========   =========   ========   ========   ========   ========   ========
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company's cash and cash equivalents increased $93.6 million, from $15.4
million at December 31, 1996 to $109.0 million at December 31, 1997. The
increase in cash and cash equivalents is due primarily to cash provided by
operating activities of $66.0 million and cash provided by investing activities
of $105.7 million offset by cash used in financing activities of $78.1 million.
Cash provided by operating activities of $66.0 million was composed primarily of
(i) a $21.0 million payment received as a result of the termination of the
proposed merger with IHS; (ii) $41.4 million received from Caremark as a result
of the settlement of the Caremark Litigation and (iii) improved cash collections
of accounts receivable and decreased disbursement levels. Cash provided by
investing activities is due primarily to net proceeds from the sale of the
Lithotripsy Business of $124.8 million offset by the purchase of fixed assets
totaling $19.1 million. Cash used in financing activities consists primarily of
debt repayments of $89.4 million offset by additional borrowings of $10.0
million.

     On June 2, 1997, the Company refinanced $150.0 million owed its lenders
under the Senior Credit Facility through a refinancing transaction with Goldman
Sachs Credit Partners L.P. ("GSCP"). GSCP acquired the debt through an
assignment from Chase Manhattan Bank. In January 1998, the Company repaid

                                       22
<PAGE>   24

in full all principal, interest and related fees totaling approximately $80.1
million due under the Senior Credit Facility. See Note 8 to the Company's
Consolidated Financial Statements.

     On May 1, 1997 a group of investors consisting of Cerberus Partners, L.P.,
GSCP and Foothill Capital (collectively the "Holders") purchased the Rollover
Note and all the rights to the warrants thereunder. The Company has received a
six-month extension to September 30, 1998 for the payment of deferred interest
and fees related to the Rollover Note, provided that the Company and the Holders
of the Rollover Note reach an agreement in principle for its restructuring by
April 13, 1998. Any restructuring will be subject to the parties entering into
definitive agreements and the satisfaction of any conditions to consummation set
forth herein. See Note 8 to the Company's Consolidated Financial Statements.
There can be no assurance that future cash flow from operations will be
sufficient to cover current or future debt obligations or that any restructuring
thereof will be consummated.

     In June 1997, the Company entered into a settlement agreement with
Caremark. Under the terms of the settlement, the Junior Subordinated PIK Notes
totaling approximately $100.0 million principal and $20.0 million accrued
interest were canceled with all payments thereunder forgiven and Caremark agreed
to pay $45.0 million in cash which was received on September 2, 1997. Of the
$45.0 million cash received, $3.6 million was placed in escrow pending
reconciliation of certain lockbox issues. Accordingly in 1997, the Company
recorded settlement income of $156.8 million. See Note 3 to the Company's
Consolidated Financial Statements. Upon receipt of the cash proceeds due to the
Company in the settlement of the Caremark Litigation, the Company applied
substantially all net cash proceeds to reduce outstanding debt.

     On August 20, 1997 the Company signed an agreement with IHS for the sale of
its Lithotripsy Business. Effective September 30, 1997, the Company completed
the transaction as to all of its Lithotripsy Business other than its interests
in three lithotripsy partnerships. Pursuant to a side agreement amending the
August 20, 1997 purchase agreement, the Company's interests in the three
remaining partnerships were placed in escrow pending the satisfaction of certain
conditions. Following satisfaction of these conditions, two of the partnerships
were conveyed to IHS effective October 3, 1997. Due to the Company's and IHS's
inability to obtain the consent of the other partner to the transfer of Coram's
interest therein, its interest in the remaining partnership was returned to the
Company on October 21, 1997. Proceeds on the sale of the Lithotripsy Business
totaled $126.6 million which further allowed the Company to substantially reduce
its debt obligations and eliminate contingent liabilities associated with the
Company's former commitments to its partners in the Lithotripsy Business. During
the years ended December 31, 1997, 1996 and 1995 the Lithotripsy Business
provided net revenue of approximately $37.3 million, $49.7 million and $53.5
million, respectively, to the Company. See Note 5 to the Company's Consolidated
Financial Statements.

     The Company from time to time evaluates strategic alternatives in meeting
scheduled maturities of principal and interest. The strategic alternatives which
the Company considers include, but are not limited to, the pursuit of
opportunities in its core alternate site infusion therapy business, including
consolidation with or acquisition of other companies in its core business or in
businesses complimentary to the Company's core business. These future
acquisitions, if any, may require a change in capital structure or equity and
debt financing. There can be no assurance that any such consolidations or
acquisitions will occur. Additionally, if they occur there can be no assurance
that the financing sources will be available to the Company or, if available,
will be available on commercially acceptable terms to the Company.

     As of December 31, 1997, the Company did not have any material commitments
for capital expenditures.

RISK FACTORS

  Recent Operating Losses; Future Operating Results Uncertain

     During the year ended December 31, 1997, the Company recorded operating
income of $169.4 million and net income of $125.3 million. Net income in 1997
included non-recurring income of $156.8 million income from settlement of the
Caremark Litigation, $26.8 million gain on sale of Lithotripsy Business and
$15.2 million termination fee income. Excluding these non-recurring charges, the
Company incurred an operating income of $12.6 million and a net loss of $73.5
million. During the years ended December 31, 1996

                                       23
<PAGE>   25

and 1995 the Company recorded operating losses of $16.2 million and $283.9
million, respectively, and net losses of $85.0 million and $334.0 million,
respectively. Numerous factors have affected the Company's performance and
financial condition to date, including, among others (i) under-performance of
the Caremark Business resulting in loss of revenues compared to original
expectations, a negative impact on revenue referral sources and employee morale
throughout the Company and the incurrence of substantial indebtedness to acquire
the Caremark Business, which it expected to fund primarily through the operating
income and cash flow of the Caremark Business; (ii) distractions in its revenue
generation programs in the first half of 1997 during the pendency of the IHS
Merger which was terminated April 4, 1997; (iii) the implementation of a policy
to terminate physician arrangements and certain businesses during fiscal 1995
which the Company inherited from its predecessors that were potentially in
conflict with new federal and state law, resulting in the loss of a number of
historic referral sources; (iv) ongoing pricing pressure in the Company's core
infusion business as a result of a continuing shift in payor mix from private
indemnity insurance to managed care and governmental payors and intense
competition among infusion providers; and (vi) increased competition from
hospitals and physicians who have sought to increase the scope of services they
offer through their facilities and offices, including services similar to those
offered by the Company.

     With the settlement of the Caremark Litigation, termination of the proposed
IHS Merger and completion of sale of the Lithotripsy Business, management of the
Company is now focused on strategic alternatives for the Company and its
operations to enable the Company to realize its potential in the changing market
for alternate site infusion therapy services. In addition, proceeds from the
sale of Lithotripsy Business and settlement of Caremark Litigation allowed the
Company to substantially reduce its obligations under its credit arrangements.
Notwithstanding these events and the Company's actions to address the factors
discussed above, there can be no assurance that these factors will not continue
to have an adverse effect on the Company's financial condition and results of
operations in the future.

  Substantial Leverage

     The Company incurred a significant amount of long-term debt in connection
with the acquisition of the Caremark Business. As of December 31, 1997, the
Company's consolidated indebtedness was $193.1 million, net of $107.6 million
cash held in overnight funds, and its consolidated stockholders' equity was
$125.0 million. The degree to which the Company is leveraged could impair the
Company's ability to finance, through its own cash flow or from additional
financing, its future operations or pursue its business strategy and make the
Company more vulnerable to economic downturns, competitive and payor pricing
pressures and adverse changes in government regulation. See "Liquidity and
Capital Resources." At December 31, 1997, $299.2 million of the Company's
borrowings were under arrangements with variable interest rates. As of December
31, 1997, there was $80.0 million principal due under the Senior Credit
Facility, all of which was repaid in full in January 1998. Payment of deferred
interest and fees of $69.2 million as of December 31, 1997 on a $150.0 million
Rollover Note is due September 30, 1998 provided that the Company and Holders of
the Rollover Note reach an agreement in principle for its restructuring by April
13, 1998. Any significant increase in the interest rates on those borrowings
would have a material adverse effect on the Company's business, financial
condition and results of operations.

  Liquidity; Need For Additional Financing

     The Rollover Note matures on October 6, 2000 while deferred interest and
accrued fees on the Rollover Note are due September 30, 1998 provided that the
Company and Holders of the Rollover Note reach an agreement in principle for its
restructuring by April 13, 1998. The agreement pursuant to which the Bridge Note
and Rollover Note were issued contains customary covenants and events of
default. At December 31, 1997, the Company was in compliance with all of these
covenants. There can be no assurance that the Company's cash flow from
operations will be sufficient to meet its short or long-term needs or that the
restructuring will be consummated. Therefore, additional sources of funds may be
required in future periods. In order to satisfy such obligations, the Company
may engage in a public or private offering of debt or equity securities or a
sale or merger of the Company. Any such transaction could result in a
substantial dilution in the ownership interest of the existing stockholders and
may have an adverse impact on the market price of the

                                       24
<PAGE>   26

Company's Common Stock. There can be no assurance that the Company will
undertake any such transaction, what the timing thereof would be or that the
Company will be able to obtain any additional funds or complete such a
transaction on terms acceptable to the Company. See "Liquidity and Capital
Resources."

  Dependence On Key Personnel; Changes In Management

     The Company is substantially dependent upon the services of its key
executive officers, which include Donald J. Amaral, Chairman and Chief Executive
Officer, Richard M. Smith, President, Wendy L. Simpson, Executive Vice President
and Chief Financial Officer, and Paul J. Quiner, Senior Vice President and
General Counsel. The loss of services of any of these executives could have a
material adverse affect on the Company. The Company's future growth and success
depends, in large part, upon its ability to obtain, retain and expand its staff
of professional personnel. There can be no assurance that the Company will be
successful in its efforts to attract and retain such personnel.

  Certain Litigation

     The Company, directly or indirectly, is a party to certain lawsuits that
could, if their outcomes were unfavorable, have a material adverse effect,
directly or indirectly, on its business, financial condition and results of
operations. The Company intends vigorously to defend itself in these matters.
Nevertheless, due to the uncertainties inherent in litigation, the ultimate
disposition of the litigations cannot be presently determined. See Item 3. LEGAL
PROCEEDINGS.

  Dependence On Relationships With Third Parties

     The profitability of the Company's business depends in part on its ability
to establish and maintain close working relationships with managed care
organizations, private and governmental third-party payors, hospitals,
physicians, physician groups, home health agencies, long-term care facilities
and other institutional health providers and insurance companies and large
self-insured employers. A central feature of the Company's business strategy is
to improve its relationships with such third parties in general, and with
physicians and physician groups in particular. There can be no assurance that
the Company will be successful in improving and maintaining such relationships
or that the Company's existing relationships will be successfully maintained or
that additional relationships will be successfully developed and maintained in
existing or future markets. The loss of such existing relationships or the
failure to continue to develop such relationships in the future could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business Strategy."

  Governmental Regulation

     The Company is subject to extensive federal and state laws regulating,
among other things, the provision of pharmacy, home care nursing services,
health planning, health and safety, environmental compliance and toxic waste
disposal. The Company is also subject to fraud and abuse and self referral laws
and "anti-kickback" statutes which affect the Company's business relationships
with physicians and other health care providers and referral sources and its
reimbursement from government payors. The Company may be required to obtain
certification to participate in governmental payment programs, such as Medicare
and Medicaid. Some states have established certificate of need programs
regulating the establishment or expansion of health care facilities, including
certain of the Company's facilities.

     Violations of the federal anti-kickback statute are punishable by criminal
or civil penalties, including imprisonment, fines and exclusion of the provider
from future participation in federal healthcare programs. Civil suspension for
antikickback violations can also be imposed through an administrative process,
without the imposition of civil monetary penalties. The failure to obtain, renew
or maintain any of the required regulatory approvals or licenses could adversely
affect the Company's business and could prevent the location involved from
offering products and services to patients. The Company's business, financial
condition and results of operations could be materially adversely affected as a
result of any such change or sanctions. The health care services industry will
continue to be subject to intense regulation at the federal and state levels,
the

                                       25
<PAGE>   27

scope and effect of which cannot be predicted. No assurance can be given that
the activities of the Company will not be reviewed and challenged or that
government sponsored health care reform, if enacted, will not have a material
adverse effect on the Company. See Item 1. GOVERNMENT REGULATION.

     As part of the Balanced Budget Act of 1997, Congress made various changes
that affect the participation of companies like Coram in the Medicare program.
Specifically, the Company will be required to obtain and post surety bonds for
each of its Part A home health agency providers and Part B durable medical
equipment suppliers when HCFA's rules implementing the bonding requirements
become final. The Company currently operates eleven Part A home health agencies
and virtually all of the Company's branch offices participate in Part B of the
Medicare program. Under the regulations currently proposed for Part A home
health agency providers, each provider would be required to post a surety bond
in an amount equal to the greater of 15% of the amount paid to the agency or
branch by Medicare in the previous year (up to a maximum of $3,000,000) or
$50,000 whichever is greater. Discontinuing the Company's participation in the
Medicare program would have a material adverse effect on the Company's business,
financial condition and results of operations. If the Company is required to
post surety bonds for each of its Part A home health agency providers and Part B
durable medical equipment supplier locations as a condition to its participation
in the Medicare program and is forced to obtain similar bonds for its
participation in the state Medicaid programs it currently participates in, the
Company would be forced to obtain surety bonds in the minimum face amount of
approximately $12.0 million. If the Company is not able to obtain the necessary
bonds, it would have to cease its participation in the Medicare and Medicaid
programs. There can be no assurance that the Company will be able to obtain the
required surety bonds and the Company may be forced to raise additional capital
to facilitate its acquisition of the necessary bonds. See Item 1. GOVERNMENT
REGULATION -- "Medicare and Healthcare Reform."

  Dependence On Payors And Reimbursement-Related Risks

     The profitability of the Company depends in large part on reimbursement
provided by third-party payors. Because alternate site care is generally less
costly to third-party payors than hospital-based care, alternate site providers
have historically benefited from cost containment initiatives aimed at reducing
the costs of hospitalization. However, competition for patients, efforts by
traditional third-party payors to contain or reduce health care costs and the
increasing influence of managed care payors such as health maintenance
organizations in recent years have resulted in reduced rates of reimbursement
for services provided by alternate site providers such as the Company. Since
1993, the alternate site infusion industry, including the Company, experienced
severe reductions in the pricing of its products and services as a result of
these trends. See "Factors Affecting Recent Operating Results."

     Additionally, managed care payors and even traditional indemnity insurers
increasingly are demanding fee structures and other arrangements providing for
the assumption by health care providers of all or a portion of the financial
risk of providing care (e.g., capitation). Capitation arrangements currently do
not comprise a material component of the Company's revenues. While the Company
believes that short-term pricing pressures are stabilizing, no assurance can be
given that pricing pressures will not continue or that the Company's business,
financial condition and results of operations will not be adversely affected by
such trends. A rapid increase in the percentage of revenue derived from managed
care payors without a corresponding decrease in the Company's operating costs
could have an adverse impact on the Company's profit margins.

  Concentration Of Large Payors

     Managed care organizations have grown substantially in terms of the
percentage of the population that is covered by such organizations and in terms
of their control over an increasing portion of the healthcare economy. Managed
care plans have continued to consolidate to enhance their ability to influence
the delivery of healthcare services. The Company has a number of contractual
arrangements with managed care organizations and other parties. Other than
Medicare and Medicaid, none of these arrangements individually accounted for
more than 5% of the Company's net revenues in the year ended December 31, 1997;
however, 10 managed care customers accounted in the aggregate for approximately
10% of the Company's infusion

                                       26
<PAGE>   28

therapy revenue and the loss of such customers could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Factors Affecting Recent Operating Results."

  Intensely Competitive Industry

     The Company competes in the alternate site health care market which is
highly competitive and is experiencing both horizontal and vertical
consolidation. Some of the Company's current and potential competitors include
(i) integrated providers of alternate site health care services, (ii) large
national hospital chains; (iii) local providers of multiple products and
services offered for the alternate site health care market; and (iv) physicians,
including physicians with whom the Company previously had business arrangements.
The Company has experienced increased competition from hospitals and physicians
who have sought to increase the scope of services offered through their offices,
including services similar to those offered by the Company or who have entered
into risk relationships with managed care organizations pursuant to which they
have taken control of certain medical services, including the services offered
by the Company. Integrated alternate site health care companies and certain of
the Company's other national competitors may have superior financial, marketing
and managerial resources, size, purchasing power and numerous strategic
relationships with providers, referral sources such as physicians and
traditional indemnity and managed care payors. Moreover, there are relatively
few barriers to entry in the local markets which the Company serves. Local or
regional companies are currently competing in many of the home health care
markets served by the Company and others may do so in the future. The Company
expects its competitors to continue to improve their service offerings and price
competitiveness. The Company also expects its competitors to develop new
strategic relationships with providers, referral sources and payors, which could
result in a rapid and dramatic increase in competition. The introduction of new
and enhanced services, acquisitions and continued industry consolidation and the
development of strategic relationships by the Company's competitors could cause
a significant decline in sales or loss of market acceptance of the Company's
services or intense price competition, or make the Company's services
noncompetitive. The Company expects to continue to encounter increased
competition in the future that could limit its ability to maintain or increase
its market share. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures will not have a material adverse effect on the Company's business,
financial condition and results of operations. See Item 1. COMPETITION. See also
"Business Strategy" and "Factors Affecting Recent Operating Results."

