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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, 1999
                         COMMISSION FILE NUMBER 1-11343

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

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

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

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

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

                                      None

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

<TABLE>
<CAPTION>
                                                          NAME OF EACH EXCHANGE ON
             TITLE OF EACH CLASS                              WHICH REGISTERED
             -------------------                          ------------------------
<S>                                             <C>
  Common Stock ($.001 par value per share)                    Over the Counter
                                                               Bulletin Board
</TABLE>

     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 14, 2000, there were outstanding 49,638,452 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 Over the Counter Bulletin Board on
March 14, 2000, was approximately $26.3 million.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                      None
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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 Healthcare Corporation ("Coram"
or the "company") 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. Coram's actual results may vary materially from the
forward-looking statements made in this report due to important factors,
including, but not limited to: the company's lack of profitability;
uncertainties associated with the outcomes of certain pending legal proceedings;
the company's significant level of outstanding indebtedness; the company's need
to obtain additional financing or equity; uncertainties associated with the
dilution that would occur if the company's existing debt holders exercise their
equity conversion rights; the company's limited liquidity; and the company's
dependence upon the prices paid by third party payers for the company's
services; and certain other factors, all of which are described in greater
detail in this report in Item 7 under the caption "Risk Factors." 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. "Management's Discussion and Analysis of Financial Condition
and Results of Operations: 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.

                                     PART I

ITEM 1. BUSINESS

GENERAL OVERVIEW

     Lines of Business. During 1999, Coram and its subsidiaries were engaged in
three principal lines of business: alternate site (outside the hospital)
infusion therapy and related services, ancillary network management services,
and pharmacy benefit management and specialty mail-order pharmacy services.
Other services offered by Coram included centralized management, administrative
and clinical support for clinical research trials, medical informatics and
non-intravenous home health products such as durable medical equipment and
respiratory therapy services.

     In December 1999, Coram announced that it was repositioning its business to
focus on its core alternate site infusion therapy business and the clinical
research and medical informatics business operated by its subsidiary, CTI
Network, Inc. ("CTI"). Accordingly, Coram's primary business strategy is to
focus its efforts on the delivery of its core infusion therapies, such as
nutrition, anti-infective therapies, intravenous immunoglobulin ("IVIG"),
therapy for patients requiring transplants and coagulant and blood clotting
therapies for persons with hemophilia. To that end, the company has established
product managers with dedicated sales, marketing and clinical resources aimed at
expanding the company's growth in these specific areas. Coram has also
implemented programs focused on the reduction and control of the cost of
providing services and operating expenses, assessment of under performing
branches and review of branch efficiencies. Pursuant to this review, 11 branches
have been closed or scaled back to serve as satellites for other branches.
Senior management is evaluating the delivery of nursing care and modification of
certain protocols and practices. The objective is to maintain Coram's high
levels of patient satisfaction and effective clinical outcomes to enhance
patient independence while reducing the actual number of nursing visits.
Furthermore, management throughout Coram is continuing to concentrate on
reimbursement for services rendered by emphasizing improved billing procedures,
documentation and cash collections methods, continued assessment of systems
support for reimbursement and concentration of Coram's expertise and managerial
resources into certain reimbursement locations.

     Meanwhile, certain other divisions of Coram are being reviewed for
divestiture or liquidation. In August 1999, the company announced that it had
hired an investment advisor to assist it in pursuing strategic alternatives

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for the Coram Prescription Services division ("CPS"). With the assistance of its
investment advisor, Coram is currently conducting an auction of the CPS
division. As of the filing of this document, the company cannot predict whether
a sale will occur or what proceeds would be derived from any sale. On November
12, 1999, the company's subsidiaries that provided ancillary network management
services filed voluntary petitions for protection under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware. Those subsidiaries, Coram Resource Network, Inc. and Coram Independent
Practice Association, Inc. (the "Resource Network Subsidiaries"), are being
liquidated through the Chapter 11 proceedings.

     While management believes the implementation of its overall business
strategy has improved operating performance throughout the company, no
assurances can be given as to its ultimate success. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

     Coram's reportable segments over the last three fiscal years have been
infusion, lithotripsy, ancillary network management services and other services,
consisting primarily of mail order pharmacy and pharmacy benefit management
services. Infusion is Coram's base business which derives its revenue primarily
from alternate site infusion therapy. The lithotripsy segment was discontinued
in 1998 following Coram's sale of its last interest in a lithotripsy unit. The
Resource Network Subsidiaries managed networks of home health care providers on
behalf of managed care plans and other payers. The other segment includes
revenue derived from the mail order pharmacy and pharmacy benefit management
services provided by the CPS division. See Note 16 to the company's Consolidated
Financial Statements for financial information with respect to these segments.

COMPANY HISTORY; RECENT EVENTS

     Coram was formed on July 8, 1994 as a result of a merger by and among T(2)
Medical, Inc., Curaflex Health Services, Inc., Medisys, Inc., and
HealthInfusion, Inc., each of which was a publicly-held national or regional
provider of home infusion therapy and related services. Each of these companies
became and is now an indirect, wholly-owned subsidiary of Coram. The merger was
accounted for as a pooling of interests.

     Coram 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., effective April 1, 1995. In addition, Coram acquired
H.M.S.S., Inc., a leading regional provider of home infusion therapies based in
Houston, Texas, effective September 12, 1994. As a result of these acquisitions,
Coram became a leading provider of alternate site infusion therapy services in
the United States based on geographic service area and total revenue.

     As of January 1, 1997, Coram provided lithotripsy services through a
controlling interest in 11 lithotripsy partnerships and two wholly-owned
lithotripsy entities. The company also owned a lithotripsy management company
and a lithotripter maintenance company. Lithotripsy is a non-invasive technique
that uses shock waves to disintegrate kidney stones. On August 20, 1997, the
company signed an agreement with Integrated Health Services, Inc. for the sale
of Coram's interest in its thirteen lithotripsy entities, the lithotripsy
management company, the stock of its equipment service company and certain
related assets. Effective September 30, 1997, the company completed the
transaction as to all of the lithotripsy entities 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 inability of Coram
and Integrated Health Services 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. Effective June 1, 1998, the company completed the sale of
its remaining lithotripsy partnership to Integrated Health Services. See Note 6
to the company's Consolidated Financial Statements.

     In April 1998, the company signed a Master Agreement, effective July 1,
1998 with Aetna U.S. Healthcare, Inc. ("Aetna") (the "Master Agreement"). Under
the Master Agreement, that was expected to last five (5) years, Coram, through
its Resource Network Subsidiaries, managed and provided home health care
services for over 2,000,000 Aetna enrollees in eight states for a stated monthly
fee per enrollee. Coram began serving Aetna enrollees under the Master Agreement
on approximately July 1, 1998. Coram provided its notice of
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termination of the Master Agreement effective June 30, 1999. Subsequently, Aetna
terminated the company's National Ancillary Services Agreement effective April
12, 2000. As of the date of this Report, the company was involved in litigation
with Aetna over the operation and termination of the Master Agreement. The case
is pending before the United States District Court for the Eastern District of
Pennsylvania and is on the Court's April 2000 trial calendar. See Item 3. "Legal
Proceedings" and Note 13 to the company's Consolidated Financial Statements for
more information regarding this matter.