  Health Care Reform Legislation

     In recent years, an increasing number of legislative initiatives have been
introduced or proposed in Congress and in state legislatures that would effect
major changes in the health care system, either nationally or at the state
level. Among the proposals under consideration are various insurance market
reforms, forms of price control, expanded fraud and abuse and anti-referral
legislation and further reductions in Medicare and Medicaid reimbursement. The
Company cannot predict whether any of the above proposals or any other proposals
will be adopted, and if adopted, no assurance can be given that the
implementation of such reforms will not have a material adverse effect on the
business of the Company. In addition, no assurance can be give that recent
reforms will not have a material adverse effect on the business of the Company.
See Item 1. GOVERNMENT REGULATION.

  Potential Professional Liability And Insurance

     The services of the Company involve an inherent risk of professional
liability. While the Company has not had any material claims for professional
liability asserted against it, no assurance can be given that such claims will
not be asserted in the future. While the Company maintains insurance consistent
with industry practice, there can be no assurance that the amount of insurance
currently maintained will satisfy all claims made against the Company or that
the Company will be able to obtain insurance in the future at satisfactory rates
or in adequate amounts. The Company cannot predict the effect that any such
claims, regardless of their ultimate outcome, might have on its business or
reputation or on its ability to attract and retain patients.

                                       27
<PAGE>   29

  Changes In Technology

     The alternate site infusion business of the Company is dependent on
physicians continuing to prescribe the administration of drugs and nutrients
through intravenous and other infusion methods. Intravenous administration is
often the most appropriate method for treating critically ill patients and is
often the only way to administer proteins and biotechnology drugs. Nonetheless,
technological advances in drug delivery systems, the development of therapies
that can be administered orally, such as protease inhibitors for the treatment
of persons with HIV or AIDS, and the development of new medical treatments that
cure certain complex diseases or reduce the need for infusion therapy could
adversely impact the business of the Company.

  Year 2000 Issues

     The Company has determined that it will need to modify, upgrade or replace
portions of its software so that its computer systems will function properly
with respect to dates in the Year 2000 and beyond. The Company also has
initiated discussions with its significant suppliers, large customers and
financial institutions to determine those parties have appropriate plans to
remediate Year 2000 issues where their systems interface with the Company's
systems or otherwise impact its operations. The Company is assessing the extent
to which its operations are vulnerable should those organizations fail to
properly remediate their computer systems, and as of the date hereof is not able
to quantify the impact on the Company, if any, of failures of those
organizations to remediate Year 2000 issues properly.

  Potential Volatility Of Stock Price

     There may be significant volatility in the market price for Coram common
stock. Factors such as actual or anticipated fluctuations in the Company's
operating results, new products introduced or new contracts entered into by the
Company or its competitors, conditions and trends in the healthcare industry,
adoption of new accounting standards affecting the healthcare industry, changes
in financial estimates by securities analysts, proposed or anticipated business
combinations including the Company, general market conditions and other factors
could cause the market price of Coram common stock to fluctuate substantially.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market prices
for the common stocks of healthcare companies. These broad market fluctuations
may adversely affect the market price of the common stock. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has been brought against the
Company. There can be no assurance that such litigation will not occur in the
future with respect to the Company; such litigation could result in substantial
costs and a diversion of management's attention and resources, which could have
a material adverse effect upon the Company's business, financial condition and
results of operations.

ITEM 8. FINANCIAL STATEMENTS.

     The Company's Consolidated Financial Statements and financial statement
schedule at December 31, 1997, and 1996 and for the years ended December 31,
1997, 1996 and 1995 and the independent auditors' reports thereon are included
in this report on pages F-1 through F-26 and page S-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

                                       28
<PAGE>   30

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information with respect to directors and executive officers of the Company
is incorporated herein by reference to the information under the caption
"Management -- Directors and Executive Officers" in the Company's Proxy
Statement for the 1998 Annual Meeting of Stockholders.

ITEM 11. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.

     Information with respect to executive compensation is incorporated herein
by reference to the information under the caption "Management Compensation" in
the Company's Proxy Statement for the 1998 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT.

     Information with respect to security ownership of certain beneficial owners
and management is incorporated herein by reference to the tabulation under the
caption "Voting Securities and Principal Stockholders" in the Company's Proxy
Statement for the 1998 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information with respect to certain relationships and related transactions
is incorporated herein by reference to this information under the caption
"Certain Transactions" in the Company's Proxy Statement for the 1998 Annual
Meeting of Stockholders.

                                    PART IV

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

     (a) The following documents are filed as part of this report:

          1. Financial Statements. The following consolidated financial
     statements of the Registrant and Independent Auditors Report thereon are
     presented on pages F-1 through F-26:

           Report of Independent Auditors

           Consolidated Balance Sheets -- December 31, 1997 and 1996

           Consolidated Statements of Operations--Years ended December 31, 1997,
           1996 and 1995

           Consolidated Statements of Stockholders' Equity (Deficit) -- Years
           ended December 31, 1997, 1996 and 1995

           Consolidated Statements of Cash Flows -- Years ended December 31,
           1997, 1996 and 1995 Notes to Consolidated Financial Statements

          2. Financial Statement Schedules. The following consolidated financial
     statement schedule of the Registrant for the years ended December 31, 1997,
     1996 and 1995 is presented following the Notes to the Consolidated
     Financial Statements.

           Schedule II -- Valuation and Qualifying Account

           Schedules not listed above have been omitted because they are not
           applicable or are not required or the information required to be set
           forth therein is included in the Consolidated Financial Statements or
           notes thereto.

     (b) Reports on Form 8-K. On October 15, 1997, the Company filed a report on
Form 8-K announcing the completion of the sale of its Lithotripsy Business to
Integrated Health Services, Inc. as discussed in Note 5 to the Company's
Consolidated Financial Statements.

                                       29
<PAGE>   31

     (c) Exhibits

     Included as exhibits are the items listed on the Exhibit Index. The
Registrant will furnish a copy of any of the exhibits listed below upon payment
of $5.00 per exhibit to cover the costs to the Registrant of furnishing such
exhibit.

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
     EXHIBIT NUMBER                                EXHIBIT
     --------------                                -------
<C>                      <S>
          2.1            -- Agreement and Plan of Merger dated as of February 6,
                            1994, by and among the Registrant, T2, Curaflex,
                            HealthInfusion, Medisys, T2 Acquisition Company, CHS
                            Acquisition Company, HII Acquisition Company and MI
                            Acquisition Company (Incorporated by reference to Exhibit
                            2.1 of Registration No. 33-53957 on Form S-4).
          2.2            -- First Amendment to Agreement and Plan of Merger dated as
                            of May 25, 1994, by and among the Registrant, T2
                            Curaflex, HealthInfusion, Medisys, T2 Acquisition
                            Company, CHS Acquisition Company, HII Acquisition Company
                            and MI Acquisition Company (Incorporated by reference to
                            Exhibit 2.2 of Registration No. 33-53957 on Form S-4).
          2.3            -- Second Amendment to Agreement and Plan of Merger dated as
                            of July 8, 1994 by and among the Registrant, T2,
                            Curaflex, HealthInfusion, Medisys, T2 Acquisition
                            Company, CHS Acquisition Company, HII Acquisition Company
                            and MI Acquisition Company (Incorporated by reference to
                            Exhibit 2.3 of the Registrant's Current Report on Form
                            8-K dated as of July 15, 1994).
          2.4            -- Asset Sale and Note Purchase Agreement, (the "Asset
                            Purchase Agreement") among the Registrant, Caremark
                            International Inc. and Caremark Inc. dated as of January
                            29, 1995 (Incorporated by reference to Exhibit C of the
                            Registrant's Current Report on Form 8-K dated April 6,
                            1995). The exhibits and schedules to the Asset Purchase
                            Agreement are omitted from this Exhibit. The Company
                            agrees to furnish supplementally any omitted exhibits or
                            schedule with the Securities and Exchange Commission.
          2.5            -- Agreement and Plan of Merger among the Registrant, CHC
                            Acquisition Corp. and Lincare Holdings Inc., (the
                            "Lincare Merger Agreement") dated as of April 17, 1995
                            (Incorporated by reference to Exhibit B of the
                            Registrant's Current Report on Form 8-K dated May 2,
                            1995). The exhibits and schedules to the Lincare Merger
                            Agreement are omitted from this Exhibit. The Company
                            agrees to furnish supplementally any omitted exhibit or
                            schedule with the Securities and Exchange Commission.
          2.6            -- Agreement and Plan of Merger entered into as of October
                            19, 1996, among Coram Healthcare Corporation, Integrated
                            Health Services, Inc. and IHS Acquisition XIX, Inc.
                            (Incorporated by reference to Exhibit 2.1 of the
                            Registrant's Quarterly Report on Form 10-Q for the
                            quarter ended September 30, 1996).
          2.7            -- Purchase Agreement by and between Integrated Health
                            Services, Inc., T2 Medical, Inc., Coram Healthcare
                            Corporation of Greater New York and Coram Healthcare
                            Corporation. (Incorporated by reference Exhibit 2 of the
                            Registrant's Current Report on Form 8-K dated as of
                            August 20, 1997).
          2.8            -- Side Agreement dated as of September 30, 1997 among Coram
                            Healthcare Corporation, T2 Medical, Inc., Coram
                            Healthcare Corporation of Greater New York and Integrated
                            Health Services, Inc. (Incorporated by reference Exhibit
                            2.1 of the Registrant's Current Report on Form 8-K dated
                            as of September 30, 1997).
</TABLE>

                                       30
<PAGE>   32

<TABLE>
<CAPTION>
     EXHIBIT NUMBER                                EXHIBIT
     --------------                                -------
<C>                      <S>
          3.1            -- Certificate of Incorporation of Registrant, as amended
                            through May 11, 1994 (Incorporated by reference to
                            Exhibit 3.1 of Registration No. 33-53957 on Form S-4).
          3.2            -- Bylaws of Registrant (Incorporated by reference to
                            Exhibit 3.2 of Registration No. 33- 53957 on Form S-4).
          3.3            -- Certificate of Amendment of the Registrant's Certificate
                            of Incorporation.*
          4.1            -- Form of Common Stock Certificate for the Registrant's
                            common stock, $.001 par value per share. (Incorporated by
                            reference to Exhibit 4.1 of the Registrant's Annual
                            Report on Form 10-K for the year ended December 31,
                            1994).
          4.2            -- Form of Common Stock Certificate for the Registrant's
                            common stock, par value $0.001, including legend thereon
                            in respect of the Stockholder Rights Agreement which
                            exhibit is hereby incorporated by reference thereto.*
          4.3            -- Form of Certificate of Designation, Preferences and
                            Rights of the Registrant's Series X Participating
                            Preferred Stock (filed as Exhibit A to the Stockholder
                            Rights Agreement, which was filed as Exhibit 1 to the
                            Registrant's Current Report on Form 8-K dated as of June
                            25, 1997, and which exhibit is hereby incorporated by
                            reference thereto).
         10.1            -- Amended and Restated Credit Agreement dated as of
                            February 10, 1995, by and among Curaflex, T2,
                            HealthInfusion, Medisys, and HMSS as Co-Borrowers,
                            Toronto Dominion (Texas), Inc., as Agent (the "Amended
                            Credit Agreement") (Incorporated by reference to Exhibit
                            10.1 of the Registrant's Annual Report on Form 10-K for
                            the year ended December 31, 1994). The exhibits and
                            schedules to the Amended Credit Agreement are omitted
                            from this Exhibit. The Company agrees to furnish
                            supplementally any omitted exhibit or schedule to the
                            Securities and Exchange Commission upon request.
         10.2            -- Form of Employment Agreement between the Registrant and
                            Charles A. Laverty (Incorporated by reference to Exhibit
                            10.1 of Registration No. 33-53957 on Form S-4).
         10.3            -- Form of Severance/Non-Compete Agreement between the
                            Registrant and Miles E. Gilman (Incorporated by reference
                            to Exhibit 10.2 of Registration No. 33-53957 on Form
                            S-4).
         10.4            -- Form of Severance/Non-Compete Agreement between the
                            Registrant and William J. Brummond (Incorporated by
                            reference to Exhibit 10.3 of Registration No. 33-53957 on
                            Form S-4).
         10.5            -- Form of Severance/Non-Compete Agreement between the
                            Registrant and Tommy H. Carter (Incorporated by reference
                            to Exhibit 10.4 of Registration No. 33-53957 on Form
                            S-4).
         10.6            -- Form of Indemnification Agreement between the Registrant
                            and each of the Registrant's directors and certain
                            executive officers. (Incorporated by reference to Exhibit
                            10.6 of the Registrant's Form 10-K for the year ended
                            December 31, 1994).
         10.7            -- Registrant's 1994 Stock Option/Stock Issuance Plan and
                            related forms of agreements (Incorporated by reference to
                            Exhibit 10.15 of Registration No. 33-53957 on Form S-4).
         10.8            -- Registrant's Employee Stock Purchase Plan (Incorporated
                            by reference to Exhibit 10.16 of Registration No.
                            33-53957 on Form S-4).
         10.9            -- 401(k) Plan of T2 dated December 8, 1989 (Incorporated
                            herein by reference to Exhibit 10(s) of T2 Annual Report
                            on Form 10-K for the fiscal year ended September 30,
                            1989, filed with the Commission on or about December 29,
                            1988.
</TABLE>

                                       31
<PAGE>   33

<TABLE>
<CAPTION>
     EXHIBIT NUMBER                                EXHIBIT
     --------------                                -------
<C>                      <S>
         10.10           -- 1988 Stock Option Plan of T2, as amended and restated as
                            of July 31, 1990 and as further amended as of (i) August
                            20, 1991; (ii) November 12, 1991; and (iii) July 6, 1992
                            (Incorporated by reference to Exhibit 10.18 of
                            Registration No. 33-53957 on Form S-4).
         10.11           -- Curaflex 1989 Stock Option Plan (Incorporated by
                            reference to Exhibit 10.53 of Registration No. 33-53957
                            on Form S-4).
         10.12           -- Curaflex Amended 1990 Stock Option Plan (Incorporated by
                            reference to Exhibit 10.54 of Registration No. 33-53957
                            on Form S-4).
         10.13           -- Curaflex Directors' Nonqualified Stock Option Plan
                            (Incorporated by reference to Exhibit 10.59 of
                            Registration No. 33-53957 on Form S-4).
         10.14           -- Clinical Homecare Ltd. 1990 Incentive Stock Option Plan,
                            as amended (Incorporated by reference to Exhibit 10.61 of
                            Registration No. 33-53957 on Form S-4).
         10.15           -- Clinical Homecare Ltd. 1990 Stock Option Plan, as amended
                            (Incorporated by reference to Exhibit 10.62 of
                            Registration No. 33-53957 on Form S-4).
         10.16           -- 1989 Stock Option Plan of Medisys (Incorporated by
                            reference to Exhibit 10.85 of Registration No. 33-53957
                            on Form S-4).
         10.17           -- Form of Non-Plan Option Agreement of Medisys
                            (Incorporated by reference to Exhibit 10.86 of
                            Registration No. 33-53957 on Form S-4).
         10.18           -- Credit Agreement among Coram Healthcare Corporation,
                            Coram, Inc., the Lenders named therein and Chemical Bank,
                            as Administrative Agent, Collateral Agent and Fronting
                            Bank (the "Senior Credit Facility") dated as of April 6,
                            1995. (Incorporated by reference to Exhibit D of the
                            Registrant's Current Report on Form 8-K dated April 6,
                            1995). The exhibits and schedules to the Senior Credit
                            Facility are omitted from this Exhibit. The Company
                            agrees to furnish supplementally any omitted exhibit or
                            schedule to the Securities and Exchange Commission.
         10.19           -- First Amendment and Waiver to the Credit Agreement, dated
                            as of August 9, 1995, together with exhibits hereto,
                            among the Registrant, Coram Inc., each Subsidiary
                            Guarantor (as defined therein), the Financial
                            Institutions party thereto (as defined therein), and
                            Chemical Bank as Agent. (Incorporated by reference to
                            Exhibit 10.19 of the Registrant's Quarterly Report on
                            Form 10-Q for the quarter ended September 30, 1995).
                            Certain exhibits and schedules of this Exhibit have been
                            omitted. The Registrant agrees to furnish supplementally
                            any omitted schedule or exhibit to the Securities and
                            Exchange Commission.
         10.20           -- Second Amendment to the Credit Agreement dated as of
                            September 7, 1995, by and among the Registrant, Coram
                            Inc., each Subsidiary Guarantor (as defined therein), the
                            Financial Institutions party thereto (as defined
                            therein), and Chemical Bank as Agent. (Incorporated by
                            reference to Exhibit 10.20 of the Registrant's Quarterly
                            Report on Form 10-Q for the quarter ended September 30,
                            1995). Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
</TABLE>