DELIVERY OF ALTERNATE SITE INFUSION SERVICES

     General. Coram delivers its alternate site infusion therapy services
through approximately 80 branch offices located in 41 states and Ontario,
Canada. Infusion therapy involves the intravenous administration of nutrition,
anti-infective therapy, IVIG, blood factor therapies, pain management,
chemotherapy, and other therapies.

     Infusion patients are primarily referred to Coram following the 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. Typically a hospital discharge planner, the patient's physician or a
managed care payer will recommend or determine the infusion company to which a
patient is referred even though the patient ultimately has the freedom to choose
his or her own service provider. Because drugs administered intravenously tend
to be more potent and complex than oral drugs, the delivery of intravenous drugs
requires patient training, specialized equipment and clinical monitoring by
skilled nurses and pharmacists. Most therapies require either a gravity-based
flow control device or an electro-mechanical pump to administer the drugs. Some
therapies are administered continuously; most, however, are given for prescribed
intermittent periods of time. Coram nurses and pharmacists work with the
patient's physician to monitor and assess 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 as long as the patient's entire life.

     Branch Facilities. The delivery of infusion services is coordinated through
local or regional infusion branches, or related satellite locations. A typical
full service branch provides 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)  marketing to local referral sources, including doctors, hospitals
            and payers; and

     (viii) general management.

A typical full service branch has a fully equipped infusion pharmacy, offices
for clinical and administrative personnel and a storage warehouse. It also
employs a branch manager, licensed pharmacists, pharmacy technicians, registered
nurses, dietitians, and sales and administrative personnel. A typical full
service 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. Smaller satellite locations
contain limited supplies and pharmacy operations and are used as support centers
to respond to patient needs in specific geographical areas. Coram's full service
branches and satellite locations are leased and consist of 1,500 to 32,000
square feet of office space primarily in suburban office parks, often in close
proximity to major medical facilities.

     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 clinician and hospital personnel in order to assess the patient's
suitability for home care. This assessment process includes, among other things,
an assessment of the patient's
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physical and emotional status as well as the assessment of certain social
factors such as the safety and cleanliness of the home environment and the
availability of family members or others to assist in the administration of the
patient's therapy, if necessary. Patient review also includes a verification of
a patient's eligibility based upon established admission criteria and benefits
package through the patient's insurance carrier, managed care provider or
governmental payer.

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

     Prior to the patient receiving treatment services from Coram, the treating
physician develops the patient's plan of treatment and communicates it to the
local branch's clinical support team, including its nurses and pharmacists. This
team develops a plan of care and works with the treating physician and the
managed care coordinator, if applicable, to provide care and to monitor the
patient's progress and responses to treatment. 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, creating an information flow that allows the treating physician to
actively manage the patient's treatment. The treating physician always directs
the patient's care, including changing the plan of treatment in accordance with
the patient's needs and responses.

     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 as well as the level of independence the patient or
carepartner has achieved with regard to the administration and monitoring of the
prescribed therapy. During these subsequent visits, the nurse may check and
assess 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 supplies and drugs are typically delivered on a weekly basis depending
on the therapy and the particular drugs being administered. The treating
physician and the managed care coordinator, if applicable, remain actively
involved in the patient's treatment by monitoring the success of the plan of
treatment and revising as necessary.

ALTERNATE SITE INFUSION THERAPY: PRODUCTS AND SERVICES

     General. Coram provides a variety of infusion therapies, principally
nutrition, anti-infective therapies, IVIG, as well as coagulant and blood
clotting therapies for patients with hemophilia. 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
infection conditions, while others, such as nutrition or coagulants, may be
required on a long-term or permanent basis. The infusion therapies that are
administered at the patient's home are administered by the patient, the
designated carepartner or an employee or agent of Coram. In patient groups such
as immune suppressed patients (e.g., AIDS/HIV, cancer and transplant patients),
blood coagulant therapies or anti-infective therapy care may be provided
periodically over the duration of the primary disease or for the remainder of
the patient's life, generally as episodic care.

     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 and other patients may require short-term TPN therapy to augment
nutritional status such as patients with a diagnosis of cancer, hyperemesis,
HIV, eating disorders, and other diseases and treatments.

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     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.

     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 episodes, such as
osteomyelitis (bone infections), bacterial endocarditis (infection of the heart
valves), wound infections, infections associated with AIDS, cancer,
post-transplant and infections of the kidneys and urinary tract. Intravenous
anti-infective drugs are delivered through a peripheral catheter inserted in a
vein in the patient's arm or via a centrally placed catheter. Anti-infective
drugs are often more effective when infused directly into the bloodstream than
when taken orally.

     Intravenous Immunoglobulin. Intravenous immunoglobulin or "IVIG" therapy
involves the administration of a blood derivative product (gammaglobulins) which
is administered to patients with immune deficiency or altered immune status.
IVIG therapy is most commonly administered to patients with primary immune
deficiencies or autoimmune disorders or as part of a post-transplant treatment
protocol. 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 1998 and 1999, Coram experienced
difficulties in obtaining IVIG due to a national shortage of this product and
has attempted to maintain its inventory of this product at levels sufficient to
meet anticipated demand. Coram management has learned that the product shortage
has been eased. An ongoing shortage of IVIG may make it harder for Coram to
serve patients, which may adversely impact Coram's future results of operations.

     Coagulation and Blood Clotting Therapies. Coagulation or "factor
replacement" therapy is the intermittent administration of a blood clotting
factor. Blood clotting factors are generally administered to persons with
hemophilia or related genetic disorders which affect the blood's ability to
clot. In these disorders one or more of the normal blood clotting factors is not
produced in sufficient amounts by the body. The absence of these clotting
factors makes it difficult or impossible for a patient to stop bleeding. Severe
hemophiliacs can suffer from spontaneous bleeding episodes without trauma.
Repeated bleeding episodes can cause permanent loss of mobility in the joints
putting the patient at further risk medically and impinging on their ability to
live a normal life. Factor replacement products are administered via a centrally
inserted or peripherally inserted IV catheter over a short period of time
(approximately 10 minutes). Factor is infused when bleeding episodes occur or on
a routine preventative basis (prophylaxis). Most patients (even children) and/or
their carepartners learn to start their own IV and administer their factor.
Persons with hemophilia and others who have inherited clotting disorders will
require these products throughout their lives. Due to the nature of the factor
manufacturing processes, intermittent product shortages may be experienced from
time to time, which may make it difficult for Coram to meet the needs of its
patients and may have an adverse impact on Coram's future results of operations.

     Coram has developed a specific program and is providing therapies and
services to pre-and post bone marrow, blood cell and organ transplant patients.
The clinically focused care management program includes, among others,
proprietary patient and environmental assessment and monitoring protocols,
patient education tools and clinical training programs. The most common therapy
category for transplant patients is anti-infective, including antibiotic,
anti-viral and anti-fungal agents, most often prescribed intravenously to
prevent or treat an infection due to their immune compromised status. Other
prescribed therapies include TPN, IVIG, biologic response modifiers,
immunosuppressive therapies and blood products.

     Biotherapy. Coram provides patients with biological response modifiers,
colony stimulating factors, erythropoietin and interferons. In addition, Coram
provides growth hormone therapies as ordered by physicians.

     Other Therapies. Coram provides other technologically advanced therapies
such as chemotherapy, anti-neoplastic therapy, pain management, intravenous
inotropic 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 chemotherapy induced
emesis or hyperemesis gravidarum. Hydration therapy is often administered in
conjunction with intravenous chemotherapy. In addition, Coram provides therapies
for other diseases. Each such therapy amounted to less than 5% of its infusion
therapy net revenue for each of the years ended December 31, 1999 and 1998.
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ALTERNATE SITE INFUSION THERAPY: ORGANIZATION AND OPERATIONS

     General. In the first quarter of 1999, Coram undertook an organizational
realignment to effect a functional reporting structure. Coram's alternate site
infusion therapy business operations are conducted through approximately 80
branches. The branches are divided into four geographic areas. Each area has an
Area Vice-President of Operations who reports to the Senior Vice-President of
Operations, and an Area Vice-President of Sales who reports to Coram's Chief
Operating Officer. The Senior Vice-President of Operations reports to Coram's
Chief Operating Officer. Coram's new organizational structure was designed to
create greater operating and decision making efficiencies associated with
operating and managing the company. Coram believes that the functional approach
to management has better facilitated high quality local decision making, which
allows Coram to attract and retain experienced local managers and be responsive
to local market needs. As the company continues to reposition its business and
increase focus on its alternate site infusion therapy business, it will continue
to review its operations focusing on cost effective delivery of appropriate
care. For example, Coram has established a Hemophilia Services Division and
specialty hemophilia distribution centers in Malvern, Pennsylvania and
Albuquerque, New Mexico. Each center utilizes existing Coram branches and
resources and concentrates experienced company clinicians and management on
addressing the unique needs of hemophilia patients and their carepartners.

     Operating Systems and Controls. An important factor in Coram's ability to
monitor its operating locations is the management information systems. Besides
routine financial reporting, the company has developed a performance model for
monitoring its field operations in its infusion business. 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 and monitoring of best
demonstrated practices facilitates operating improvement.

     Coram endeavors to ensure that its local managers have the appropriate
authority and ability to perform effectively by providing them with training,
education, policies and procedures and standardized systems. Coram has designed
various management incentive plans that reward performance based on revenue,
accounts receivable collection, inventory control and contribution of earnings
before interest expense, income taxes, depreciation and amortization.

ALTERNATE SITE INFUSION THERAPY: QUALITY ASSURANCE/PERFORMANCE IMPROVEMENT

     Coram has established performance improvement programs for its infusion
therapy business that are consistent with the service standards and enable the
company to monitor whether the objectives of those standards are met. In 1999,
Coram began triennial re-surveys conducted by the Joint Commission on the
Accreditation of Health Care Organizations. As of December 31, 1999, the
corporate office and 30 branches, including related satellite locations have
successfully completed the triennial survey process. Prior to February 29, 2000,
two additional branch locations completed their initial Joint Commission survey
and achieved accreditation. The company expects that the triennial re-survey
will be completed during the calendar year 2001.

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

     (i)    Evaluate branch programs, policies and procedures and amend
            protocols as needed;

     (ii)   Provide ongoing direction to the quality improvement efforts;

     (iii)  Evaluate patient satisfaction activities and results and analyze any
            trends, respond as necessary to achieve better outcomes;

     (iv)   Assist in development of new programs or procedures to meet
            recognized needs within the branch or community that it serves;

     (v)    Evaluate the branch staff efforts related to professional and
            clinical issues such as clinical monitoring of patients; and

     (vi)   Identify and monitor key performance areas of operations and modify
            as needed.
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     In addition, Coram's Clinical Services Department assists branch management
in assessing the levels of service being provided.

CLINICAL RESEARCH AND MEDICAL INFORMATICS SERVICES

     Coram has been providing support services for clinical research studies for
the alternate site infusion therapy business since 1995. In 1998, the company
created a Clinical Research and Medical Informatics division and began devoting
additional resources to and actively marketing its capabilities in this arena.
This division is operated through a company subsidiary, CTI Network, Inc.
("CTI"). Through Coram's national network of approximately 950 full-time
equivalent alternate site infusion nurses and pharmacists, utilizing integrated
information systems, CTI can offer its customers the opportunity to complete
some of the most challenging aspects of a clinical trial more quickly by:

     (i)    providing single source contracting through a central office for
            national services;

     (ii)   assisting in the identification of potential investigators;

     (iii)  providing nurse study coordinators at the physician's office;

     (iv)   providing alternate site health care services such as therapy
            administration, specimen collection, patient education and training,
            patient assessments and data collection;

     (v)    providing alternate site pharmacy services; and

     (vi)   providing patient screening and surveying services.

Through CTI, clinical data from the infusion therapy business integrated data
warehouse can be analyzed to provide information necessary to make important
product development and marketing decisions by biopharmaceutical and managed
care organizations. CTI provides data collection and integration services as
well as pharmaco-economic, outcomes and utilization analyses. Additionally, a
proprietary reporting system, the Corameters(SM) Utilization and Outcomes
Reporting System, has been developed to demonstrate resource utilization trends
in alternate site settings. CTI also provides reports to facilitate the
satisfaction of certain reporting requirements of the Health Plan Employer Data
and Information Set and the "ORYX" initiative of the Joint Commission on the
Accreditation of Health Care Organizations.

CPS:PHARMACY BENEFIT MANAGEMENT AND SPECIALTY MAIL-ORDER PHARMACY SERVICES

     CPS offers HMO, PPO, at-risk physician groups, self funded employer benefit
plans, labor organizations and other managed care customers pharmacy benefit
management and specialty mail-order pharmacy services. The pharmacy benefit
management services include on-line claims administration, formulary management
and drug utilization review through a nationwide network of over 51,000 retail
pharmacies. As of December 31, 1999, the company had approximately 60 such
arrangements in place for pharmacy benefit management services.

     CPS's specialty mail-order pharmacy service offers centralized
distribution, compliance monitoring, patient education and clinical support to
patients with specialized needs. In particular, CPS has focused its marketing
efforts on patients with organ transplants, HIV/AIDS, growth deficiencies and
other chronic conditions. As of December 31, 1999, CPS had approximately 6,200
active patients receiving its specialty mail-order pharmacy services.

     During 1999, CPS pursued the development of the capability to offer and
sell its specialty mail-order pharmacy products, services and supplies over the
Internet. Completion of this project is estimated to be the end of the second
quarter in 2000.

     The CPS division operates from its centralized facility located in Orlando,
Florida which opened in March 1999, replacing its former centralized facility
located in Omaha, Nebraska. Both facilities were operational for much of 1999,
with the Omaha facility serving a support role as the transition was made to
Orlando. The Omaha facility continues to service local payer relationships and
the Orlando facility serves as the primary CPS call center and specialty
mail-order pharmacy location. CPS also maintains four other satellite pharmacy
operations to

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satisfy specific local customer and payer requirements. One of the satellites
functions as a walk-in retail pharmacy and is located in a large hospital. CPS
closed its Plainview, New York satellite pharmacy effective February 2000.

     The CPS division is managed by a division President who reports to the
company's Chief Executive Officer. Reporting to the CPS President is a Vice
President of Operations, several directors, and sales and marketing personnel.
The Vice President has directors and managers reporting to him that handle
specific operations and tasks. CPS utilizes a management information system that
was developed specifically for supporting its business operations. The system
facilitates referral intake, benefit authorizations, member eligibility and
claims submission functions.

     In August 1999, the company announced that it had hired an investment
advisor to assist it in pursuing strategic alternatives for CPS. With the
assistance of its investment advisor, the company is currently conducting an
auction of the CPS division. The company cannot predict whether a sale will
occur or what the proceeds would be from any sale.