                                       32
<PAGE>   34

<TABLE>
<CAPTION>
     EXHIBIT NUMBER                                EXHIBIT
     --------------                                -------
<C>                      <S>
         10.21           -- Third Amendment and Limited Waiver to the Credit
                            Agreement, dated as of September 29, 1995, by and among
                            the Registrant, Coram Inc., each Subsidiary Guarantor (as
                            defined therein), the Financial Institutions party
                            thereto (as defined therein), and Chemical Bank as Agent
                            (Incorporated by reference to Exhibit 10.21 of the
                            Registrant's Quarterly Report on Form 10-Q for the
                            quarter ended September 30, 1995). Certain exhibits and
                            schedules of this Exhibit have been omitted. The
                            Registrant agrees to furnish supplementally any omitted
                            schedule or exhibit to the Securities and Exchange
                            Commission.
         10.22           -- Fourth Amendment and Limited Waiver to the Credit
                            Agreement and First Amendment to Security Documents dated
                            as of October 13, 1995, together with selected exhibits
                            thereto, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions Party thereto (as defined therein) and
                            Chemical Bank as Agent (Incorporated by reference to the
                            Company's Current Report on Form 8-K as filed October 24,
                            1995).
         10.23           -- Warrant Agreement dated as of October 13, 1995, among the
                            Registrant, Coram Inc., and the other parties specified
                            therein (Incorporated by reference to the Company's
                            Current Report on Form 8-K as filed October 24, 1995).
         10.24           -- Amendment and Limited Waiver to Bridge Securities
                            Purchase Agreement, dated as of October 13, 1995, by and
                            among the Registrant, Coram Inc., and Donaldson, Lufkin &
                            Jenrette. (Incorporated by reference to Exhibit 10.24 of
                            the Registrant's Quarterly Report on Form 10-Q for the
                            quarter ended September 30, 1995). Certain exhibits and
                            schedules of this Exhibit have been omitted. The
                            Registrant agrees to furnish supplementally any omitted
                            schedule or exhibit to the Securities and Exchange
                            Commission.
         10.25           -- Form of Employment Agreement between the Registrant and
                            Donald J. Amaral. (Incorporated by reference to Exhibit
                            10.25 of the Registrant's Quarterly Report on Form 10-Q
                            for the quarter ended September 30, 1995).
         10.26           -- Securities Purchase Agreement ("Securities Purchase
                            Agreement") and Form of Subordinated Bridge Note, dated
                            as of April 6, 1995, among Coram Inc., Coram Funding,
                            Inc. and the Registrant (Incorporated by reference to
                            Exhibit E of the Registrant's Current report on Form 8-K
                            dated April 6, 1995). The exhibits and schedules to the
                            Securities Purchase Agreement are omitted from this
                            Exhibit. The Registrant agrees to furnish supplementally
                            any omitted exhibit or schedule to the Securities and
                            Exchange Commission.
         10.27           -- Exclusive Distribution Agreement -- Healthcare Products
                            and Biomedical Equipment and Services Agreement between
                            Medical Specialties Distributors, Inc. ("MSD") and Coram,
                            dated as of June 1, 1996. (Incorporated by reference to
                            Exhibit 10.1 of the Registrant's Quarterly Report on Form
                            10-Q/A Amendment No. 1 for the quarter ended June 30,
                            1996).
         10.28           -- Medical Specialties Master Service Agreement between MSD
                            and Coram, dated as of June 1, 1996. (Incorporated by
                            reference to Exhibit 10.2 of the Registrant's Quarterly
                            Report on Form 10-Q/A Amendment No. 1 for the quarter
                            ended June 30, 1996).
         10.29           -- Medical Specialties Master Rental Agreement between MSD
                            and Coram, dated as of June 1, 1996. (Incorporated by
                            reference to Exhibit 10.3 of the Registrant's Quarterly
                            Report on Form 10-Q/A Amendment No. 1 for the quarter
                            ended June 30, 1996).
</TABLE>

                                       33
<PAGE>   35

<TABLE>
<CAPTION>
     EXHIBIT NUMBER                                EXHIBIT
     --------------                                -------
<C>                      <S>
         10.30           -- Coram Healthcare Litigation Memorandum of Understanding
                            between all parties to In re Coram Healthcare Corp.
                            Securities Litigation, Master File No. 95-N-2074 and
                            Shevde v. Sweeney et al., Civil Action No. 96-N-722,
                            dated as of August 5, 1996. (Incorporated by reference to
                            Exhibit 10.4 of the Registrant's Quarterly Report on Form
                            10-Q/A Amendment No. 1 for the quarter ended June 30,
                            1996).
         10.31           -- Fifth Amendment to the Credit Agreement Dated as of
                            February 6, 1996, by and among the Registrant, Coram
                            Inc., each Subsidiary Guarantor (as defined therein), the
                            Financial Institutions party thereto (as described
                            therein), and Chemical Bank as Agent. (Incorporated by
                            reference to Exhibit 99.1 of the Registrant's Quarterly
                            Report on Form 10-Q for the quarter ended March 31,
                            1996). Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.32           -- Sixth Amendment to Credit Agreement Dated as of April 19,
                            1996, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions party thereto (as described therein), and
                            Chemical Bank as Agent. (Incorporated by reference to
                            Exhibit 99.2 of the Registrant's Quarterly Report on Form
                            10-Q for the quarter ended March 31, 1996). Certain
                            exhibits and schedules of this Exhibit have been omitted.
                            The Registrant agrees to furnish supplementally any
                            omitted schedule or exhibit to the Securities and
                            Exchange Commission.
         10.33           -- Seventh Amendment to Credit Agreement Dated as of July 3,
                            1996, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions party thereto (as described therein), and
                            Chemical Bank as Agent. (Incorporated by reference to
                            Exhibit 99.1 of the Registrant's Quarterly Report on Form
                            10-Q/A Amendment No. 1 for the quarter ended June 30,
                            1996). Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.34           -- Eighth Amendment to Credit Agreement dated as of December
                            3, 1996, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions party thereto (as described therein), and
                            Chase Manhattan Bank as Agent. Certain exhibits and
                            schedules of this Exhibit have been omitted. The
                            Registrant agrees to furnish supplementally any omitted
                            schedule or exhibit to the Securities and Exchange
                            Commission.
         10.35           -- Ninth Amendment and Limited Waiver to the Credit
                            Agreement dated as of March 14, 1997, by and among the
                            Registrant, Coram Inc., each Subsidiary Guarantor (as
                            defined therein), the Financial Institutions party
                            thereto (as described therein), and Chase Manhattan Bank
                            as Agent. Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.36           -- Amended Agreement, dated as of March 28, 1997 by and
                            among the Registrant, Coram Inc., and Donaldson, Lufkin &
                            Jenrette. Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.37           -- Sabratek Corporation and Coram Healthcare Exclusive
                            Supply Agreement for IV Infusion Pumps, IV Disposable
                            Sets and Related Items, dated as of February 26, 1997.
</TABLE>

                                       34
<PAGE>   36

<TABLE>
<CAPTION>
     EXHIBIT NUMBER                                EXHIBIT
     --------------                                -------
<C>                      <S>
         10.38           -- Amendment to 9% Subordinated Convertible Debenture and
                            Notice of Conversion dated as of June 30, 1996, by and
                            among the Registrant, Coram Inc., and the other parties
                            specified therein (Incorporated by reference to the
                            Company's report on Form 8-K as filed on July 12, 1996.
         10.39           -- Tenth Amendment to Credit Agreement dated June 2, 1997,
                            by and among the Registrant, Goldman Sachs Credit
                            Partners L.P., Coram, Inc., each Subsidiary Guarantor (as
                            defined therein) and The Chase Manhattan Bank, as
                            administrative agent and collateral agent for the Lenders
                            named therein, to that certain Credit Agreement dated as
                            of April 6, 1995, by and among the Registrant, Coram,
                            Inc, each Subsidiary Guarantor (ad defined therein), the
                            Financial Institutions named therein and The Chase
                            Manhattan Bank, as collateral agent for the Lenders named
                            therein. Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission. (Incorporated by
                            reference Exhibit 99 of the Registrant's Current Report
                            on Form 8-K dated as of June 2, 1997).
         10.40           -- Letter Agreement of March 29, 1998 by and among Cerberus
                            Partners, L.P., Goldman Sachs Credit Partners, L.P. and
                            Foothill Capital Corporation on the one hand, and Coram
                            Healthcare Corporation, on the other, deferring the
                            payment of interest and fees pursuant to (i) the
                            Securities Purchase Agreement dated as of April 6, 1995
                            and (ii) the Letter Agreement dated March 28, 1997
                            between Coram Funding, Inc. and Coram Healthcare
                            Corporation.*
         20.1            -- Stockholder Rights Agreement (the "Stockholder Rights
                            Agreement"), dated as of June 25, 1997, between Coram
                            Healthcare Corporation and BankBoston, N.A., which
                            includes the form of Certificate of Designation,
                            Preferences and Rights setting forth the terms of the
                            Series X Participating Preferred Stock, par value $0.001
                            per share, as Exhibit A, the Summary of Stockholder
                            Rights Agreement as Exhibit B and the form of Right
                            Certificate as Exhibit C. Pursuant to the Stockholder
                            Rights Agreement, printed Right Certificates will not be
                            mailed until as soon as practicable after the earlier of
                            the tenth business day after public announcement that a
                            person or group has become an Acquiring Person or the
                            tenth business day after a person commences, or announces
                            its intention to commence, a tender offer or exchange
                            offer the consummation of which would result in such
                            person becoming an Acquiring Person. (Incorporated by
                            reference Exhibit 1 of the Registrant's Current Report on
                            Form 8-K dated as of June 25, 1997).
         21.1            -- Subsidiaries of the Registrant.*
         23.1            -- Consent of Ernst & Young LLP.*
         27.1            -- Financial Data Schedule.*
         27.2            -- Restated Financial Data Schedules.*
</TABLE>

---------------

* Filed herewith.

                                       35
<PAGE>   37

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March
31, 1998.

                                            CORAM HEALTHCARE CORPORATION

                                            By:    /s/ DONALD J. AMARAL
                                              ----------------------------------
                                                       Donald J. Amaral
                                                 Chairman and Chief Executive
                                                            Officer

                                            By:    /s/ WENDY L. SIMPSON
                                              ----------------------------------
                                                       Wendy L. Simpson
                                                 Executive Vice President and
                                                   Chief Financial Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on be half of the
registrant and in the capacities on the dates indicated.

<TABLE>
<C>                                                    <S>                                    <C>
                /s/ DONALD J. AMARAL                   Chairman and Chief Executive Officer     March 31, 1998
-----------------------------------------------------    (Principal Executive Officer)
                  Donald J. Amaral

                 /s/ RICHARD M SMITH                   President and Secretary                  March 31, 1998
-----------------------------------------------------
                  Richard M. Smith

                /s/ WENDY L. SIMPSON                   Executive Vice President and Chief       March 31, 1998
-----------------------------------------------------    Financial Officer (Principal
                  Wendy L. Simpson                       Financial Officer)

                 /s/ SCOTT R. DANITZ                   Vice President and Controller            March 31, 1998
-----------------------------------------------------    (Principal Accounting Officer)
                   Scott R. Danitz

                /s/ WILLIAM J. CASEY                   Director                                 March   , 1998
-----------------------------------------------------
                  William J. Casey

                 /s/ RICHARD A. FINK                   Director                                 March 31, 1998
-----------------------------------------------------
                   Richard A. Fink

               /s/ STEPHEN G. PAGLIUCA                 Director                                 March 31, 1998
-----------------------------------------------------
                 Stephen G. Pagliuca

                 /s/ L. PETER SMITH                    Director                                 March 31, 1998
-----------------------------------------------------
                   L. Peter Smith
</TABLE>

                                       36
<PAGE>   38

                  INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>

Report of Independent Auditors..............................  F-2
Consolidated Balance Sheets -- As of December 31, 1997 and
  1996......................................................  F-3
Consolidated Statements of Operations -- Years Ended
  December 31, 1997, 1996 and 1995..........................  F-4
Consolidated Statements of Stockholders' Equity
  (Deficit) -- Years Ended December 31, 1997, 1996 and
  1995......................................................  F-5
Consolidated Statements of Cash Flows -- Years Ended
  December 31, 1997, 1996 and 1995..........................  F-6
Notes to Consolidated Financial Statements..................  F-7
Schedule II -- Valuation and Qualifying Accounts............  S-1
</TABLE>

                                       F-1
<PAGE>   39

                         REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Coram Healthcare Corporation

     We have audited the accompanying consolidated balance sheets of Coram
Healthcare Corporation as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coram
Healthcare Corporation at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

                                            ERNST & YOUNG LLP

Denver, Colorado
March 27, 1998

                                       F-2
<PAGE>   40

                          CORAM HEALTHCARE CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                --------------------
                                                                  1997        1996
                                                                --------    --------
<S>                                                             <C>         <C>
                                       ASSETS
Current assets:
  Cash and cash equivalents.................................    $108,950    $ 15,375
  Cash limited as to use....................................       1,029       3,917
  Accounts receivable, net of allowance of $24,047 and
     $40,256................................................      86,142     106,763
  Inventories...............................................      14,277      14,268
  Deferred income taxes, net................................       3,077       4,063
  Other current assets......................................       9,510      11,884
                                                                --------    --------
          Total current assets..............................     222,985     156,270
Property and equipment, net.................................      20,050      16,998
Joint ventures and other assets.............................      19,917      24,654
Deferred income taxes, non-current..........................       2,336       1,914
Other deferred costs........................................       7,668      11,114
Goodwill, net of accumulated amortization of $57,937 and
  $50,500...................................................     243,864     334,359
                                                                --------    --------
          Total assets......................................    $516,820    $545,309
                                                                ========    ========

                   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable..........................................    $ 39,084    $ 40,350
  Current maturities of long-term debt......................     150,225     198,033
  Income taxes payable......................................      10,287       1,663
  Deferred income taxes.....................................       1,256       1,325
  Reserve for litigation....................................       2,785       3,273
  Accrued merger and restructuring..........................       8,771      13,533
  Other accrued liabilities.................................      22,197      30,622
                                                                --------    --------
          Total current liabilities.........................     234,605     288,799
Long-term debt, including revolving lines of credit.........     150,428     266,641
Minority interest in consolidated joint ventures............       1,016       4,544
Other liabilities...........................................       1,588       2,155
Deferred income taxes, non-current..........................       4,157       4,652
Commitments and contingencies...............................          --          --
Stockholders' equity (deficit):
  Preferred stock, par value $.001, authorized 10,000
     shares, none issued....................................          --          --
  Common stock, par value $.001, authorized 100,000 shares
     at December 31, 1997 and 75,000 shares at December 31,
     1996, issued and outstanding 48,069 at December 31,
     1997 and 42,404 at December 31, 1996...................          48          42
  Additional paid-in capital................................     437,608     390,741
  Common stock to be issued.................................          --      25,625
  Accumulated deficit.......................................    (312,630)   (437,890)
                                                                --------    --------
          Total stockholders' equity (deficit)..............     125,026     (21,482)
                                                                --------    --------
          Total liabilities and stockholders' equity
            (deficit).......................................    $516,820    $545,309
                                                                ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>   41

                          CORAM HEALTHCARE CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              --------------------------------
                                                                1997        1996       1995
                                                              ---------   --------   ---------
<S>                                                           <C>         <C>        <C>
Net revenue.................................................  $ 464,385   $521,969   $ 602,585
Cost of service.............................................    328,781    361,688     459,710
                                                              ---------   --------   ---------
Gross profit................................................    135,604    160,281     142,875
Operating expenses:
  Selling, general and administrative expenses..............     93,167    104,261     133,037
  Provision for estimated uncollectible accounts............     16,209     29,045      68,912
  Amortization of goodwill..................................     13,586     15,259      15,307
  Charges for long-lived assets and acquired receivables:
     Goodwill and other long-lived assets...................         --         --     166,373
     Valuation of acquired receivables......................         --         --      37,000
  Provision for (income from) litigation settlements........   (156,792)    27,875          --
  Restructuring costs, net..................................         --         --       6,158
                                                              ---------   --------   ---------
          Total operating expenses..........................    (33,830)   176,440     426,787
                                                              ---------   --------   ---------
Operating income (loss).....................................    169,434    (16,159)   (283,912)
Other income (expenses):
  Interest income...........................................      2,242      1,497       1,531
  Interest expense..........................................    (75,026)   (78,767)    (49,741)
  Termination fee...........................................     15,182         --          --
  Equity in net income of unconsolidated joint ventures.....      1,245        991       1,592
  Gain on sale of business..................................     26,744         --          --
  Gain (loss) on sales of property and equipment............        (61)       668         (50)
  Other income (expense), net...............................        333        456      (3,659)
                                                              ---------   --------   ---------
Income (loss) before income taxes and minority interests....    140,093    (91,314)   (334,239)
  Income tax expense (benefit)..............................      7,550    (13,998)    (11,154)
  Minority interests in net income of consolidated joint
     ventures...............................................      7,283      7,698      10,964
                                                              ---------   --------   ---------
Net income (loss)...........................................  $ 125,260   $(85,014)  $(334,049)
                                                              =========   ========   =========
Earnings (loss) per common share............................  $    2.64   $  (2.05)  $   (8.39)
                                                              =========   ========   =========
Earnings (loss) per common share -- assuming dilution.......  $    2.30   $  (2.05)  $   (8.39)
                                                              =========   ========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>   42