RESOURCE NETWORK SUBSIDIARIES: ANCILLARY NETWORK MANAGEMENT SERVICES

     The Resource Network Subsidiaries ("R-Net") offered ancillary network
management services to HMOs, PPOs, at-risk physician groups and other managed
care organizations for the home health services offered under their benefits
plans. As of January 1, 1999, R-Net was providing its services to its customers'
plans that covered approximately 3.5 million lives. Typically, a network of home
health service vendors managed by R-Net included providers of home infusion,
home nursing, durable medical equipment, respiratory therapy, home hospice,
medical supplies, women's health, orthotics, prosthetics and other home health
services identified by the customer. Each network provider was contracted with
R-Net and received referrals of patients from R-Net. Where appropriate, the
company's infusion and CPS divisions participated in the provider networks
established by R-Net.

     The agreements that R-Net had for the provision of ancillary network
management services have been terminated and R-Net is no longer providing any
ancillary network management services. The Resource Network Subsidiaries are
being liquidated in the Chapter 11 proceedings that are currently pending in the
United States Bankruptcy Court for the District of Delaware. The Chapter 11
proceedings were originally initiated with the filing on August 19, 1999 of an
involuntary bankruptcy petition against Coram Resource Network, Inc. in such
court. Subsequently, both Resource Network Subsidiaries filed voluntary
petitions for relief on November 12, 1999. See Item 3. "Legal Proceedings."

     For most of 1999, R-Net operated from its two primary call centers and
three satellite offices. The division's call center located in Whippany, New
Jersey was opened in 1998 for the purposes of replacing its former Totowa, New
Jersey call center with a suitable facility for rendering the services required
of R-Net under the Master Agreement with Aetna that was signed in April 1998.
R-Net also maintained a call center in Houston, Texas. Together, R-Net's primary
call centers provided administrative services for the division and management
and intake services for several payer customers. The R-Net satellite offices
were devoted to servicing the members of only one or two local customers. All of
the R-Net locations have effectively been closed in connection with the
liquidation of R-Net. A Chief Restructuring Officer who has replaced former
senior management personnel currently manages R-Net.

REIMBURSEMENT OF SERVICES

     Virtually all of Coram's operating revenue in each of its lines of business
is derived from third-party payers, including private insurers, managed care
organizations such as HMOs and PPOs, at-risk physician groups, and governmental
payers such as Medicare and Medicaid. Like other medical service providers,
Coram 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, documentation,
collection and reimbursement procedures is critical to financial success and
continues to be a high priority for management. Coram continues to focus on the
processing of clean claims and the careful screening of new cases to determine
that adequate reimbursement will be available and will be received in a timely
manner.
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<PAGE>   10

     In certain instances, fixed fee or capitated fee arrangements are utilized.
Under a capitated fee arrangement, Coram would agree to deliver or arrange for
the delivery of certain home health services required under the payer customer's
health plan in exchange for a fixed per member per month service fee. The total
per member per month fee is calculated using all members enrolled in the
particular health plan as of certain dates. Before establishing the appropriate
per member per month fee, Coram typically reviews utilization data provided by
the payer customer and/or other available utilization data. In some instances,
the per member per month rates will be adjusted or reconciled periodically to
reflect actual utilization to prevent excess losses by the company or excess
expense outlays by the payer customer. As of December 31, 1999, the number of
capitated contracts to which the Infusion division was a party was six. Monthly
revenue derived from capitated contracts is not material in relation to the
consolidated monthly revenue, as of December 1999. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations:
Background."

     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 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. The remaining 20%
co-insurance portion is the obligation of secondary insurance and/or the
patient. Private indemnity payers typically reimburse at a higher amount for a
given service and provide a broader range of benefits than governmental and
managed care payers, although net revenue and gross profits from both private
and other third-party non-governmental payers have been affected by the
continuing efforts to contain or reduce reimbursement for health care. An
increasing percentage of Coram's revenue has been derived in recent years from
agreements with HMOs, PPOs, other managed care providers and other contracted
payers. Although these agreements often provide for negotiated reimbursement at
reduced rates, they generally result in lower bad debts and provide
opportunities to generate greater volume than traditional indemnity referrals. A
substantial amount of the revenue Coram receives from the Medicare program
originates from the Part B program.

COMPETITION

     The alternate site infusion therapy, ancillary network management services,
and pharmacy benefit management and specialty mail-order pharmacy markets are
all highly competitive. Some of Coram's current and potential competitors in
these lines of business include:

     (i)    integrated providers of alternate site health care services;

     (ii)   hospitals;

     (iii)  local providers of multiple products and services for the alternate
            site health care market;

     (iv)   physicians and physician organizations such as independent practice
            associations and multi-specialty group practices;

     (v)    large national mail order pharmacies, including mail order
            pharmacies affiliated with or owned by managed care organizations;
            and

     (vi)   retail pharmacy stores.

     Coram has experienced increased competition, particularly in its alternate
site infusion therapy business, from hospitals and physicians that have sought
to increase the scope of services offered through their facilities, including
services similar to those offered by Coram.

     Coram competes on a number of factors, including quality of care and
service, reputation within the medical community, geographic scope and price.
Competition within Coram's three principal lines of business have been affected
by the decision of third-party payers and their case managers to be more active
in monitoring and directing the care delivered to their beneficiaries.
Accordingly, relationships with such payers and their case managers and
inclusion within preferred provider and other networks of approved or accredited
providers is often a prerequisite to Coram's ability to continue to serve many
of its patients. Similarly, Coram's ability to align itself with other health
care service providers may increase in importance as managed care providers and
provider

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<PAGE>   11

networks seek out providers who offer a broad range of services that may exceed
the range of services currently offered directly by Coram.

     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
health care markets served by the company and others may do so in the future.
Entrance into the local markets by competitors could cause a decline in sales,
loss of market acceptance of Coram's services and price competition. Coram
expects to continue to encounter competition in the future that could limit its
ability to maintain or increase its market share. Such competition could have an
effect on the business, financial condition and results of operations of Coram.
See Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations: Risk Factors."

SALES AND MARKETING

     Coram's alternate site infusion therapy products and services are marketed
through its field sales force, branch sales personnel and various media formats
to its primary referral sources. In late 1999, the company established product
managers for three of its core therapies, nutrition, transplant and hemophilia
related services through three Strategic Business Units: Nutrition Services,
Transplant Services, and Hemophilia Services. The Vice President for each unit
has responsibility for ongoing program development and gathering clinical and
sales resources to focus on growing sales in these areas. Reporting to each are
product specialists that assist local sales efforts by providing specialized
presentations to referral sources and payer customers.

     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 CPS division has its own dedicated sales force that markets its
own services to certain payer customers. In addition, these sales people pursue
customers identified by the sales personnel employed by Coram's infusion therapy
division. Coram's sales forces in each of its lines of business are responsible
for establishing and maintaining referral sources. All sales employees receive a
base salary plus incentive compensation based on core therapy revenue growth.

     Coram's network of field representatives enable 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 Coram's clinical expertise tailored to the
different customer interests with a specific emphasis on certain key therapies.
Specialty marketing and sales support personnel promote products and services
that are outside of base infusion therapy.