                          CORAM HEALTHCARE CORPORATION

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                 UNREALIZED
                                                                       COMMON     LOSS ON
                                        COMMON STOCK     ADDITIONAL    STOCK     AVAILABLE-
                                       ---------------    PAID-IN      TO BE      FOR-SALE    ACCUMULATED
                                       SHARES   AMOUNT    CAPITAL      ISSUED    SECURITIES     DEFICIT       TOTAL
                                       ------   ------   ----------   --------   ----------   -----------   ---------
<S>                                    <C>      <C>      <C>          <C>        <C>          <C>           <C>
Balance, January 1, 1995.............  38,964    $39      $341,328    $     --     $(279)      $ (18,827)   $ 322,261
  Issuance of common stock and
     warrants, net...................   1,405      1        29,548          --        --              --       29,549
  Elimination of unrealized loss.....      --     --            --          --       279              --          279
  Net loss...........................      --     --            --          --        --        (334,049)    (334,049)
                                       ------    ---      --------    --------     -----       ---------    ---------
Balance, December 31, 1995...........  40,369     40       370,876          --        --        (352,876)      18,040
  Issuance of common stock and
     warrants, net...................   2,035      2        19,865          --        --              --       19,867
  Shares reserved for litigation.....      --     --            --      25,625        --              --       25,625
  Net loss...........................      --     --            --          --        --         (85,014)     (85,014)
                                       ------    ---      --------    --------     -----       ---------    ---------
Balance, December 31, 1996...........  42,404     42       390,741      25,625        --        (437,890)     (21,482)
  Issuance of common stock and
     warrants, net...................     665      1        21,247          --        --              --       21,248
  Issuance of shares reserved for
     litigation......................   5,000      5        25,620     (25,625)       --              --           --
  Net income.........................      --     --            --          --        --         125,260      125,260
                                       ------    ---      --------    --------     -----       ---------    ---------
Balance, December 31, 1997...........  48,069    $48      $437,608    $     --     $  --       $(312,630)   $ 125,026
                                       ======    ===      ========    ========     =====       =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>   43

                          CORAM HEALTHCARE CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              --------------------------------
                                                                1997        1996       1995
                                                              ---------   --------   ---------
<S>                                                           <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $ 125,260   $(85,014)  $(334,049)
Adjustments to reconcile net income (loss) to net cash
  provided (used) by operating activities:
  Provision for estimated uncollectible accounts............     16,209     29,045      68,912
  Depreciation and amortization.............................     56,068     64,487      47,322
  Gain on conversion of debt................................         --     (1,350)         --
  Charge for long-lived assets and acquired receivables:
    Goodwill and long-lived assets..........................         --         --     166,373
    Valuation of acquired receivables.......................         --         --      37,000
    Merger/restructuring benefit, net.......................         --         --     (13,032)
  Litigation settlements not requiring cash.................   (120,079)    25,625       1,372
  Deferred income taxes, net................................         --         --      25,140
  Minority interest in net income of consolidated joint
    ventures, net...........................................       (784)    (2,946)      2,455
  (Gain) loss on sales of assets............................         (2)    (2,400)         50
  Gain on sale of business..................................    (26,744)        --          --
  Loss on sales of investments, net.........................         --         --       3,483
  Equity in net income of unconsolidated joint ventures,
    net.....................................................       (498)      (611)     (1,186)
  Other, net................................................        179         --         919
  Changes in assets and liabilities, net of acquisitions and
    dispositions:
    Accounts receivable.....................................     (2,026)    14,029     (41,930)
    Prepaid expenses, inventories and other assets..........     (9,198)    20,702     (13,282)
    Current and other liabilities...........................     32,849        636      62,798
    Accrued merger and restructuring........................     (4,762)    (2,817)    (10,996)
    Reserve for litigation..................................       (488)       833     (18,132)
                                                              ---------   --------   ---------
Net cash provided (used) by operating activities............     65,984     60,219     (16,783)
                                                              ---------   --------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of securities, net....................................         --         --      16,592
Proceeds from sales of long-term assets.....................        680      3,875      16,839
Purchases of property and equipment.........................    (19,149)    (6,850)     (7,329)
Cash receipts on sale (payments for acquisitions) of
  businesses, net...........................................    124,196      4,821    (241,420)
Proceeds from long-term receivables.........................         --        902       1,229
Capital contributions to unconsolidated joint ventures......         --         --      (1,333)
                                                              ---------   --------   ---------
Net cash provided (used) by investing activities............    105,727      2,748    (215,422)
                                                              ---------   --------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net of repurchases and issuance
  costs.....................................................      1,234        553      10,387
Borrowings on lines of credit...............................         --         --      15,300
Repayments of lines of credit...............................         --         --    (123,420)
Securities sold under agreements to repurchase..............         --         --      (7,430)
Debt borrowings.............................................     10,000         --     588,980
Repayments of debt..........................................    (89,370)   (74,630)   (218,851)
Cash paid for debt financing................................         --       (250)    (19,614)
                                                              ---------   --------   ---------
Net cash provided (used) by financing activities............    (78,136)   (74,327)    245,352
                                                              ---------   --------   ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........     93,575    (11,360)     13,147
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................     15,375     26,735      13,588
                                                              ---------   --------   ---------
CASH AND CASH EQUIVALENTS, END OF YEAR......................  $ 108,950   $ 15,375   $  26,735
                                                              =========   ========   =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
  Interest..................................................  $  12,399   $ 17,719   $  17,357
  Income taxes..............................................  $  (1,074)  $(24,682)  $ (30,221)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
  ACTIVITIES:
  Issuance of stock in connection with acquisitions.........  $     870   $    819   $   6,897
  Deferred interest.........................................  $   4,802   $  4,968   $  13,892
  Issuance of notes in connection with acquisition of
    Caremark Business.......................................  $      --   $     --   $ 100,000
  Conversion of long-term debt to common stock..............  $      --   $  5,267   $     382
  Note payable incurred for commitment fee on Senior Credit
    Facility................................................  $      --   $     --   $   2,350
  Warrants issued in connection with debt financing.........  $  18,965   $ 10,786   $   9,793
  Common stock issued for consulting services...............  $      --   $     --   $   1,479
  Warrants issued to settle litigation......................  $      --   $    365   $   2,520
  Common stock issued in settlement of litigation...........  $  25,625   $  1,783   $      --
  Common stock issued in connection with employment
    agreements..............................................  $      --   $    294   $      --
  Capital lease obligation incurred on equipment lease......  $      41   $    670   $      --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-6
<PAGE>   44

                          CORAM HEALTHCARE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

     Business Activity. Coram Healthcare Corporation and its subsidiaries
("Coram" or the "Company") are primarily engaged in providing alternate site
(outside the hospital) infusion therapy and related services throughout the
United States and Canada. Other services offered by the Company include the
provision of lithotripsy (see Note 5), mail-order pharmacy, pharmacy benefit
management, ancillary network management service and other non-intravenous
infusion products and services.

     The operations of the Company commenced on July 8, 1994, as a result of a
merger of T2 Medical, Inc. ("T2"), Curaflex Health Services, Inc. ("Curaflex"),
HealthInfusion, Inc. ("HealthInfusion") and Medisys, Inc. ("Medisys")
(collectively, the "Merged Entities") (the "Four-Way Merger"). Each of these
companies is a wholly-owned subsidiary of the Company. The transaction was
accounted for as a pooling of interests.

     The Company has made a number of acquisitions since commencing operations,
the most significant of which was the acquisition of substantially all of the
assets and the assumption of certain specified liabilities of the alternate site
infusion business and certain related businesses (the "Caremark Business") from
Caremark Inc., a subsidiary of Caremark International, Inc. (collectively
"Caremark") effective April 1, 1995. In addition, Coram acquired H.M.S.S., Inc.
("HMSS"), a leading regional provider of home infusion therapies based in
Houston, Texas, effective September 12, 1994. See Note 6.

     Recent Operations and Financial Condition. Most of the Company's revenue is
derived from alternate site infusion therapy and is reimbursed by third-party
payors such as private insurers, managed care organizations and governmental
payors. In 1997 and 1996, the increasingly and highly competitive market
combined with the efforts by third-party payors to contain or reduce healthcare
costs contributed to reduced reimbursement rates for services. These factors are
likely to continue, at least in the near term, and may have an adverse effect on
the Company's operations.

     The Company has suffered loss of revenue from under-performance of the
Caremark Business compared to original expectations, along with a negative
impact on revenue referral sources and employee morale throughout the Company.
In addition, the Company incurred substantial indebtedness to acquire the
Caremark Business, which it expected to service primarily through the operating
income and cash flow of the Caremark Business. In 1997, the Company settled its
litigation with Caremark for $165.0 million. See Notes 3 and 12. With the
settlement of the Caremark litigation, the Company is now focused on strategic
alternatives for the Company and its operations to realize its potential in the
changing market for alternate site infusion therapy services. Additionally, in
1997 the Company sold its interest in its thirteen lithotripsy partnerships, the
stock of its equipment service company and certain related assets (the
"Lithotripsy Business"). The sale allowed the Company to substantially reduce
its debt obligations and its contingent liabilities associated with the
Company's former commitments to its partners in the Lithotripsy Business,
thereby further improving its financial position. See Note 5.

     On October 19, 1996, Coram, Integrated Health Services, Inc. ("IHS") and
IHS Acquisition XIX, Inc., a wholly-owned subsidiary of IHS ("Merger Sub"),
entered into a definitive Agreement and Plan of Merger (the "Merger Agreement")
providing for the merger (the "IHS Merger") of Merger Sub with and into the
Company. On April 4, 1997, the merger with IHS was terminated. See Note 4.

     Concentration of Credit Risks. Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash
equivalents and accounts receivable. As of December 31, 1997, approximately 98%
of cash was deposited with Chase Manhattan Bank, the former lead bank under the
Company's Senior Credit Facility. See Note 8. No other single institution
represented greater than 5% of total cash equivalents. Amounts are generally in
excess of the FDIC insurance limits but credit risk is mitigated as deposits are
kept only with high credit quality institutions and invested in overnight funds.
Accounts receivable are primarily from third-party payors, including private
insurers, managed care organizations and state and federal governmental payors
such as Medicare and Medicaid, and are unsecured. Credit risk is mitigated by
                                       F-7
<PAGE>   45
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the large number of entities that comprise the third-party payor base and credit
evaluations of patients and third-party payors.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation and Principles of Consolidation. The consolidated
financial statements include the accounts of Coram, its subsidiaries and joint
ventures and partnerships in which ownership is 50% or greater and considered to
be under the control of the Company. All material intercompany accounts and
transaction balances have been eliminated in consolidation. The Company uses the
equity method of accounting to account for investments in entities in which it
exhibits significant influence, but not control, and has an ownership interest
less than 50%.

     Reclassifications. Certain amounts in the 1996 and 1995 financial
statements have been reclassified to conform to the 1997 presentation.

     Revenue Recognition. Revenue is recognized as services are rendered or
products are delivered. Substantially all of the Company's revenue is billed to
third-party payors, including insurance companies, managed care plans,
governmental payors and contracted institutions. Revenue is recorded net of
contractual adjustments and related discounts. Contractual adjustments represent
estimated differences between service revenue at established rates and amounts
expected to be realized from third-party payors under contractual agreements.
Management fees, which are collected from entities managed by the Company, are
based principally on a percentage of the entities' revenue. Management fees were
approximately $2.0 million, $1.6 million and $7.6 million in 1997, 1996 and
1995, respectively.

     Revenue from the Medicare and Medicaid programs accounted for approximately
28%, 27% and 24%, respectively, of the Company's net revenue for the years ended
December 31, 1997, 1996 and 1995, respectively. Laws and regulations governing
the Medicare and Medicaid programs are complex and subject to interpretation.
Management of the Company believes that it is in compliance with all applicable
laws and regulations. Compliance with such laws and regulations can be subject
to future government review and interpretation as well as significant regulatory
action including fines, penalties, and exclusion from the Medicare and Medicaid
programs.

     Cash and Cash Equivalents. Cash equivalents include all highly liquid
investments with an original maturity of three months or less. As of December
31, 1997, the Company had approximately $107.6 million cash held in overnight
funds. A portion of the Company's cash balance was limited as to its use
including cash of partnerships that may only be used for partnership operations.
The restricted balances approximated $1.0 million at December 31, 1997 and $3.9
million at December 31, 1996.

     Inventories. Inventories, consisting primarily of pharmaceuticals and
medical supplies, are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

     Property and Equipment. Property and equipment are stated at cost.
Depreciation is computed using straight-line and accelerated methods over the
estimated useful lives of one to 10 years for machinery and equipment,
furniture, fixtures and vehicles, and 30 to 31.5 years for buildings. Leasehold
improvements are amortized over the shorter of the lease term or estimated
useful lives of the related assets.

     Goodwill and other Long-Lived Assets. Goodwill represents the excess of the
purchase price over the fair value of net assets acquired through business
combinations accounted for as purchases and is amortized on a straight-line
basis over the expected periods to be benefited. In 1995, the Company
implemented Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("Statement 121"). Accordingly, the carrying value of goodwill and other
long-lived assets is reviewed quarterly to determine if any impairment
indicators are present. If it is determined that such indicators are present and
the review indicates that the assets will not be recoverable,

                                       F-8
<PAGE>   46
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

based on undiscounted estimated cash flows over their remaining depreciation and
amortization period, their carrying value is reduced to estimated fair market
value. Impairment indicators include, among other conditions, cash flow
deficits; an historic or anticipated decline in revenue or operating profit;
adverse legal, regulatory or reimbursement developments; accumulation of costs
significantly in excess of amounts originally expected to acquire the asset; or
a material decrease in the fair value of some or all of the assets.

     Within the home infusion business, the review is done separately for each
of the markets in which the Company operates. Markets are currently the lowest
level for which there are cash flows that are largely independent of the cash
flows of other parts of the business. The Company performed the allocation of
goodwill and other identifiable intangible assets at September 30, 1995. The
Company was not able to allocate goodwill and other identifiable intangible
assets to its branches or markets at the time such assets were acquired due to
the numerous acquisitions and branch consolidations. Because the Company
believes its goodwill is closely tied to the revenue generating capacity of each
market, it allocated the goodwill to each market area at September 30, 1995 in
proportion to the revenue of the market. The Company believed this was the most
reasonable and objective basis available at that date. The allocation of
goodwill was made using forecasted 1996 revenue. Other identifiable intangible
assets were allocated in the same manner.

     The Company believes that its goodwill is defined by its
relationships -- many of which are noncontractual -- with physicians, medical
groups, hospitals, case managers and managed care organizations and other
referral sources to the Company in the marketplace. The evaluation of the
recoverability of goodwill is significantly affected by estimates of future cash
flows from each of the Company's market areas. If estimates of future cash flows
from operations decrease, the Company may be required to write down its goodwill
and other long-lived assets in the future. Any such write-down could have a
material adverse effect on the Company's financial position and results of
operations.

     As of October 1, 1995, the Company reduced the remaining useful lives for
goodwill to 25 years because of uncertainties in the Company's business
environment and adverse operating results. Prior to that date, goodwill was
amortized over useful lives ranging from 30 to 40 years. The change in estimated
useful lives increased amortization expense by approximately $5.1 million, $5.8
million and $1.3 million during the years ended December 31, 1997, 1996 and
1995, respectively.

     Provision for Estimated Uncollectible Accounts. Management regularly
reviews the collectibility of accounts receivable utilizing system-generated
reports which track collection and write-off activity. Estimated write-off
percentages are then applied to each aging category by payor classification to
determine the allowance for estimated uncollectible accounts. The allowance for
estimated uncollectible accounts is adjusted as needed to reflect current
collection, write-off and other trends, including changes in assessment of
realizable value. While management believes the resulting net carrying amounts
for accounts receivable are fairly stated at each quarter-end and that the
Company has made adequate provision for uncollectible accounts based on all
information available, no assurance can be given as to the level of future
provisions for uncollectible accounts, or how they will compare to the levels
experienced in the past.

     The Company's ability to successfully collect its accounts receivable
depends, in part, on its ability to adequately supervise and train personnel in
billing and collections, and minimize losses related to branch consolidations
and system changes. In 1995, the Company recorded as part of its quarterly
provision for estimated uncollectible accounts a charge of $20.0 million which
management believes resulted principally from events that transpired as part of
the consolidation of the various constituent companies' billing systems
ultimately into one billing system for use at substantially all locations and to
move its billing and collections functions from a centralized to a decentralized
structure.

     Earnings per Share. In 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share ("Statement 128"). Statement 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings

                                       F-9
<PAGE>   47
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to fully diluted earnings
per share under the previous earnings per share methodology. All earnings per
share amounts for all periods have been presented, and where appropriate,
restated to conform to the Statement 128 requirements.

     The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                      1997        1996        1995
                                                    --------    --------    ---------
<S>                                                 <C>         <C>         <C>
Numerator for basic and diluted earnings per
  share...........................................  $125,260    $(85,014)   $(334,049)
                                                    ========    ========    =========
Denominator:
  Weighted average shares.........................    44,321      41,546       39,802
  Contingently issuable shares....................     3,142          --           --
                                                    --------    --------    ---------
  Denominator for basic earnings per share........    47,463      41,546       39,802
Effect of other dilutive securities:
  Stock options...................................     1,292          --           --
  Warrants........................................     5,726          --           --
                                                    --------    --------    ---------
  Denominator for diluted earnings per
     share -- adjusted weighted average shares and
     assumed conversion...........................    54,481      41,546       39,802
                                                    ========    ========    =========
Earnings (loss) per common share..................  $   2.64    $  (2.05)   $   (8.39)
                                                    ========    ========    =========
Earnings (loss) per common share -- assuming
  dilution........................................  $   2.30    $  (2.05)   $   (8.39)
                                                    ========    ========    =========
</TABLE>

     In 1997, basic earnings per share data was computed by dividing net income
by the weighted average number of common shares and contingently issuable shares
outstanding during the period. Diluted earnings per share was adjusted for the
assumed conversion of all potentially dilutive securities including stock
options and warrants to purchase common stock. In 1996 and 1995, the
computations do not give effect to options or warrants as their effect would
have been anti-dilutive.

     Segment Reporting. In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information ("Statement 131"), which is
effective for years beginning after December 15, 1997. Statement 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company will
adopt the new requirements in 1998. Management has not completed its review of
Statement 131, but does not anticipate that the adoption of this statement will
have a significant effect on the Company's financial statement disclosures.

     Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates.

3. CAREMARK ACQUISITION AND LITIGATION SETTLEMENT

     Effective April 1, 1995, the Company acquired the Caremark Business for
$209.0 million in cash and $100.0 million aggregate principal amount of Junior
Subordinated Pay-In-Kind Notes ("Junior Subordinated PIK Notes"). The Company
assumed only certain specified liabilities of the Caremark Business, which

                                      F-10
<PAGE>   48
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

expressly excluded any liabilities associated with the government investigation
of Caremark, which was settled by Caremark in June 1995. The transaction was
accounted for as a purchase.

     The following unaudited pro forma information is provided for comparative
purposes only. It presents a combination of the Company's reported results and
information furnished by Caremark for the Caremark Business prior to its
acquisition by the Company as if the acquisition of the Caremark Business had
occurred January 1, 1995. The data used for the Caremark Business in such pro
forma financial information for the period prior to acquisition by the Company
was furnished by Caremark (in thousands except per share data).

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                                    1995
                                                                ------------
<S>                                                             <C>
Net revenue.................................................      $698,685
Net loss....................................................      (344,207)
Net loss per common share...................................         (8.65)
</TABLE>

     Following the purchase of the Caremark Business in 1995, the Company
expected the combined business to grow and expected to realize substantial cost
savings, principally through elimination of geographically duplicative branches
and consolidation of corporate functions. However, since the acquisition of the
Caremark Business, the anticipated cost savings were offset by a decline in
revenue resulting in substantial losses to the Company. During 1995, the Company
reduced the valuation of the acquired receivables by an aggregate of $37.0
million and charged that amount to operations when it concluded that certain
receivables for services rendered prior to April 1, 1995 were uncollectible and
its sole source of recovery was its lawsuit against Caremark. The Company filed
its initial complaint against Caremark on September 11, 1995. On June 30, 1997,
the Company entered into a settlement agreement with Caremark for $165.0
million. Under the terms of the settlement, the Junior Subordinated PIK Notes
totaling approximately $100.0 million principal and $20.0 million accrued
interest (payable semiannually in PIK Notes of the same type) were cancelled
with all payments thereunder forgiven. Additionally, Caremark agreed to pay
$45.0 million in cash to the Company which was received September 2, 1997. Of
the $45.0 million cash received, $3.6 million was placed in escrow pending
reconciliation of certain lockbox issues. Additionally, as part of the
settlement, Caremark assigned and transferred to Coram all of Caremark's claims
and causes of action against Caremark's auditors, Price Waterhouse LLP, related
to the lawsuit. This assignment of claims includes claims for damages sustained
by Caremark in defending and settling the lawsuit. See Note 12. In June 1997,
the Company recorded settlement income of $156.8 million which represents the
$165.0 million settlement less related costs of $8.2 million.

4. TERMINATED MERGER WITH IHS

     On October 19, 1996, the Company, IHS and Merger Sub entered into the
Merger Agreement providing for the merger of Merger Sub with and into the
Company. If the IHS Merger had been consummated, the Company would have become a
wholly-owned subsidiary of IHS.

     On March 30, 1997, Coram, IHS and Merger Sub executed an amendment to the
Merger Agreement (the "Amendment"), which was to become effective April 4, 1997.
On April 4, 1997, the Company received from IHS a written notice of termination
of the Amendment and the Merger Agreement. Pursuant to the terms of the Merger
Agreement and as a result of such termination, IHS paid the Company $21.0
million on May 6, 1997. Accordingly, in the second quarter of 1997 the Company
recorded other income of $15.2 million, representing the $21.0 million
termination fee less legal, professional and other costs related to the
terminated merger of $5.8 million.

                                      F-11
<PAGE>   49
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. SALE OF LITHOTRIPSY BUSINESS

     On August 20, 1997, the Company signed an agreement with IHS for the sale
of the Company's interest in its thirteen lithotripsy partnerships, the stock of
its equipment service company and certain related assets (the "Lithotripsy
Business"). Effective September 30, 1997, the Company completed the transaction
as to all of its Lithotripsy Business other than its interests in three
lithotripsy partnerships. Pursuant to a side agreement amending the August 20,
1997 purchase agreement, the Company's interests in the three remaining
partnerships were placed in escrow pending the satisfaction of certain
conditions. Following satisfaction of these conditions, two of the partnerships
were conveyed to IHS effective October 3, 1997. Due to the Company's and IHS's
inability to obtain the consent of the other partner to the transfer of Coram's
interest therein, the Company's interest in the remaining partnership was
returned to the Company.

     During the years ended December 31, 1997, 1996 and 1995 the Lithotripsy
Business provided the following to the Company's operations (in thousands):

<TABLE>
<CAPTION>
                                                         1997       1996       1995
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Net revenue...........................................  $37,282    $49,689    $53,491
Gross profit..........................................   23,494     27,352     30,175
Operating income......................................   17,584     21,824     27,200
</TABLE>

     Proceeds on the sale of the Lithotripsy Business totaled $126.6 million of
which $105.6 million relates to the lithotripsy partnerships conveyed to IHS on
September 30, 1997 and $21.0 million relates to the partnerships conveyed
October 3, 1997. In 1997, the Company recognized a gain of $26.7 million on the
sale of business.

6. ACQUISITIONS AND RESTRUCTURING

     Acquisitions. The acquisition activity during the year ended December 31,
1996 was limited to the completion of the purchase of certain minority interests
in two lithotripsy joint ventures for approximately $4.7 million in cash. During
1995, the Company made several acquisitions, consisting primarily of certain
physician owned entities totaling $25.0 million. These acquisitions were
accounted for as purchases. Individually and in the aggregate, the results of
operations of these businesses for periods prior to their acquisition were not
material to the Company's consolidated results of operations.

     Certain agreements related to previously acquired businesses or interests
therein provide for additional contingent consideration to be paid by the
Company. The amount of additional consideration, if any, is generally based on
the financial performance levels of the acquired companies. As of December 31,
1997, the Company may be required to pay under such contingent obligations
approximately $2.5 million subject to increase based, in certain cases, on the
Company or its subsidiaries exceeding certain revenue or income targets and
changes in the market value of the Company's stock. Subject to certain elections
by the Company or the sellers, a maximum of approximately $1.5 million of these
contingent obligations, subject to increase, may be paid in cash. If these
contingent payments are made, they will be recorded as additional goodwill in
the period in which the payment becomes probable. Payments made during the years
ended December 31, 1997, 1996 and 1995 were $0.6 million, $3.7 million and $0.7
million, respectively.

     Merger and Restructuring. During September 1994, the Company initiated a
merger and restructuring plan (the "Coram Consolidation Plan") to reduce
operating costs, improve productivity and gain efficiencies through
consolidation of redundant infusion centers and corporate offices, reduction of
personnel, and elimination or discontinuance of investments in certain joint
ventures and other non-infusion facilities. As a result of the Coram
Consolidation Plan, the Company recorded charges of $28.5 million in estimated
merger costs and $95.5 million in estimated restructure costs. During May 1995,
the Company initiated a second restructuring plan (the "Caremark Business
Consolidation Plan") and charged $25.8 million to operations as

                                      F-12
<PAGE>   50
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a restructuring cost. Certain additional restructuring costs totaling
approximately $11.4 million were accounted for as adjustments to the purchase
price of the Caremark Business.

     For both the Coram and the Caremark Business Consolidation Plans, personnel
reduction costs include severance payments, fringe benefits and taxes related to
employees to be terminated, costs of terminating executives and buying out
employment and consulting contracts, and incremental professional fees to
develop and implement the plans. Facility reduction costs consist of the cost of
fulfilling or buying out existing lease commitments on branch facilities and
corporate offices that will be closed as part of the restructuring, reduced by
any sublease income. They also include related costs for equipment leases and
facility closure expenses. Facility reduction costs resulting in non-cash
charges consist principally of the write-down, net of any proceeds on
disposition, of operating assets that have become redundant because of the
consolidation. They also include inventory that has no future value because of
the restructuring. For the Coram Consolidation Plan, merger costs consist of
executive severance payments directly related to the Four-Way Merger based on
the relevant employment agreements, investment banking fees, consulting, legal
and accounting fees and other costs incurred as a direct result of the merger.
Discontinuance costs are principally non-cash and consist of the estimated loss
on the disposal of non-core businesses.

     In 1997, net revenue of the Company does not include revenue from non-core
businesses that were discontinued or disposed of as part of the Coram
Consolidation Plan. However, in the years ended December 31, 1996 and 1995, net
revenue included approximately $4.9 million and $52.1 million, respectively,
from non-core businesses. Operating results from businesses that were
discontinued or disposed were not material.

     During 1995, the Company had substantially completed the consolidation
process contemplated by both the Coram and Caremark Business Consolidation
Plans, including the closure of approximately 220 branch facilities, the
downsizing of 40 branch facilities, the consolidation of corporate functions
previously conducted in five corporate offices, and the reduction of 1,670
full-time equivalent field service and corporate personnel.

     As a result of evaluating the estimated cost to complete in relation to the
accruals, the Company recognized the following benefits in 1995 (in thousands):

<TABLE>
<CAPTION>
                                            CORAM           CAREMARK BUSINESS
                                      CONSOLIDATION PLAN    CONSOLIDATION PLAN     TOTAL
                                      ------------------    ------------------    --------
<S>                                   <C>                   <C>                   <C>
Personnel Reduction Costs.........         $(5,600)              $(6,700)         $(12,300)
Facility Reduction Costs..........           1,100                (2,500)           (1,400)
Discontinuance Costs..............          (4,500)                   --            (4,500)
                                           -------               -------          --------
Total Restructuring Costs.........         $(9,000)              $(9,200)         $(18,200)
                                           =======               =======          ========
</TABLE>

     The Company recognized net charges of $6.2 million (including the above
benefit and a $1.4 million gain on the disposition of a non-core business) in
the year ended December 31, 1995. No amounts were recorded during the years
ended December 31, 1997 and 1996, however, the Company may continue to adjust
amounts recorded as contingencies related to lease buyouts, contractual
obligations and other facility reduction costs as they are resolved.

                                      F-13
<PAGE>   51
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Under the two plans, the Company has made total asset payments and total
asset disposals through December 31, 1997 as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            BALANCE AT
                                  CHARGES THROUGH DECEMBER 31, 1997     DECEMBER 31, 1997
                                  ---------------------------------   ----------------------
                                      CASH       NON-CASH             FUTURE CASH     TOTAL
                                  EXPENDITURES   CHARGES     TOTAL    EXPENDITURES   CHARGES
                                  ------------   --------   -------   ------------   -------
<S>                               <C>            <C>        <C>       <C>            <C>
Coram Consolidation Plan:
  Merger Costs..................    $27,300      $   600    $27,900      $  600      $28,500
                                    =======      =======    =======      ======      =======
  Personnel Reduction Costs.....    $20,300      $   600    $20,900      $  300      $21,200
  Facility Reduction Costs......     11,600       21,500     33,100         500       33,600
  Discontinuance Costs..........      1,900       29,400     31,300         400       31,700
                                    -------      -------    -------      ------      -------
  Total Restructuring Costs.....    $33,800      $51,500    $85,300      $1,200      $86,500
                                    =======      =======    =======      ======      =======
Caremark Business Consolidation
  Plan:
  Personnel Reduction Costs.....    $11,300      $    --    $11,300      $   --      $11,300
  Facility Reduction Costs......      8,850        3,900     12,750       3,950       16,700
                                    -------      -------    -------      ------      -------
  Total Restructuring Costs.....    $20,150      $ 3,900    $24,050      $3,950      $28,000
                                    =======      =======    =======      ======      =======
</TABLE>

     The balance in the "Accrued Merger and Restructuring" liability at December
31, 1997 consists of future cash expenditures of $5.8 million referenced above
and $3.0 million of other accruals. The Company estimates that the future cash
expenditures related to both the Coram and Caremark Business Consolidation Plans
will be made in the following periods: 40% through December 31, 1998, 4% through
December 31, 1999, 7% through December 31, 2000, and 49% through December 31,
2001, and thereafter. Although subject to future adjustment and the Company's
ability to successfully implement its business strategy, the Company believes it
has adequate reserves and liquidity as of December 31, 1997 to meet future
expenditures related to the Coram Consolidation Plan and the Caremark Business
Consolidation Plan. However, there is no assurance that the reserves will be
adequate or that the Company will generate sufficient working capital to meet
future expenditures.

7. PROPERTY AND EQUIPMENT

     Property and equipment are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1997        1996
                                                              --------    --------
<S>                                                           <C>         <C>
Land and buildings..........................................  $     --    $    791
Leasehold improvements......................................     4,567       3,782
Equipment and other.........................................    42,059      59,263
Furniture and fixtures......................................     6,140       7,758
                                                              --------    --------
                                                                52,766      71,594
Less accumulated depreciation and amortization..............   (32,716)    (54,596)
                                                              --------    --------
                                                              $ 20,050    $ 16,998
                                                              ========    ========
</TABLE>

     The above includes immaterial amounts of equipment under capital leases.

                                      F-14
<PAGE>   52
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. LONG-TERM DEBT

     Long-term debt is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                1997         1996
                                                              ---------    ---------
<S>                                                           <C>          <C>
Senior Credit Facility......................................  $  80,000    $ 157,700
Bridge Note and Rollover Note, including accrued interest...    219,241      189,013
Junior Subordinated Pay-In-Kind (PIK) notes:
  Junior convertible subordinated PIK note..................         --       84,609
  Junior non-convertible subordinated PIK note..............         --       30,669
Other obligations, including capital leases, at interest
  rates ranging from 6% to 16%, collateralized by certain
  property and equipment....................................      1,412        2,683
                                                              ---------    ---------
                                                                300,653      464,674
Less current scheduled maturities...........................   (150,225)    (198,033)
                                                              ---------    ---------
                                                              $ 150,428    $ 266,641
                                                              =========    =========
</TABLE>

     The Company's principal credit and debt agreements were entered into on
April 6, 1995 at the time of the acquisition of the Caremark Business. The cash
paid by the Company in connection with the acquisition of the Caremark Business
and the repayment of amounts outstanding under a prior credit facility, together
with related fees and expenses, were financed through: (i) borrowings of
approximately $205 million under a Credit Agreement with Chase Manhattan Bank
(formerly Chemical Bank) as Agent (the "Senior Credit Facility") and (ii) $150
million from the issuance of a subordinated bridge note (the "Bridge Note"). On
October 13, 1995, the Company and its lenders under its Senior Credit Facility
and its Bridge Note agreed to a restructuring of the major terms of both
agreements, as outlined below, provided a new $25.0 million credit line, which
expired with no borrowings outstanding on December 31, 1996, terminated the
unused portion of the existing revolving debt commitments of approximately $64.2
million and redefined certain financial covenants. In return, the lenders under
the Senior Credit Facility received warrants to purchase 2.5 million shares of
common stock of the Company or, at the option of the lenders, 6% of the shares
of Coram Inc., a wholly-owned subsidiary of the Company and the immediate parent
of the Company's operating subsidiaries, exercisable at a nominal price over
five years. The Company is currently precluded from declaring or paying
dividends on its capital stock.

     On March 14, 1997, the Company entered into a Ninth Amendment to the Senior
Credit Facility which extended the maturity date. On June 2, 1997, the Company
refinanced $150.0 million owed its lenders under the Senior Credit Facility
through a refinancing transaction with Goldman Sachs Credit Partners L.P.
("GSCP"). GSCP acquired the debt through an assignment from Chase Manhattan
Bank. As a result, the Company and GSCP entered into a Tenth Amendment to the
Senior Credit Facility. The Tenth Amendment further extended the maturity date
of the Senior Credit Facility, reinstated the Company's ability to borrow and
repay loans under the revolving portion of the Senior Credit Facility, allowed
the Company to make certain business acquisitions not previously permitted,
modified interest rates and revised certain financial and other covenants.
Interest is based on margins over certain domestic and foreign indices and was
9.25% as of December 31, 1997. In January 1998, the Company canceled and repaid
in full all principal, interest and related fees totaling approximately $80.1
million due under the Senior Credit Facility.

     The warrants issued to the Company's lenders under the Senior Credit
Facility were valued at $8.0 million, their fair value at date of issuance, and
were accounted for as interest expense through March 31, 1997. The Company
charged $1.6 million, $5.2 million and $1.2 million to expense during the years
ended December 31, 1997, 1996 and 1995, respectively, related to these warrants.

                                      F-15
<PAGE>   53
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Bridge Note was issued on April 6, 1995, as an unsecured obligation of
the Company in the principal amount of $150.0 million. The Bridge Note was not
repaid in full on its April 6, 1996 due date, and a Rollover Note (the "Rollover
Note") which matures on October 6, 2000 was issued for the outstanding principal
on the Bridge Note. The interest rate on the Rollover Note is based on various
indices plus a margin which increases by 0.25% quarterly, but not to exceed
21.0% per annum. The rate as of December 31, 1997 was approximately 16.25%.
During the year ended December 31, 1997, an additional $30.2 million was accrued
on the Rollover Note for a total unsecured obligation in the amount of $219.2
million (including a funding fee of approximately $5.0 million due upon issuance
of the Rollover Note which has also been deferred). Interest and accrued fees on
the Rollover Note are due September 30, 1998 provided that the Company and the
holders of the Rollover Note reach an agreement in principle for their
restructuring by April 13, 1998. The agreement pursuant to which the Bridge Note
and Rollover Note were issued contains customary covenants and events of
default. At December 31, 1997, the Company was in compliance with all of these
covenants. On May 1, 1997 a group of investors consisting of Cerberus Partners,
L.P., GSCP and Foothill Capital (collectively the "Holders") purchased the
Rollover Note and all the rights to the warrants thereunder.