     As a result of escalating pressures to contain health care costs,
third-party payers are participating in certain decisions regarding health care
alternatives, using their significant bargaining power to secure discounts and
to direct referrals of their enrollees to providers. In response, Coram has
directed its sales and development focus to aggressively pursue agreements with
third-party payers, managed care organizations and provider networks that
provide high quality, cost-effective care. Coram maintains a dedicated sales
force in each of its lines of business to enhance its efforts to market and sell
its services to managed care payers. In the company's infusion therapy division,
managed care sales representatives are deployed in each market with additional
resources focused on large national payers. Coram is currently focusing its
efforts in its infusion therapy business 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,
anti-infectives, IVIG and services for persons with hemophilia and persons
receiving certain types of organ and bone marrow/blood cell transplants.

CUSTOMERS AND SUPPLIERS

     Coram provides alternate site home health care services and products to a
large number of patients. Excluding Medicare and Medicaid, which collectively
represented 20% of net revenue from continuing operations for 1999, and Aetna
U.S. Healthcare and its affiliated payers, including Prudential, which
represented 7% of net revenue from continuing operations for 1999, no other
single payer accounted for more than 5% of Coram's net revenue for 1999. R-Net
no longer provides services under the Master Agreement with Aetna and Aetna
notified Coram that, effective April 12, 2000, all of its other service
agreements with Coram would be terminated.
                                       10
<PAGE>   12

     Coram purchases products from a large number of suppliers and considers its
relationships with its vendors to be good subject to credit uncertainty. Coram
believes that substantially all of its products are available from alternative
sources with terms consistent in all material respects to its present
agreements. However, the principal supplier of Coram's infusion pumps, Sabratek
Corporation, filed for protection under Chapter 11 of the United States
Bankruptcy Code in December 1999. Coram has learned that Baxter Corporation is
purchasing certain Sabratek assets, including Sabratek's pump manufacturing
division and intends to continue to produce the related tubing and infusion sets
needed to operate the ambulatory infusion pumps manufactured by Sabratek and
used by Coram. The manufacturing process for the related tubing and infusion
sets has, however, been disrupted and Coram has received word from Baxter that
the delivery of additional tubing and sets will be suspended. Because the
infusion tubing and sets required by the Sabratek ambulatory infusion pumps are
unique, the company must obtain other infusion pumps while the manufacturing
process for the Sabratek tubing and sets is being corrected. While the company
believes it can meet the needs of its patients, Coram can not predict what
consequences will result from it being forced to obtain alternate ambulatory
infusion pumps, tubing and sets. Moreover, the company received word from its
supplier of drugs for its patients with alpha 1 antitrypsin deficiency that it
was discontinuing the sale of its drug, Prolastin, to all suppliers other than
one exclusive pharmacy. Accordingly, the company was forced to discontinue
servicing approximately 175 patients as its supply of the needed product was
discontinued.

GOVERNMENT REGULATION

     General. The federal government and all states in which Coram is currently
operating regulate various aspects of Coram's business. In particular, Coram's
operations are subject to extensive federal and state laws regulating, among
other things, the provision of pharmacy, home care, nursing services, ancillary
network management services, health planning, health and safety, environmental
compliance and toxic and medical waste disposal. Coram is also subject to fraud
and abuse and self-referral laws, which affect its business relationships with
physicians and other health care providers and referral sources and its
reimbursement from government payers. 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 company employees are subject to
state laws and regulations governing the ethics and professional practices of
pharmacy and nursing.

     Coram may also be required to obtain certifications or register in order 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 operations, including certain of
Coram's operations. The failure to obtain, renew or maintain any of the required
regulatory approvals, certifications, registrations or licenses could adversely
affect Coram's business and could prevent the location involved from offering
products and services to patients, and/or from billing third party payers.
Coram's operating results could be adversely affected, directly or indirectly,
as a result of any such actions. Coram believes it complies in all material
respects with these and all other applicable laws and regulations. The health
care 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 Coram will not be reviewed and
challenged or that government sponsored health care reform, if enacted, will not
result in a material adverse change to the company.

     Fraud and Abuse. Coram's operations are subject to the illegal remuneration
provisions of the Social Security Act (sometimes referred to as the
"anti-kickback" statute) that imposes 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
health care 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 health care 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 Civilian Health and Medical Program
of the Uniformed Services, among others. Administrative exclusion and civil
monetary penalties for anti-

                                       11
<PAGE>   13

kickback violations can also be imposed through an administrative process.
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, but has not yet adopted, federal legislation that would expand the
federal anti-kickback statute to include the same broad prohibitions regardless
of payer source.

     In addition to the payment or receipt of illegal remuneration for the
referral or generation of federal healthcare program business, the fraud and
abuse laws cover 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 health care 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, exclusion from state funded programs, 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,
unless the financial relationship fits within an exception enumerated in Stark
II or regulations promulgated thereunder. Aspects of Coram's business which are
"designated health services" for purposes of Stark II include 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. Coram has financial relationships with physicians
and physician owned entities in the form of medical director agreements and
services agreements pursuant to which the company provides pharmacy products. In
each case the relationship has been structured using an arrangement the company
believes to be consistent with applicable exceptions set forth in Stark II, such
as the personal services arrangements exception or the exception for payments by
a physician for items and services.

     In addition, the company is aware of certain referring physicians that have
had a financial interests in the company through ownership of shares of the
company's common stock. The Stark II law includes an exception for the ownership
of publicly traded stock in certain companies with equity above certain levels.
As of December 31, 1999, the company complied with the requirements of such
exception. However, there can be no assurance that the ownership of shares of
Coram common stock by referring physicians will continue to fit within the
public company exception of Stark II because the public company exception
requires the issuing company to have stockholders' equity of at least $75
million either as of the end of its most recent fiscal year or during the last
three fiscal years. At the end of Coram's 1999 fiscal year, its level of
stockholders' equity was well below the required level, but average
stockholders' equity over the prior three years was above the required level.
Without an increase in Coram's stockholders' equity level prior to the end of
the fiscal year ending December 31, 2000, Coram would no longer qualify for such
exception and would be forced to cease accepting referrals of patients with
government sponsored benefit programs from physicians who own shares of Coram's
common stock. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations: Risk Factors."

     Under Stark II, an 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 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. In addition, a number of the states in which

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<PAGE>   14

the company operates have similar prohibitions on physician self-referrals with
similar penalties. Although the company believes it has structured its financial
relationships with physicians to comply with such Stark II and applicable state
law equivalents, a failure to comply with the provisions of such laws could have
a material adverse effect on the company.

     Other Fraud and Abuse Laws. The False Claims Act imposes civil liability on
individuals or entities that submit false or fraudulent claims for payment to
the government. Violations of the False Claims Act may result in civil penalties
and forfeitures and exclusion from the Medicare and Medicaid programs. The
Health Insurance Portability and Accountability Act of 1996 created two new
federal crimes: "Health Care Fraud" and "False Statements Relating to Health
Care Matters." The Health Care Fraud statute prohibits knowingly and willfully
executing a scheme or artifice to defraud any health care benefit program. A
violation of this statute is a felony and may result in fines and/or
imprisonment. The False Statements statute prohibits knowingly and willfully
falsifying, concealing or covering up a material fact by any trick, scheme or
device or making any materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for health care benefits, items or
services. A violation of this statute is a felony and may result in fines and/or
imprisonment. Recently, the federal government has made a decision to
significantly increase the financial resources allocated to enforcing the health
care fraud and abuse laws. In addition, private insurers and various state
enforcement agencies have increased their level of scrutiny of health care
claims in an effort to identify and prosecute fraudulent and abusive practices
in health care. A failure to comply with any of the fraud and abuse laws could
have a material adverse effect on the company.

     Medicare and Health Care Reform. As part of the Balance Budget Act of 1997
(the "BBA"), Congress made numerous changes that affect the participation of
Part A certified home health agency providers and Part B suppliers like Coram in
the Medicare program.

     Pursuant to regulations proposed under the BBA, Part A certified home
health agencies will be required, as a condition of their participation in Part
A of the Medicare program, to post surety bonds. The bonds are to 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. The Balanced Budget Refinement Act of 1999
("BBRA") modified the surety bond amounts to require the lesser of 10% of the
annual amount Medicare paid to the provider in the prior year or $50,000. The
deadline for securing such bonds has been extended indefinitely while HCFA
reviews the bonding requirements. HCFA has indicated that the new compliance
date will be sixty days after the publication of the final rule. Coram 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 15, 2000,
the company had only three Medicare certified home health providers, none of
which has obtained a surety bond.

     Coram 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, Coram would be required to post bonds for each of its branches
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 Coram's branch
offices participate as suppliers in the Part B Medicare program. Similar bonding
requirements are being required by state Medicaid programs. If Coram 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, Coram would be required to obtain bonds in the minimum face
amount of approximately $17.5 million. If Coram is not able to obtain all of the
necessary bonds, it may have to cease its participation in the Medicare and
Medicaid programs for some or all of its branch locations. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations: Liquidity and Capital Resources -- Part A and Part B Medicare Surety
Bonds."

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<PAGE>   15

     The BBA also reduced reimbursement for oxygen and oxygen related therapies
by 25% effective January 1, 1998, with an additional 5% reduction effective
January 1, 1999. In addition, the BBA eliminated the 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, thereby "freezing" the payment amount for such items until the
year 2003. The BBRA restored a portion of the durable medical equipment payments
by increasing the fee schedule by 0.3% in 2001 and 0.6% in 2002. The BBA also
initiated the implementation of a prospective payment system for home health
services for cost reporting periods beginning on or after October 1, 1999. This
date subsequently was changed to October 1, 2000. On October 28, 1999, HCFA
issued a proposed rule to implement the home health prospective payment system.
Under the proposed rule, Medicare would pay home health agencies for each
covered 60-day episode of care. Payment would be determined based on the care
needs of the patients, as determined by a standardized assessment tool used to
assess patient needs. Agencies would also be eligible for outlier payments if
the costs of care of an individual beneficiary were significantly higher than
the specified payment rate. HCFA intends to finalize the implementing
regulations by the statutory effective date of October 1, 2000. The BBRA also
delayed the 15% reduction in the base payment rates for home health agencies
until October 1, 2001. HCFA has indicated that the 15% cut will not be
necessary. However, Congress would still need to repeal the 15% payment
reduction. The BBA also authorized certain demonstration projects for
competitive bidding of, at a minimum, oxygen and oxygen equipment, through
December 31, 2002. The first competitive bidding project, underway in Polk
County, Florida, is using payment rates that are between 13 and 31 percent lower
than Medicare's existing fee schedule for five categories of products including
enteral nutrition equipment and supplies and urological supplies. A second
competitive bidding project is being designed in the San Antonio area, and is
scheduled to become effective in January 2001. While the final details of the
prospective payment and future 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 Coram 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 Coram may provide 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 health care 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 health
care services and to manage and contain their cost. Coram 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 Coram's business operations have not been
subject to state or federal regulatory interpretation. There can be no assurance
that review of Coram's business by courts or regulatory authorities will not
result in determinations that could adversely affect the operations of Coram or
that the health care regulatory environment will not change so as to restrict
its existing operations or its expansion.

     Most states have laws regulating insurance companies and HMOs. Coram is not
qualified in any state to engage in either the insurance or HMO business, but
Coram had registered one of its R-Net subsidiaries as a risk-taking preferred
provider organization in one state. As managed care penetration increases, state
regulators are beginning to scrutinize the practices of and relationships among
third-party payers, 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. State
regulators are also reviewing whether risk-bearing entities are subject to
insurance or HMO regulation. Coram believes that its practices are consistent
with those of other health care companies and do not constitute licensable HMO
or insurance activities. To the extent

                                       14
<PAGE>   16

such licenses may be required, Coram 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 Coram and/or its customers,
Coram may be compelled to restructure or refrain from engaging in certain
business practices.

     Pharmacies and Home Health Agencies. Each of Coram's pharmacies is licensed
in the states in which it is located and in the states where its products are
delivered. Each of these pharmacies also has a Controlled Substances
Registration Certificate 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 and medical 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 health care 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. Furthermore,
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.

     T(2) Medical Settlement and Compliance Activities. In September 1994, T(2)
Medical, entered into a settlement agreement with the United States (the "T(2)
OIG Settlement Agreement") settling claims arising out of an investigation by
the Department of Health and Human Services Office of Inspector General ("OIG")
into certain operations of T(2) Medical, which occurred prior to the Four-Way
Merger that created Coram. T(2) 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 T(2) OIG Settlement
Agreement imposed certain restrictions upon the types of relationships that T(2)
Medical may have with referring physicians and imposed a five-year reporting
obligation upon T(2) Medical. In September 1999, the company submitted to the
OIG its final report under the Settlement Agreement. In March 2000, the OIG
confirmed that Coram's obligations under the Settlement Agreement have
concluded.

     Coram has implemented measures to ensure compliance with applicable law and
has engaged Richard P. Kusserow, the former Inspector General of the Department
of Health and Human Services, as a consultant to assist Coram in its continued
development and administration of its compliance program. Coram's internal
regulatory compliance review program is intended to deal with legal, regulatory
and ethical compliance issues. However, no assurance can be given that 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 in the
future. Such investigation could result in any, or any combination, of the
penalties discussed above depending upon the agency involved in such
investigation and prosecution.

     Coram 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 applicable statute or
regulation. The health care 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 Coram. Any loss by Coram of its various federal
certifications, its authorization to participate in the Medicare or 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. "Management's
Discussion and Analysis of Financial Condition and Results of Operations: Risk
Factors."

                                       15
<PAGE>   17

EMPLOYEES

     As of December 31, 1999, Coram had approximately 2,600 full-time equivalent
employees (3,340 full and part-time employees). None of Coram's employees is
currently represented by a labor union or other labor organization, or covered
by a collective bargaining agreement. Approximately 35% of the employees are
nurses and pharmacists, with the remainder consisting primarily of sales and
marketing, billing and reimbursement, branch operations, clinical coordinators,
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 27,000 square feet of office space leased through August 2001.
CPS's call center and specialty mail order pharmacy facility located in Orlando,
Florida occupies approximately 26,000 square feet of office space leased through
February 2006. R-Net's principal office and call center located in Whippany, New
Jersey occupied approximately 41,000 square feet of office space leased through
August 2004, and efforts are being made to sublet or assign the lease for the
facility to a third party. As of March 14, 2000, Coram as a whole had
approximately 90 facilities throughout the United States and Canada, totaling
approximately 1.0 million square feet of facility space with annual rent
aggregating approximately $12.8 million. Coram believes that the loss of the
lease on any one facility would not materially effect its operations.