     As long as the Rollover Note is outstanding, the Holders have the right to
receive warrants to purchase up to 20% of the outstanding shares of common stock
of the Company on a fully diluted basis as of April 6, 1995, in accordance with
the following table.

<TABLE>
<S>                                                           <C>
0-89 days (Issued December 30, 1995)........................  0.50%
90-179 days (Issued March 29, 1996).........................  1.00%
180-269 days (Issued June 27, 1996).........................  1.00%
270-359 days (Issued September 25, 1996)....................  1.50%
360-449 days (Issued December 24, 1996).....................  2.00%
450-539 days (Issued March 24, 1997)........................  2.50%
540-629 days (Issued June 22, 1997).........................  2.50%
630-719 days (Issued September 20, 1997)....................  3.00%
720-809 days (Issued December 19, 1997).....................  3.00%
810 days and thereafter (Issued March 19, 1998).............  3.00%
                                                              -----
                                                              20.00%
                                                              =====
</TABLE>

     Warrants issued to the Holders are accounted for as interest expense and
additional paid-in capital. Through March 19, 1998, warrants for approximately
8.4 million shares of the Company's common stock have been reserved in escrow
with a value of approximately $32.8 million. The value was determined as of the
date the warrants were issued. The Company recorded interest expense of $18.2
million and $7.3 million related to these warrants during the years ended
December 31, 1997 and 1996, respectively.

     The Junior Subordinated PIK Notes were issued to Caremark in connection
with the acquisition of the Caremark Business. Through June 30, 1997 interest
was based on rates ranging from 7% to 12%. On June 30, 1997, the Company entered
into a settlement agreement with Caremark pursuant to which Caremark has
canceled the Junior Subordinated PIK Notes totaling approximately $100.0 million
principal and $20.0 million accrued interest as of such date with all payments
thereunder forgiven. See Note 3.

                                      F-16
<PAGE>   54
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 1997, the Company was obligated to make principal payments
on long-term debt outstanding as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S>                                                           <C>
  1998......................................................  $150,225
  1999......................................................       338
  2000......................................................   150,060
  2001......................................................        30
                                                              --------
                                                              $300,653
                                                              ========
</TABLE>

9. INCOME TAXES

     The components of the consolidated income tax expense (benefit) were as
follows (in thousands):

<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                        1997       1996        1995
                                                       ------    --------    --------
<S>                                                    <C>       <C>         <C>
Current:
  Federal............................................  $5,000    $(14,000)   $(36,293)
  State..............................................   2,550           2          --
                                                       ------    --------    --------
          Total Current..............................   7,550     (13,998)    (36,293)
                                                       ------    --------    --------
Deferred:
  Federal............................................      --          --      16,745
  State..............................................      --          --       8,394
                                                       ------    --------    --------
          Total Deferred.............................      --          --      25,139
                                                       ------    --------    --------
  Income tax expense (benefit).......................  $7,550    $(13,998)   $(11,154)
                                                       ======    ========    ========
</TABLE>

     The following table reconciles the federal statutory rate to the effective
income tax expense (benefit) rate:

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               1997      1996      1995
                                                              ------    ------    ------
<S>                                                           <C>       <C>       <C>
Federal statutory rate......................................   35.0%    (35.0)%   (35.0)%
Valuation allowance.........................................  (34.4)     17.9      31.9
State income taxes, net of federal income tax benefit.......     .8        --        --
Goodwill....................................................    1.2       2.7        .5
Other.......................................................    3.1        .3       (.6)
                                                              -----     -----     -----
Effective income tax expense (benefit) rate.................    5.7%    (14.1)%    (3.2)%
                                                              =====     =====     =====
</TABLE>

     The 1997 effective income tax rate is substantially lower than the
statutory rate because of the Company's ability to utilize net operating loss
carryforwards which are fully reserved in the valuation allowance. The income
tax benefits recognized in 1996 and 1995 have been limited to the estimated
amounts recoverable through carryback of losses to the separate returns of the
Company's predecessor entities that were participants in the Four-Way Merger.
Accordingly, the effective income tax rates from those years differ
substantially from the expected combined federal and state income tax rates
calculated using applicable statutory rates.

                                      F-17
<PAGE>   55
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The temporary differences, tax effected, which give rise to the Company's
net deferred tax asset (liability) were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                1997         1996
                                                              ---------    ---------
<S>                                                           <C>          <C>
Deferred tax assets:
  Goodwill, net of amortization.............................  $  45,505    $  52,175
  Restructuring costs.......................................      4,554        7,344
  Net operating loss carryforwards..........................     43,255       74,933
  AMT credit carryforwards..................................      4,000           --
  Accrued litigation........................................      1,143        1,343
  Litigation settlement costs...............................         --       10,518
  Allowance for doubtful accounts...........................      9,870       10,822
  Intangible assets.........................................      2,921           --
  Property and equipment writedown..........................      1,272           --
  Accrued vacation..........................................        636          967
  Other accruals............................................      4,364        3,358
  Other.....................................................        553        2,032
                                                              ---------    ---------
  Total gross deferred tax asset............................    118,073      163,492
  Less valuation allowance..................................   (112,660)    (157,515)
                                                              ---------    ---------
  Total deferred tax asset..................................      5,413        5,977
Deferred tax liabilities:
  Property and equipment depreciation.......................     (3,988)      (3,988)
  Amortization of intangibles...............................       (169)        (664)
  Partnerships..............................................       (144)        (213)
  Other.....................................................     (1,112)      (1,112)
                                                              ---------    ---------
  Total deferred tax liabilities............................     (5,413)      (5,977)
                                                              ---------    ---------
          Net deferred tax asset (liability)................  $      --    $      --
                                                              =========    =========
</TABLE>

     Deferred tax assets have been limited to amounts expected to be recovered
through (a) carryback of taxable losses and resulting recovery of income taxes
previously paid by predecessor entities for 1996 and (b) offset against deferred
tax liabilities that would otherwise become payable in the carryforward period
for 1996 and 1997. The Company believes that realization of the balance of
deferred tax assets is sufficiently uncertain at this time that they should be
offset by a valuation allowance.

     As of December 31, 1997, the Company had net operating loss carryforwards
("NOLs") for federal income taxes of approximately $109.5 million which are
available to offset future federal taxable income, expiring in varying amounts
in the years 2002 through 2011. This includes approximately $43.4 million
generated prior to the Four-Way Merger and subject to separate return
limitations of a predecessor company as well as an annual usage limitation of
approximately $4.5 million.

     During the year ended December 31, 1996, the Company received a $24.7
million refund related to the carryback of tax losses for its tax years ended
September 30, 1996 and 1995.

     The Internal Revenue Service ("IRS") is in the process of examining the tax
return for the year ended September 30, 1995 and has proposed an adjustment for
deduction of warrants to purchase the Company's stock that were issued to
individuals in the settlement of the T2 Medical, Inc. Securities Class Action
Litigation. The Company is in the process of responding to the IRS' proposal and
will vigorously oppose the IRS in the event the IRS maintains its current
position. Nevertheless, due to the early phase of this matter

                                      F-18
<PAGE>   56
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and the uncertainties inherent in any proceeding with the IRS (in the event the
IRS maintains its current position), no assurance can be made that the Company
will prevail.

10. RELATED PARTY TRANSACTIONS

     Prior to the Four-Way Merger, the Merged Entities entered into agreements
with individuals and/or companies considered to be related parties. The majority
of these individuals and/or companies are no longer related parties as these
individuals are no longer Company employees, officers and/or directors. The
following summarizes the significant related party transactions:

     At December 31, 1996, the Company had an outstanding loan to a certain
member of management approximating $0.7 million. The loan was collateralized by
the individual's primary residence and had an interest rate of 8%. In 1997, the
debt was satisfied.

     In 1997, the Company's Board of Directors approved a contingent bonus to
Donald J. Amaral, Chairman and Chief Executive Officer for his success in the
financial turnaround of Coram. Under the agreement, subject to certain material
terms and conditions, Mr. Amaral is to be paid $1.0 million following a
refinancing of the Company's debt and $4.0 million following a sale of the
Company.

     Certain executive officers and consultants to the Merged Entities had
employment, severance or consulting agreements that entitled such executive
officers or consultants to certain termination, severance and consulting
payments upon consummation of the Four-Way Merger or upon termination of
employment following the Four-Way Merger. In conjunction with the Coram
Consolidation Plan (see Note 6), the Company accrued $18.8 million for the
termination of the existing employment, consulting and/or severance agreements
with these individuals. This accrual is included as a component of the Coram
Consolidation Plan.

     A director of the Company is associated with a law firm that rendered
various legal services to the Company. The legal fees to the firm approximated
$0.2 million, $1.7 million, and $2.4 million during the years ended December 31,
1997, 1996 and 1995, respectively.

     A director of the Company also serves on the Board of Directors of Sabratek
Corporation. In 1997, the Company purchased from Sabratek Corporation
approximately $11.5 million in multi-therapy infusion pumps and $4.3 million in
related equipment and supplies.

11. STOCKHOLDERS' EQUITY

     At December 31, 1997, the Company was authorized to issue 10 million shares
of preferred stock, $.001 par value, which may be issued at the discretion of
the Company's Board of Directors without further stockholder approval. The Board
of Directors can also determine the preferences, rights, privileges and
restrictions of any series of preferred stock. At December 31, 1997, there were
no shares of preferred stock issued and outstanding.

     In 1997, the Company adopted a Stockholder Rights Agreement which provides
for the distribution of one "Right" to purchase a unit equal to one-hundredth of
a share of newly created series of participating preferred stock ("Series X
Preferred Stock") for each outstanding share of the Company's common stock of
record on July 9, 1997.

     The Rights have an exercise price of $10 per Right, subject to subsequent
adjustment under certain circumstances, and entitle the stockholder to purchase
units of Series X Preferred Stock at an effective discount of 50% of the market
price of the common stock under certain circumstances. Each unit of Series X
Preferred Stock will be entitled to one vote on all matters on which shares of
common stock may vote. This agreement expires by its terms on June 25, 1998,
unless extended in one year increments by action of the Company's Board of
Directors.

                                      F-19
<PAGE>   57
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Stock Option Plans. The Company has elected to follow Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25") and
related Interpretations in accounting for its employee stock options as
permitted under Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("Statement 123").

     In connection with the Four-Way Merger, the Company assumed the outstanding
obligations under the various stock option and stock purchase plans of the
Merged Entities. No further options will be granted under these plans, unless so
determined by the Company's Board of Directors. In addition, the Company
implemented the 1994 Coram Healthcare Corporation Stock Option/Stock Issuance
Plan (the "1994 Plan") and the Coram Employee Stock Purchase Plan (the "Purchase
Plan"). During the fourth quarter of 1996, the Company's Board of Directors
approved the suspension of the Purchase Plan. During 1997, the Purchase Plan was
amended to increase the number of common shares issuable from 0.3 million to 1.0
million. Effective January 1998, the Employee Stock Purchase Plan was
reinstated.

     The 1994 Plan contains three separate incentive programs which provide for
the granting of stock options to certain officers, key employees, consultants
and non-employee members of the Company's Board of Directors. Coram's 1994 Plan
has authorized the grant of options for up to 7.6 million shares of the
Company's common stock. Options granted under the 1994 Plan may constitute
either incentive stock options, non-statutory options or stock appreciation
rights based on the type of incentive program utilized. For each of the
incentive programs, options may be granted at exercise prices ranging from 85%
to 100% of the fair market value of the Company's stock at the date of grant.
All options granted expire ten years from the date of grant and become
exercisable at varying dates depending upon the incentive program utilized. The
1994 Plan is administered by a committee of the Board of Directors which has the
authority to determine the employees to whom awards will be made and the
incentive program to be utilized.

     The Company had an option agreement outside the 1994 Plan, with a firm
performing consulting services to the Company for the purchase of 0.6 million
shares of the Company's common stock granted as of November 2, 1994 at an
exercise price of $15.63 and expiring in November 1999. This option was to vest
over a 3 year period, commencing in November 1994. These options were accounted
for under APB 25 using the fair value method of measurement at the date of
grant. In September 1995, those options were canceled and 0.2 million shares of
the Company's common stock were issued to that firm. The cancellation of the
options and the issuance of the Company's stock were accounted for as consulting
expenses in the amount of approximately $1.5 million in the year ended December
31, 1995.

     On May 16, 1997, the Company's Board of Directors recognized that the
exercise price of certain stock options issued under the 1994 Plan were
significantly out of the money as a result of a substantial decline in Coram's
stock price. To better incentivize and retain employees of the Company, options
held by all non-director employees (except the Chief Executive Officer) to
purchase in the aggregate 2.8 million shares of the Company's common stock were
reissued to reflect an exercise price of $2.625 per share, representing the fair
market value of the Company's common stock on the date of such reissuance.

     Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options granted subsequent to December 31, 1994
under the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes multiple option pricing
model with the following assumptions for 1997, 1996 and 1995, respectively:
riskfree interest rates ranging from 5.73% to 6.57%, 5.26% to 6.54% and 5.5% to
7.39%; a dividend yield of 0% for each year; volatility factors of the expected
market price of the Company's common stock of .62 for each year; and an expected
life of the option of one year past vesting.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models

                                      F-20
<PAGE>   58
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Because
compensation expense associated with an award is recognized over the vesting
period, the impact on pro forma net income disclosed below may not be
representative of compensation expense in future pro forma years. The Company's
pro forma information is as follows (in thousands except for earnings per share
information):

<TABLE>
<CAPTION>
                                                         1997       1996       1995
                                                       --------   --------   ---------
<S>                                                    <C>        <C>        <C>
Pro forma income (loss)..............................  $120,638   $(90,180)  $(337,035)
Pro forma earnings (loss) per common share...........  $   2.54   $  (2.17)  $   (8.47)
Pro forma earnings (loss) per share -- assuming
  dilution...........................................  $   2.23   $  (2.17)  $   (8.47)
</TABLE>

     A summary of the Company's stock option activity, and related information
for the years ended December 31 is as follows:

<TABLE>
<CAPTION>
                                               1997                  1996                  1995
                                        -------------------   -------------------   -------------------
                                                  WEIGHTED-             WEIGHTED-             WEIGHTED-
                                                   AVERAGE               AVERAGE               AVERAGE
                                        OPTIONS   EXERCISE    OPTIONS   EXERCISE    OPTIONS   EXERCISE
                                         (000)      PRICE      (000)      PRICE      (000)      PRICE
                                        -------   ---------   -------   ---------   -------   ---------
<S>                                     <C>       <C>         <C>       <C>         <C>       <C>
Outstanding-Beginning Of Year.........    6,611     $5.41      7,145     $ 8.48      7,119     $16.62
  Granted:
     Price equal to fair value........    5,153     $2.77      1,348     $ 4.93      3,962     $ 9.02
     Price greater than fair value....       --     $  --         --     $   --      3,681     $ 4.27
     Price less than fair value.......       --     $  --         --     $   --        300     $ 2.98
     Exercised........................     (327)    $3.21        (12)    $ 4.53       (791)    $11.58
     Forfeited........................   (3,876)    $5.98     (1,870)    $16.81     (7,126)    $14.39
                                        -------               ------                ------
Outstanding-end of year...............    7,561     $3.39      6,611     $ 5.41      7,145     $ 8.48
                                        =======               ======                ======
Exercisable at end of year............    3,375                2,264                 1,570
                                        =======               ======                ======
Weighted-average fair Value of options
  granted During the year:
  Price equal to fair value...........  $  1.19               $ 2.39                $ 4.43
  Price greater than fair value.......  $    --               $   --                $ 1.17
  Price less than fair value..........  $    --               $   --                $ 1.16
</TABLE>

                                      F-21
<PAGE>   59
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Exercise prices for options outstanding and the weighted-average remaining
contractual life of those options at December 31, 1997 is as follows:

<TABLE>
<CAPTION>
                       OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
------------------------------------------------------------------   ------------------------------
                   NUMBER      WEIGHTED-AVERAGE                        NUMBER
   RANGE OF      OUTSTANDING      REMAINING       WEIGHTED-AVERAGE   EXERCISABLE   WEIGHTED-AVERAGE
EXERCISE PRICES     (000)      CONTRACTUAL LIFE    EXERCISE PRICE       (000)       EXERCISE PRICE
---------------  -----------   ----------------   ----------------   -----------   ----------------
<S>              <C>           <C>                <C>                <C>           <C>
$ 1.44 - $ 1.44         1            2.92              $ 1.44               1           $ 1.44
$ 2.50 - $ 2.50     1,347            9.42              $ 2.50              --           $   --
$ 2.63 - $ 2.63     2,774            7.97              $ 2.63           1,379           $ 2.63
$ 2.84 - $ 3.13       300            9.20              $ 3.08             100           $ 2.98
$ 3.45 - $ 3.45     2,200            7.78              $ 3.45           1,466           $ 3.45
$ 3.50 - $ 5.13       771            8.70              $ 4.91             261           $ 4.77
$ 5.50 - $39.04       145            5.00              $12.05             145           $12.05
$41.27 - $41.27         9            0.58              $41.27               9           $41.27
$42.46 - $42.46        13            0.72              $42.46              13           $42.46
$45.24 - $45.24         1            0.71              $45.24               1           $45.24
                    -----                                               -----
$ 1.44 - $45.24     7,561            8.22              $ 3.39           3,375           $ 3.83
                    =====                                               =====
</TABLE>

     On December 28, 1995, the Company's former Chairman and the outside members
of the Board of Directors returned stock options held by them for 3.9 million
shares.