ITEM 3. LEGAL PROCEEDINGS

     Coram filed a complaint (the "Coram Complaint") against Aetna in the United
States District Court for the Eastern District of Pennsylvania (Civil Action No.
99-CV-3330) on June 30, 1999. The Coram Complaint sets forth claims against
Aetna for fraud, misrepresentation, breach of contract and rescission relating
to the Master Agreement between the parties for ancillary network management
services through the R-Net. Coram provided its notice of termination of the
Master Agreement effective June 30, 1999. Under the arrangement, that was
expected to last for five years, Coram managed and provided home health care
services for over 2,000,000 Aetna enrollees in eight states for a stated monthly
fee per enrollee. Coram began serving Aetna enrollees under the Master Agreement
on approximately July 1, 1998. On June 30, 1999, Coram received a copy of a
complaint (the "Aetna Complaint") that had been filed by Aetna on June 29, 1999
in the Court of Common Pleas of Montgomery County, Pennsylvania (Case No.
99-11025). The Aetna Complaint sought specific performance, injunctive relief
and declaratory relief to compel Coram to perform under the Agreement, including
the payment of compensation to the healthcare providers that have rendered and
continue to render services to Aetna's health plan members. As stated in the
Aetna Complaint, Aetna disputes Coram's right to terminate the Agreement. Coram
removed the Aetna Complaint to federal court, and the Aetna Complaint is also
pending in the United States District Court for the Eastern District of
Pennsylvania (Civil Action No. 99-CV-3378).

     On July 20, 1999, Aetna filed a counterclaim against Coram in the federal
court lawsuit brought by Coram (Civil Action No. 99-CV-3330). In its
counterclaim, Aetna has sued Coram for, among other things, breach of the Master
Agreement and fraudulent misrepresentation, contending Coram never intended to
perform the Master Agreement, defamation, interference with contractual
relations with providers and for interference with prospective contractual
relations with other companies that allegedly bid for the Master Agreement.
Aetna seeks in excess of $133.0 million in the lawsuit.

     The parties filed summary judgment motions with respect to various claims
raised by the other party. In February 2000, the Court issued a series of orders
regarding the summary judgment motions filed by the parties. Specifically, the
court granted Coram's summary judgment motions regarding the claims for specific
performance and injunctive relief made by Aetna in the Aetna Complaint
dismissing such claims as moot. The Court also granted a motion dismissing
Aetna's counterclaims against Coram and the other related Coram parties for
fraud, defamation, interference with contractual relations with providers and
for interference with prospective contractual relationships with other companies
that allegedly bid for the Master Agreement. Finally, the Court granted Aetna's
motion for summary judgement dismissing Coram's claims for misrepresentation,
fraud, and rescission. As a result of the Court's rulings, the tort claims of
both Coram and Aetna have been dismissed, and each party is

                                       16
<PAGE>   18

pursuing breach of contract claims against the other. Aetna seeks approximately
$133 million for its breach of contract claims against Coram and Coram seeks
over $45 million for its breach of contract claims against Aetna. The case has
been placed on the Court's April 2000 trial calendar.

     Coram intends to pursue its claims against Aetna vigorously and to put
forth a vigorous defense against all of the claims brought by Aetna against
Coram. Due to the uncertainties inherent in litigation, the ultimate disposition
of the Aetna litigation described in the preceding paragraphs cannot presently
be determined and no provision has been recorded in the company's Consolidated
Financial Statements for any recovery or loss that may result upon resolution of
the litigation. The company has, however, established a reserve for the costs
associated with litigating the case against Aetna. An adverse outcome in such
litigation could have a material adverse effect on the financial position,
results of operations and liquidity of the company. See Note 3 to the company's
Consolidated Financial Statements.

     On August 19, 1999, a small group of parties with claims against R-Net
filed an involuntary bankruptcy petition under Chapter 11 against Coram Resource
Network, Inc. ("CRN") in the United States Bankruptcy Court for the District of
Delaware. Subsequently, on November 12, 1999, the Resource Network Subsidiaries
filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware, Case No.
99-2889 (MFW). The voluntary cases are pending under the style, In Re Coram
Resource Network, Inc. and Coram Independent Practice Association, Inc., Case
No. 99-2889 (MFW).

     Apria Healthcare, Inc. and one of its affiliates (collectively "Apria")
have also filed suit against the company and the Resource Network Subsidiaries
in the Superior Court of Orange County, California (Apria Healthcare, Inc. and
Apria Healthcare of New York State, Inc. v. Coram Healthcare Corporation, Coram
Resource Network, Inc. and Coram Independent Practice Association, Inc, Case No.
813264) regarding Apria's specific provider claims. The claims relate to
services that were rendered as part of a network in connection with the Master
Agreement with Aetna. Apria's complaint alleges, among other things, that the
Resource Network Subsidiaries operated as the alter ego of Coram and, as a
result, Coram should be declared responsible for the alleged breaches of the
contracts that the Resource Network Subsidiaries had with Apria. The complaint
includes requests for declaratory, compensatory and other relief in excess of
$1.4 million. A notice has been filed with the Court notifying it of the
bankruptcy proceedings and contending that the case has, by operation of certain
provisions of the United States Bankruptcy Code, been stayed. If the case is
prosecuted against Coram despite the stay of the proceedings, Coram will pursue
all available grounds for dismissal and defend itself vigorously in the matter.
Due to the uncertainties inherent in litigation, the ultimate disposition of
this matter cannot presently be determined and no provision has been recorded in
the company's Consolidated Financial Statements for any loss that may result
upon resolution of the litigation with Apria. See Note 3 to the company's
Consolidated Financial Statements.

     In January 1999, the Internal Revenue Service ("IRS") completed the
examination of Coram's federal income tax return of the company for the year
ended September 30, 1995, and proposed substantial adjustments to the prior tax
liabilities of the company. Coram has agreed to adjustments of $24.4 million
that affect only the net operating loss carryforwards available. Coram does not
agree with the other proposed adjustments regarding the deduction of warrants,
write-off of goodwill and the specified liability portion of the 1995 loss which
would, if the IRS prevails, affect the prior years' tax liabilities. On May 14,
1999, Coram received a statutory notice of deficiency with respect to the
proposed adjustments. The alleged deficiency totaled approximately $12.7 million
plus interest and penalties to be determined. Coram is contesting the notice of
deficiency through administrative proceedings and litigation, and will
vigorously defend its position. The most significant adjustment proposed by the
IRS relates to the ability of Coram to categorize certain net operating losses
as specified liability losses and offset income in prior years, for which the
company has previously received refunds in the amount of approximately $12.7
million. In August 1999, Coram filed a petition with the United States Tax Court
contesting the notice of deficiency. The IRS responded to the petition and
requested the petition be denied. The IRS Appeals Office currently has
jurisdiction over the case. Due to the uncertainty of final resolution, the
company's financial statements include a reserve for these potential
liabilities. No assurance can be given that the company will prevail given the
early phase of this matter and the uncertainties inherent in any proceeding with
the IRS or in litigation. If the company does not prevail with respect to the
proposed material adjustments, the financial position and liquidity of the
company could be materially adversely affected. See Item 7. "Management's
                                       17
<PAGE>   19

Discussion and Analysis of Financial Condition and Results of Operations: Risk
Factors" and Note 10 to the company's Consolidated Financial Statements.