     Common shares reserved for future issuance include approximately 0.8
million shares related to options outside of the 1994 Plan, 0.7 million shares
related to the Purchase Plan and 12.4 million shares related to stock purchase
warrants. In addition, Donald J. Amaral, Chairman and Chief Executive Officer,
will receive his 1998 net base salary in shares of common stock. The shares will
be valued at the time the compensation is paid based upon the lesser of the
closing price of the stock or the average closing price for the prior 30 days.

     Warrants to Purchase Common Stock. The following warrants are outstanding
or issuable at December 31, 1997:

<TABLE>
<CAPTION>
                                                         EXERCISE
                                                           PRICE             EXPIRATION
                                           SHARES        PER SHARE              DATE
                                           ------        ---------           ----------
<S>                                       <C>         <C>               <C>
Issued to lenders under Senior Credit
  Facility (Note 8).....................  2,462,286       nominal       October 13, 2000
Issued to the Rollover Note Holders
  (Note 8)..............................  7,116,260       nominal       June 15, 2005
Issued in settlement of T2 litigation
  (Note 12).............................  2,519,862       $22.125       July 10, 1999
Issued in settlement of dispute with
  former principals of Company acquired
  by T2 (Note 12).......................    281,250       $4.625        September 30, 1999
Issued by Merged Entities prior to
  Four-Way Merger.......................     34,718   $12.58 - $18.79   March 6, 2001 to none
</TABLE>

12. COMMITMENTS AND CONTINGENCIES

     Leases. The Company leases office, other operating space and equipment
under various operating and capital leases. The leases provide for monthly
rental payments including real estate taxes and other operating costs. Total
rental expense for the years ended December 31, 1997, 1996 and 1995 was
approximately $12.2 million, $13.0 million and $17.5 million, respectively,
exclusive of amounts charged to restructuring

                                      F-22
<PAGE>   60
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reserves. At December 31, 1997 the aggregate future minimum lease commitments
were as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING                                                  CAPITAL    OPERATING
DECEMBER 31,                                                  LEASES      LEASES
------------                                                  -------    ---------
<S>                                                           <C>        <C>
1998........................................................  $  937      $11,963
1999........................................................     221        7,975
2000........................................................      --        4,775
2001........................................................      --          968
2002........................................................      --        1,301
Thereafter..................................................      --          187
                                                              ------      -------
          Total minimum lease payments......................   1,158       27,169
Less amounts representing interest..........................     (85)          --
                                                              ------      -------
Net minimum lease payments..................................  $1,073      $27,169
                                                              ======      =======
</TABLE>

     Capital lease obligations are included in other obligations. Operating
lease obligations include $3.8 million, less $2.4 million of subleases, accrued
for as part of the restructuring costs under the Coram and Caremark Business
Consolidation Plans. See Notes 6 and 8.

     Employee Benefit Plans. The Merged Entities provided various defined
contribution plans that were available to their employees. Management of the
Company merged these benefit plans during 1995. Eligible employees include all
individuals over the age of 21 who have worked at least 1,000 hours for the
Company in a one year period. The Company offers a matching program of $.50 for
every $1 contributed up to the first 6% of the employees' pay. Employee
contributions vest immediately upon contribution, and the Company's
contributions vest as follows: 1 year 0%, 2 years 25%, 3 years 50%, 4 years 75%
and 5 years 100%. During the years ended December 31, 1997, 1996 and 1995, the
Company's total contributions to these plans were approximately $1.7 million,
$2.1 million and $1.9 million, respectively.

     Litigation. On November 21, 1995 , a suit captioned William Hall and
Barbara Lisser v. Coram Healthcare Corporation, James W. Sweeney, Patrick
Fortune, and Sam Leno, No 1:95-CV-2994(WHB) was filed in the United States
District Court for the Northern District of Georgia on behalf of a purported
class of plaintiffs who were entitled to receive warrants pursuant to the
settlement of In re T2 Medical, Inc. Shareholder Litigation. Plaintiffs filed an
Amended Class Action Complaint on February 28, 1996, in which they allege that
the Defendants made false and misleading statements that caused a fraud on the
market and artificially inflated the price of the Company's stock during the
period from August 1994 through August 1995. Such Complaint alleges violations
of Section 10(b) of the Securities Act of 1934, and Rule 10b-5 promulgated
thereunder, against all of the Defendants. The Complaint also alleges
controlling person liability against the individual defendants under Section
20(a) of the Securities and Exchange Act, and further alleges fraud by all of
the Defendants under Georgia law. Finally, Plaintiffs allege a breach of the
covenant of good faith and fair dealing by all Defendants. Plaintiffs seek
compensatory damages reflecting the difference in value between the warrants as
issued pursuant to the settlement of In re T2 Medical, Inc. Shareholder
Litigation with the trading price of the Company's common stock at its actual
price and the same number of warrants at the same exercise price with the
Company's stock trading at its alleged true value. The Defendants filed a Motion
to dismiss the Amended Class Action Complaint on March 13, 1996. The Court
granted the Company's Motion to Dismiss the Complaint on February 12, 1997. The
Plaintiffs have appealed the dismissal to the Eleventh Circuit Court of Appeals.
The Company opposed the appeal. The Eleventh Circuit held oral argument on
November 18, 1997, but the Court has not yet ruled on the appeal.

     The Company intends vigorously to defend itself in the matter described
above. Nevertheless, due to the uncertainties inherent in litigation, the
ultimate disposition of the matter described in the preceding paragraph

                                      F-23
<PAGE>   61
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

cannot presently be determined. Accordingly, except for the settlement of the
Shareholder Litigation described below and charges recorded for various
litigation settlements that are not individually material to the Company, no
provision for any loss that may result upon resolution of any suits or
proceedings has been made in the Consolidated Financial Statements. An adverse
outcome could be material to the financial position, results of operations and
liquidity of the Company.

     On August 8, 1996, the Company announced an agreement in principle to
settle certain shareholder class action and certain derivative litigation ("the
Shareholder Litigation"). The agreement in principle was approved by the
Colorado District Court on January 24, 1997. As consideration for the
settlement, the Company paid approximately $0.3 million and the Company's
director's and officer's insurance policies paid approximately $22.3 million.
Additionally, the Company was required to adopt certain disclosure policies with
regard to certain public statements. Under the agreement the Company was
required to issue 5.0 million freely tradable shares of common stock of which
1.5 million shares were issued March 11, 1997 and 3.5 million shares were issued
November 28, 1997. The Company recorded non-cash charges of $25.6 million and a
cash charge of $0.3 million during the year ended December 31, 1996. The $25.6
million, which was recorded in operations as a provision for shareholder
litigation settlement and in stockholders' equity as common stock to be issued,
represents the 5.0 million shares at the stock price of $5.125 per share on the
date the settlement was approved.

     In September 1995, as amended on October 6, 1995, the Company filed suit
against Caremark (the "Caremark Litigation") in the San Francisco Superior
Court. The Caremark Litigation and other related issues arose out of the
acquisition of certain assets of Caremark's home infusion business in 1995. On
June 30, 1997, the Company entered into a settlement with Caremark. Under the
terms of the settlement, Junior Subordinated Pay-In-Kind Notes totaling
approximately $100.0 million principal and $20.0 million accrued interest were
canceled with all payments due thereunder forgiven. Additionally, Caremark
agreed to pay $45.0 million in cash which was received on September 2, 1997. Of
the $45.0 million cash received, $3.6 million was placed in escrow pending
reconciliation of certain lockbox issues. As a result the Company recorded
income from litigation settlement of $156.8 million in June of 1997. See Note 3.

     On July 7, 1997, the Company filed suit against Price Waterhouse LLP in the
Superior Court of San Francisco, California seeking damages in excess of $165.0
million. As part of the settlement of the Caremark Litigation, Caremark assigned
and transferred to the Company all of Caremark's claims and causes of action
against Caremark's auditors, Price Waterhouse LLP, related to the lawsuit. This
assignment of claims includes claims for damages sustained by Caremark in
defending and settling its lawsuit with the Company. Price Waterhouse has moved
to dismiss the Company's lawsuit on several grounds. The Company has responded.
However, there can be no assurance that the Company will succeed in its
opposition to the motion to dismiss and there can be no assurance of any
recovery from Price Waterhouse LLP. See Note 3.

     The Company is also a party to various other legal actions arising out of
the normal course of its business. Management believes that the ultimate
resolution of such other actions will not have a material adverse effect on the
Company's financial position, results of operations and liquidity of the
Company. Nevertheless, due to the uncertainties inherent in litigation, the
ultimate disposition of these actions cannot presently be determined.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The financial instruments included in the Company's assets and current
liabilities (excluding long-term debt) are reflected in the financial statements
at amounts approximating their fair value because of the short-term maturity of
those instruments.

     At December 31, 1997 and 1996, the Company's ability to borrow was limited.
At December 31, 1997 and 1996, the Company had total debt carried at $300.7
million and $464.7 million, respectively. At

                                      F-24
<PAGE>   62
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997 and 1996, the Senior Credit Facility was carried at $80.0
million and $157.7 million, respectively, and the Company estimates that its
fair value approximates its face value based on the interest rate, security,
covenants and remaining term to maturity.

     It is not practicable to determine the fair value as of December 31, 1997
of the Rollover Note, carried at $219.2 million. The obligation is unsecured and
subordinate to the Company's Senior Credit Facility, and cash payments of
principal or interest cannot be made under terms of the Senior Credit Facility.
The timing and amounts of payments that may be made in the future are not
determinable at this time. Further, the Company is not able to determine at what
interest rate subordinated loans may be available to the Company, or whether
loans on a subordinated unsecured basis would even be available. The Company
believes the fair value of the Rollover Note at December 31, 1997 may be
substantially less than its carrying amount because of its subordination
provisions and remaining term to maturity and the Company's adverse operating
results and liquidity.

     Considerable judgment is required in developing estimates of fair value,
and the information furnished above is not meant to be indicative of what such
debt could be settled for. See Note 8.

     The Company has investments in unconsolidated entities totaling
approximately $1.2 million and $1.9 million at December 31, 1997 and 1996,
respectively. Since these entities are all closely held companies and there are
no quoted market prices, it is not practicable to estimate the fair value of
such investments.

14. QUARTERLY RESULTS (IN THOUSANDS, EXCEPT PER COMMON SHARE DATA) (UNAUDITED)

<TABLE>
<CAPTION>
                                                      FOURTH     THIRD      SECOND     FIRST
                                                     QUARTER    QUARTER    QUARTER    QUARTER
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Year Ended December 31, 1997
  Net revenue......................................  $105,039   $119,516   $118,115   $121,715
                                                     ========   ========   ========   ========
  Gross profit.....................................  $ 23,949   $ 36,590   $ 35,075   $ 39,990
                                                     ========   ========   ========   ========
  Net income (loss)................................  $(19,226)  $  2,303   $156,771   $(14,588)
                                                     ========   ========   ========   ========
  Earnings (loss) per common share.................  $  (0.39)  $   0.05   $   3.29   $  (0.31)
                                                     ========   ========   ========   ========
  Earnings (loss) per common share -- assuming
     dilution......................................  $  (0.39)  $   0.04   $   2.99   $  (0.31)
                                                     ========   ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                      FOURTH     THIRD      SECOND     FIRST
                                                     QUARTER    QUARTER    QUARTER    QUARTER
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Year Ended December 31, 1996
  Net revenue......................................  $126,029   $131,206   $133,109   $131,625
                                                     ========   ========   ========   ========
  Gross profit.....................................  $ 40,241   $ 44,615   $ 41,959   $ 33,466
                                                     ========   ========   ========   ========
  Net loss.........................................  $(31,575)  $(12,012)  $(23,526)  $(17,901)
                                                     ========   ========   ========   ========
  Loss per common share............................  $  (0.75)  $  (0.28)  $  (0.58)  $  (0.44)
                                                     ========   ========   ========   ========
  Loss per common share -- assuming dilution.......  $  (0.75)  $  (0.28)  $  (0.58)  $  (0.44)
                                                     ========   ========   ========   ========
</TABLE>

     In 1997, unusual or infrequently occurring charges included second quarter
income from litigation settlement of $156.8 million and termination fee income
of $15.2 million. In addition, in the third and fourth quarters of 1997, the
Company recorded a gain on sale of Lithotripsy Business of $18.0 million and
$8.7 million, respectively.

                                      F-25
<PAGE>   63
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In 1996, unusual or infrequently occurring charges included provisions for
litigation of $12.5 million, $0.3 million and $15.1 million in the second, third
and fourth quarters, respectively.

     The 1996 and first three quarters of 1997 earnings per share amounts have
been restated to comply with Statement 128.

                                      F-26
<PAGE>   64

                          CORAM HEALTHCARE CORPORATION

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                  BALANCE AT   CHARGED TO
                                  BEGINNING    COSTS AND      CHARGED TO                        BALANCE AT
          DESCRIPTION             OF PERIOD     EXPENSES    OTHER ACCOUNTS   DEDUCTIONS        END OF PERIOD
          -----------             ----------   ----------   --------------   ----------        -------------
<S>                               <C>          <C>          <C>              <C>               <C>
Year ended December 31, 1997
Reserves and allowances deducted
  from asset accounts:
  Allowance for uncollectible
     accounts...................   $40,256      $16,209        $    --        $(32,418)(3)(1)     $24,047
Year Ended December 31, 1996
Reserves and allowances deducted
  from asset accounts:
  Allowance for uncollectible
     accounts...................   $63,839      $29,045        $    --        $(52,628)(1)        $40,256
Year Ended December 31, 1995
Reserves and allowances deducted
  from asset accounts:
  Allowance for uncollectible
     accounts...................   $17,990      $68,912        $41,124(2)     $(64,187)(1)        $63,839
</TABLE>

---------------

(1) Accounts written off, net of recoveries.

(2) Balance related to the Acquisition of Caremark Business, including $37.0
    million charged to operations in the quarter ended September 30, 1995.

(3) Includes a reduction in the reserve of $0.5 million resulting from the sale
    of the Lithotripsy Business.

                                       S-1
<PAGE>   65

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                    EXHIBIT
        -------                                    -------
<C>                      <S>
          2.1            -- Agreement and Plan of Merger dated as of February 6,
                            1994, by and among the Registrant, T2, Curaflex,
                            HealthInfusion, Medisys, T2 Acquisition Company, CHS
                            Acquisition Company, HII Acquisition Company and MI
                            Acquisition Company (Incorporated by reference to Exhibit
                            2.1 of Registration No. 33-53957 on Form S-4).
          2.2            -- First Amendment to Agreement and Plan of Merger dated as
                            of May 25, 1994, by and among the Registrant, T2
                            Curaflex, HealthInfusion, Medisys, T2 Acquisition
                            Company, CHS Acquisition Company, HII Acquisition Company
                            and MI Acquisition Company (Incorporated by reference to
                            Exhibit 2.2 of Registration No. 33-53957 on Form S-4).
          2.3            -- Second Amendment to Agreement and Plan of Merger dated as
                            of July 8, 1994 by and among the Registrant, T2,
                            Curaflex, HealthInfusion, Medisys, T2 Acquisition
                            Company, CHS Acquisition Company, HII Acquisition Company
                            and MI Acquisition Company (Incorporated by reference to
                            Exhibit 2.3 of the Registrant's Current Report on Form
                            8-K dated as of July 15, 1994).
          2.4            -- Asset Sale and Note Purchase Agreement, (the "Asset
                            Purchase Agreement") among the Registrant, Caremark
                            International Inc. and Caremark Inc. dated as of January
                            29, 1995 (Incorporated by reference to Exhibit C of the
                            Registrant's Current Report on Form 8-K dated April 6,
                            1995). The exhibits and schedules to the Asset Purchase
                            Agreement are omitted from this Exhibit. The Company
                            agrees to furnish supplementally any omitted exhibits or
                            schedule with the Securities and Exchange Commission.
          2.5            -- Agreement and Plan of Merger among the Registrant, CHC
                            Acquisition Corp. and Lincare Holdings Inc., (the
                            "Lincare Merger Agreement") dated as of April 17, 1995
                            (Incorporated by reference to Exhibit B of the
                            Registrant's Current Report on Form 8-K dated May 2,
                            1995). The exhibits and schedules to the Lincare Merger
                            Agreement are omitted from this Exhibit. The Company
                            agrees to furnish supplementally any omitted exhibit or
                            schedule with the Securities and Exchange Commission.
          2.6            -- Agreement and Plan of Merger entered into as of October
                            19, 1996, among Coram Healthcare Corporation, Integrated
                            Health Services, Inc. and IHS Acquisition XIX, Inc.
                            (Incorporated by reference to Exhibit 2.1 of the
                            Registrant's Quarterly Report on Form 10-Q for the
                            quarter ended September 30, 1996).
          2.7            -- Purchase Agreement by and between Integrated Health
                            Services, Inc., T2 Medical, Inc., Coram Healthcare
                            Corporation of Greater New York and Coram Healthcare
                            Corporation. (Incorporated by reference Exhibit 2 of the
                            Registrant's Current Report on Form 8-K dated as of
                            August 20, 1997).
          2.8            -- Side Agreement dated as of September 30, 1997 among Coram
                            Healthcare Corporation, T2 Medical, Inc., Coram
                            Healthcare Corporation of Greater New York and Integrated
                            Health Services, Inc. (Incorporated by reference Exhibit
                            2.1 of the Registrant's Current Report on Form 8-K dated
                            as of September 30, 1997).
          3.1            -- Certificate of Incorporation of Registrant, as amended
                            through May 11, 1994 (Incorporated by reference to
                            Exhibit 3.1 of Registration No. 33-53957 on Form S-4).
          3.2            -- Bylaws of Registrant (Incorporated by reference to
                            Exhibit 3.2 of Registration No. 33-53957 on Form S-4).
</TABLE>
<PAGE>   66

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                    EXHIBIT
        -------                                    -------
<C>                      <S>
          3.3            -- Certificate of Amendment of the Registrant's Certificate
                            of Incorporation.*
          4.1            -- Form of Common Stock Certificate for the Registrant's
                            common stock, $.001 par value per share. (Incorporated by
                            reference to Exhibit 4.1 of the Registrant's Annual
                            Report on Form 10-K for the year ended December 31,
                            1994).
          4.2            -- Form of Common Stock Certificate for the Registrant's
                            common stock, par value $.001, including legend thereon
                            in respect of the Stockholder Rights Agreement which
                            exhibit is hereby incorporated by reference thereto.*
          4.3            -- Form of Certificate of Designation, Preferences and
                            Rights of the Registrant's Series X Participating
                            Preferred Stock (filed as Exhibit A to the Stockholder
                            Rights Agreement, which was filed as Exhibit 1 to the
                            Registrant's Current Report on Form 8-K dated as of June
                            25, 1997, and which exhibit is hereby incorporated by
                            reference thereto).
         10.1            -- Amended and Restated Credit Agreement dated as of
                            February 10, 1995, by and among Curaflex, T2,
                            HealthInfusion, Medisys, and HMSS as Co-Borrowers,
                            Toronto Dominion (Texas), Inc., as Agent (the "Amended
                            Credit Agreement") (Incorporated by reference to Exhibit
                            10.1 of the Registrant's Annual Report on Form 10-K for
                            the year ended December 31, 1994). The exhibits and
                            schedules to the Amended Credit Agreement are omitted
                            from this Exhibit. The Company agrees to furnish
                            supplementally any omitted exhibit or schedule to the
                            Securities and Exchange Commission upon request.
         10.2            -- Form of Employment Agreement between the Registrant and
                            Charles A. Laverty (Incorporated by reference to Exhibit
                            10.1 of Registration No. 33-53957 on Form S-4).
         10.3            -- Form of Severance/Non-Compete Agreement between the
                            Registrant and Miles E. Gilman (Incorporated by reference
                            to Exhibit 10.2 of Registration No. 33-53957 on Form
                            S-4).
         10.4            -- Form of Severance/Non-Compete Agreement between the
                            Registrant and William J. Brummond (Incorporated by
                            reference to Exhibit 10.3 of Registration No. 33-53957 on
                            Form S-4).
         10.5            -- Form of Severance/Non-Compete Agreement between the
                            Registrant and Tommy H. Carter (Incorporated by reference
                            to Exhibit 10.4 of Registration No. 33-53957 on Form
                            S-4).
         10.6            -- Form of Indemnification Agreement between the Registrant
                            and each of the Registrant's directors and certain
                            executive officers. (Incorporated by reference to Exhibit
                            10.6 of the Registrant's Form 10-K for the year ended
                            December 31, 1994).
         10.7            -- Registrant's 1994 Stock Option/Stock Issuance Plan and
                            related forms of agreements (Incorporated by reference to
                            Exhibit 10.15 of Registration No. 33-53957 on Form S-4).
         10.8            -- Registrant's Employee Stock Purchase Plan (Incorporated
                            by reference to Exhibit 10.16 of Registration No.
                            33-53957 on Form S-4).
         10.9            -- 401(k) Plan of T2 dated December 8, 1989 (Incorporated
                            herein by reference to Exhibit 10(s) of T2 Annual Report
                            on Form 10-K for the fiscal year ended September 30,
                            1989, filed with the Commission on or about December 29,
                            1988.
         10.10           -- 1988 Stock Option Plan of T2, as amended and restated as
                            of July 31, 1990 and as further amended as of (i) August
                            20, 1991; (ii) November 12, 1991; and (iii) July 6, 1992
                            (Incorporated by reference to Exhibit 10.18 of
                            Registration No. 33-53957 on Form S-4).
</TABLE>
<PAGE>   67

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                    EXHIBIT
        -------                                    -------
<C>                      <S>
         10.11           -- Curaflex 1989 Stock Option Plan (Incorporated by
                            reference to Exhibit 10.53 of Registration No. 33-53957
                            on Form S-4).
         10.12           -- Curaflex Amended 1990 Stock Option Plan (Incorporated by
                            reference to Exhibit 10.54 of Registration No. 33-53957
                            on Form S-4).
         10.13           -- Curaflex Directors' Nonqualified Stock Option Plan
                            (Incorporated by reference to Exhibit 10.59 of
                            Registration No. 33-53957 on Form S-4).
         10.14           -- Clinical Homecare Ltd. 1990 Incentive Stock Option Plan,
                            as amended (Incorporated by reference to Exhibit 10.61 of
                            Registration No. 33-53957 on Form S-4).
         10.15           -- Clinical Homecare Ltd. 1990 Stock Option Plan, as amended
                            (Incorporated by reference to Exhibit 10.62 of
                            Registration No. 33-53957 on Form S-4).
         10.16           -- 1989 Stock Option Plan of Medisys (Incorporated by
                            reference to Exhibit 10.85 of Registration No. 33-53957
                            on Form S-4).
         10.17           -- Form of Non-Plan Option Agreement of Medisys
                            (Incorporated by reference to Exhibit 10.86 of
                            Registration No. 33-53957 on Form S-4).
         10.18           -- Credit Agreement among Coram Healthcare Corporation,
                            Coram, Inc., the Lenders named therein and Chemical Bank,
                            as Administrative Agent, Collateral Agent and Fronting
                            Bank (the "Senior Credit Facility") dated as of April 6,
                            1995. (Incorporated by reference to Exhibit D of the
                            Registrant's Current Report on Form 8-K dated April 6,
                            1995). The exhibits and schedules to the Senior Credit
                            Facility are omitted from this Exhibit. The Company
                            agrees to furnish supplementally any omitted exhibit or
                            schedule to the Securities and Exchange Commission.
         10.19           -- First Amendment and Waiver to the Credit Agreement, dated
                            as of August 9, 1995, together with exhibits hereto,
                            among the Registrant, Coram Inc., each Subsidiary
                            Guarantor (as defined therein), the Financial
                            Institutions party thereto (as defined therein), and
                            Chemical Bank as Agent. (Incorporated by reference to
                            Exhibit 10.19 of the Registrant's Quarterly Report on
                            Form 10-Q for the quarter ended September 30, 1995).
                            Certain exhibits and schedules of this Exhibit have been
                            omitted. The Registrant agrees to furnish supplementally
                            any omitted schedule or exhibit to the Securities and
                            Exchange Commission.
         10.20           -- Second Amendment to the Credit Agreement dated as of
                            September 7, 1995, by and among the Registrant, Coram
                            Inc., each Subsidiary Guarantor (as defined therein), the
                            Financial Institutions party thereto (as defined
                            therein), and Chemical Bank as Agent. (Incorporated by
                            reference to Exhibit 10.20 of the Registrant's Quarterly
                            Report on Form 10-Q for the quarter ended September 30,
                            1995). Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.21           -- Third Amendment and Limited Waiver to the Credit
                            Agreement, dated as of September 29, 1995, by and among
                            the Registrant, Coram Inc., each Subsidiary Guarantor (as
                            defined therein), the Financial Institutions party
                            thereto (as defined therein), and Chemical Bank as Agent
                            (Incorporated by reference to Exhibit 10.21 of the
                            Registrant's Quarterly Report on Form 10-Q for the
                            quarter ended September 30, 1995). Certain exhibits and
                            schedules of this Exhibit have been omitted. The
                            Registrant agrees to furnish supplementally any omitted
                            schedule or exhibit to the Securities and Exchange
                            Commission.
</TABLE>
<PAGE>   68

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                    EXHIBIT
        -------                                    -------
<C>                      <S>
         10.22           -- Fourth Amendment and Limited Waiver to the Credit
                            Agreement and First Amendment to Security Documents dated
                            as of October 13, 1995, together with selected exhibits
                            thereto, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions Party thereto (as defined therein) and
                            Chemical Bank as Agent (Incorporated by reference to the
                            Company's Current Report on Form 8-K as filed October 24,
                            1995).
         10.23           -- Warrant Agreement dated as of October 13, 1995, among the
                            Registrant, Coram Inc., and the other parties specified
                            therein (Incorporated by reference to the Company's
                            Current Report on Form 8-K as filed October 24, 1995).
         10.24           -- Amendment and Limited Waiver to Bridge Securities
                            Purchase Agreement, dated as of October 13, 1995, by and
                            among the Registrant, Coram Inc., and Donaldson, Lufkin &
                            Jenrette. (Incorporated by reference to Exhibit 10.24 of
                            the Registrant's Quarterly Report on Form 10-Q for the
                            quarter ended September 30, 1995). Certain exhibits and
                            schedules of this Exhibit have been omitted. The
                            Registrant agrees to furnish supplementally any omitted
                            schedule or exhibit to the Securities and Exchange
                            Commission.
         10.25           -- Form of Employment Agreement between the Registrant and
                            Donald J. Amaral. (Incorporated by reference to Exhibit
                            10.25 of the Registrant's Quarterly Report on Form 10-Q
                            for the quarter ended September 30, 1995).
         10.26           -- Securities Purchase Agreement ("Securities Purchase
                            Agreement") and Form of Subordinated Bridge Note, dated
                            as of April 6, 1995, among Coram Inc., Coram Funding,
                            Inc. and the Registrant (Incorporated by reference to
                            Exhibit E of the Registrant's Current report on Form 8-K
                            dated April 6, 1995). The exhibits and schedules to the
                            Securities Purchase Agreement are omitted from this
                            Exhibit. The Registrant agrees to furnish supplementally
                            any omitted exhibit or schedule to the Securities and
                            Exchange Commission.
         10.27           -- Exclusive Distribution Agreement -- Healthcare Products
                            and Biomedical Equipment and Services Agreement between
                            Medical Specialties Distributors, Inc. ("MSD") and Coram,
                            dated as of June 1, 1996. (Incorporated by reference to
                            Exhibit 10.1 of the Registrant's Quarterly Report on Form
                            10-Q/A Amendment No. 1 for the quarter ended June 30,
                            1996).
         10.28           -- Medical Specialties Master Service Agreement between MSD
                            and Coram, dated as of June 1, 1996. (Incorporated by
                            reference to Exhibit 10.2 of the Registrant's Quarterly
                            Report on Form 10-Q/A Amendment No. 1 for the quarter
                            ended June 30, 1996).
         10.29           -- Medical Specialties Master Rental Agreement between MSD
                            and Coram, dated as of June 1, 1996. (Incorporated by
                            reference to Exhibit 10.3 of the Registrant's Quarterly
                            Report on Form 10-Q/A Amendment No. 1 for the quarter
                            ended June 30, 1996).
         10.30           -- Coram Healthcare Litigation Memorandum of Understanding
                            between all parties to In re Coram Healthcare Corp.
                            Securities Litigation, Master File No. 95-N-2074 and
                            Shevde v. Sweeney et al., Civil Action No. 96-N-722,
                            dated as of August 5, 1996. (Incorporated by reference to
                            Exhibit 10.4 of the Registrant's Quarterly Report on Form
                            10-Q/A Amendment No. 1 for the quarter ended June 30,
                            1996).
</TABLE>
<PAGE>   69

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                    EXHIBIT
        -------                                    -------
<C>                      <S>
         10.31           -- Fifth Amendment to the Credit Agreement Dated as of
                            February 6, 1996, by and among the Registrant, Coram
                            Inc., each Subsidiary Guarantor (as defined therein), the
                            Financial Institutions party thereto (as described
                            therein), and Chemical Bank as Agent. (Incorporated by
                            reference to Exhibit 99.1 of the Registrant's Quarterly
                            Report on Form 10-Q for the quarter ended March 31,
                            1996). Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.32           -- Sixth Amendment to Credit Agreement Dated as of April 19,
                            1996, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions party thereto (as described therein), and
                            Chemical Bank as Agent. (Incorporated by reference to
                            Exhibit 99.2 of the Registrant's Quarterly Report on Form
                            10-Q for the quarter ended March 31, 1996). Certain
                            exhibits and schedules of this Exhibit have been omitted.
                            The Registrant agrees to furnish supplementally any
                            omitted schedule or exhibit to the Securities and
                            Exchange Commission.
         10.33           -- Seventh Amendment to Credit Agreement Dated as of July 3,
                            1996, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions party thereto (as described therein), and
                            Chemical Bank as Agent. (Incorporated by reference to
                            Exhibit 99.1 of the Registrant's Quarterly Report on Form
                            10-Q/A Amendment No. 1 for the quarter ended June 30,
                            1996). Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.34           -- Eighth Amendment to Credit Agreement dated as of December
                            3, 1996, by and among the Registrant, Coram Inc., each
                            Subsidiary Guarantor (as defined therein), the Financial
                            Institutions party thereto (as described therein), and
                            Chase Manhattan Bank as Agent. Certain exhibits and
                            schedules of this Exhibit have been omitted. The
                            Registrant agrees to furnish supplementally any omitted
                            schedule or exhibit to the Securities and Exchange
                            Commission.
         10.35           -- Ninth Amendment and Limited Waiver to the Credit
                            Agreement dated as of March 14, 1997, by and among the
                            Registrant, Coram Inc., each Subsidiary Guarantor (as
                            defined therein), the Financial Institutions party
                            thereto (as described therein), and Chase Manhattan Bank
                            as Agent. Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.36           -- Amended Agreement, dated as of March 28, 1997 by and
                            among the Registrant, Coram Inc., and Donaldson, Lufkin &
                            Jenrette. Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission.
         10.37           -- Sabratek Corporation and Coram Healthcare Exclusive
                            Supply Agreement for IV Infusion Pumps, IV Disposable
                            Sets and Related Items, dated as of February 26, 1997.
         10.38           -- Amendment to 9% Subordinated Convertible Debenture and
                            Notice of Conversion dated as of June 30, 1996, by and
                            among the Registrant, Coram Inc., and the other parties
                            specified therein (Incorporated by reference to the
                            Company's report on Form 8-K as filed on July 12, 1996.
</TABLE>
<PAGE>   70

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                    EXHIBIT
        -------                                    -------
<C>                      <S>
         10.39           -- Tenth Amendment to Credit Agreement dated June 2, 1997,
                            by and among the Registrant, Goldman Sachs Credit
                            Partners L.P., Coram, Inc., each Subsidiary Guarantor (as
                            defined therein) and The Chase Manhattan Bank, as
                            administrative agent and collateral agent for the Lenders
                            named therein, to that certain Credit Agreement dated as
                            of April 6, 1995, by and among the Registrant, Coram,
                            Inc, each Subsidiary Guarantor (ad defined therein), the
                            Financial Institutions named therein and The Chase
                            Manhattan Bank, as collateral agent for the Lenders named
                            therein. Certain exhibits and schedules of this Exhibit
                            have been omitted. The Registrant agrees to furnish
                            supplementally any omitted schedule or exhibit to the
                            Securities and Exchange Commission. (Incorporated by
                            reference Exhibit 99 of the Registrant's Current Report
                            on Form 8-K dated as of June 2, 1997).
         10.40           -- Letter Agreement of March 29, 1998 by and among Cerberus
                            Partners, L.P., Goldman Sachs Credit Partners, L.P. and
                            Foothill Capital Corporation on the one hand, and Coram
                            Healthcare Corporation, on the other, deferring the
                            payment of interest and fees pursuant to (i) the
                            Securities Purchase Agreement dated as of April 6, 1995
                            and (ii) the Letter Agreement dated March 28, 1997
                            between Coram Funding, Inc. and Coram Healthcare
                            Corporation.*
         20.1            -- Stockholder Rights Agreement (the "Stockholder Rights
                            Agreement"), dated as of June 25, 1997, between Coram
                            Healthcare Corporation and BankBoston, N.A., which
                            includes the form of Certificate of Designation,
                            Preferences and Rights setting forth the terms of the
                            Series X Participating Preferred Stock, par value $0.001
                            per share, as Exhibit A, the Summary of Stockholder
                            Rights Agreement as Exhibit B and the form of Right
                            Certificate as Exhibit C. Pursuant to the Stockholder
                            Rights Agreement, printed Right Certificates will not be
                            mailed until as soon as practicable after the earlier of
                            the tenth business day after public announcement that a
                            person or group has become an Acquiring Person or the
                            tenth business day after a person commences, or announces
                            its intention to commence, a tender offer or exchange
                            offer the consummation of which would result in such
                            person becoming an Acquiring Person. (Incorporated by
                            reference Exhibit 1 of the Registrant's Current Report on
                            Form 8-K dated as of June 25, 1997).
         21.1            -- Subsidiaries of the Registrant.*
         23.1            -- Consent of Ernst & Young LLP.*
         27.1            -- Financial Data Schedule.*
         27.2            -- Restated Financial Data Schedules.*
</TABLE>

---------------

* Filed herewith.