     Coram intends vigorously to defend itself in the matters described above.
Nevertheless, due to the uncertainties inherent in litigation and IRS
proceedings, the ultimate disposition of the matters described in the preceding
paragraphs cannot presently be determined. Accordingly, except for the provision
established for the costs of pursuing the litigation against Aetna and the costs
for addressing the bankruptcy proceedings related to the R-Net as described in
Note 3 to the company's Consolidated Financial Statements, charges recorded for
various litigation settlements that are not individually material to Coram and
the reserve established for the tax case as discussed above, 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 in
any such litigation or proceedings could have a material adverse effect to the
financial position, results of operations and liquidity of the company.

     On July 7, 1997, Coram filed suit against Price Waterhouse LLP (now known
as PricewaterhouseCoopers LLP) in the Superior Court of San Francisco,
California, seeking damages in excess of $165.0 million. As part of the
settlement that resolved a case filed by the company against Caremark
International, Inc. and Caremark, Inc. (collectively "Caremark"), Caremark
assigned and transferred to the company all of Caremark's claims and causes of
action against Caremark's auditors, PricewaterhouseCoopers LLP, related to the
lawsuit filed by Coram against Caremark. This assignment of claims includes
claims for damages sustained by Caremark in defending and settling its lawsuit
with Coram. The case was dismissed from the court in California because of
inconvenience to witnesses with a right to re-file in Illinois. Coram re-filed
the lawsuit in state court in Illinois. PricewaterhouseCoopers LLP filed a
motion to dismiss Coram's lawsuit in the state court in Illinois on several
grounds, but their motion was denied on March 15, 1999. PricewaterhouseCoopers
LLP filed an additional motion to dismiss Coram's lawsuit in May 1999, and that
motion was dismissed on January 28, 2000. The lawsuit has progressed into the
discovery stage. There can be no assurance of any recovery from
PricewaterhouseCoopers LLP. See Note 4 and Note 13 to the company's Consolidated
Financial Statements.

     Coram 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 financial
position, results of operations or 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.

                                       18
<PAGE>   20

                                    PART II

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

     Prior to March 7, 2000, shares of Coram's common stock had been listed and
traded on the New York Stock Exchange under the symbol "CRH". Beginning on March
7, 2000, the shares have been traded through the Over the Counter Bulletin Board
maintained by the National Association of Securities Dealers, Inc. The symbol
under which the shares are now traded is "CRHE." 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:

<TABLE>
<CAPTION>
                                                          HIGH            LOW
                                                       -----------    -----------
<S>                                                    <C>            <C>
Calendar Year 1998
  First Quarter......................................      3 3/8          2 1/8
  Second Quarter.....................................      3              1 1/2
  Third Quarter......................................      2 11/16        1 5/16
  Fourth Quarter.....................................      2 9/16         1 5/16
Calendar Year 1999
  First Quarter......................................      2 13/16        1 7/16
  Second Quarter.....................................      2 5/8          1 1/2
  Third Quarter......................................      1 5/8           9/16
  Fourth Quarter.....................................      1 1/8           3/8
</TABLE>

     As of March 14, 2000, there were 4,850 record holders of the common stock.
On March 14, 2000, the last bid for Coram common stock on the Over the Counter
Bulletin Board was $0.5313 per share and the last reported ask price was $0.6250
per share. These quotations reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.

     The trading of company common stock moved to the Over the Counter Bulletin
Board following an agreement between the company and the New York Stock Exchange
that shares of Coram's common stock no longer met the requirements for trading
on the New York Stock Exchange. Coram had received notice in 1999 that it had
fallen below the minimum listing criteria of the NYSE, including the minimum
share price of $1.00, the minimum market capitalization of $50 million and the
minimum equity of $50 million.

     Coram 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. Coram currently intends to retain all future earnings for use in the
operation of its business. Accordingly, Coram 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.

     Coram did not sell any of its equity securities in the year ended December
31, 1999 that were not registered under the Securities Act of 1933 (the "Act"),
as amended.

     The holders of Coram's Series B Convertible Subordinated Notes (the "Series
B Notes") have the right to convert the Series B Notes into shares of the
company's common stock. In addition, these holders and/or their affiliates are
lenders under the Series A Senior Subordinated Notes (the "Series A Notes") of
the company, and are lenders under the new senior credit facility pursuant to
which they were issued warrants to purchase 1.9 million shares of Coram's common
stock. In certain circumstances and assuming conversion of the Series B Notes
and exercise of related warrants, such holders may own collectively a majority
of the issued and outstanding common stock of the company and be in a position
to take steps to control the affairs of the company. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations: Risk
Factors" and Note 9 to the company's Consolidated Financial Statements.

                                       19
<PAGE>   21

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 Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Amounts are in thousands, except per share data.

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                             ------------------------------------------------------
                                               1999        1998       1997       1996       1995
                                             ---------   --------   --------   --------   ---------
<S>                                          <C>         <C>        <C>        <C>        <C>
INCOME STATEMENT DATA:
Net revenue................................  $ 521,196   $445,112   $439,472   $502,830   $ 586,437
Cost of service............................    408,878    326,736    309,693    348,247     440,025
                                             ---------   --------   --------   --------   ---------
  Gross profit.............................    112,318    118,376    129,779    154,583     146,412
Operating expenses:
  Selling, general and administrative
     expenses..............................     96,809     83,337     86,457     97,981     124,141
  Provision for estimated uncollectible
     accounts..............................     28,310     14,845     14,983     27,327      66,933
  Amortization of goodwill.................     10,784     11,139     13,586     15,259      15,307
  Restructuring costs, net(1)..............      5,831     (3,900)        --         --       6,158
  Charge for long-lived assets and acquired
     receivables:
     Goodwill and other long-lived
       assets(2)...........................      9,100         --         --         --     166,373
     Valuation of acquired
       receivables(3)......................         --         --         --         --      37,000
  Provision for (income from) litigation
     settlements(4)........................         --         --   (156,792)    27,875          (7)
                                             ---------   --------   --------   --------   ---------
          Total operating expenses.........    150,834    105,421    (41,766)   168,442     415,905
                                             ---------   --------   --------   --------   ---------
Operating income (loss)....................    (38,516)    12,955    171,545    (13,859)   (269,493)
  Interest income..........................        655      1,086      2,236      1,486       1,494
  Interest expense(5)......................    (29,763)   (32,734)   (75,026)   (78,767)    (49,740)
  Gains on sales of businesses(6)..........         --      1,071     26,744         --          --
  Termination fee(7).......................         --         --     15,182         --          --
  Other income (expense), net..............        740       (266)     1,517      2,114      (2,119)
                                             ---------   --------   --------   --------   ---------
Income (loss) from continuing operations
  before income taxes and minority
  interests................................    (66,884)   (17,888)   142,198    (89,026)   (319,858)
  Income tax expense (benefit).............        440      2,300      7,550    (13,998)    (11,154)
  Minority interest in net income of
     consolidated joint ventures...........      1,470      1,399      7,283      7,698      10,964
                                             ---------   --------   --------   --------   ---------
Income (loss) from continuing operations
  after income taxes and minority
  interests................................    (68,794)   (21,587)   127,365    (82,726)   (319,668)
Discontinued Operations:
  Loss from operations.....................    (28,411)      (108)    (2,105)    (2,288)    (14,381)
  Loss from disposal.......................    (17,618)        --         --         --          --
                                             ---------   --------   --------   --------   ---------
Net income (loss)..........................  $(114,823)  $(21,695)  $125,260   $(85,014)  $(334,049)
                                             =========   ========   ========   ========   =========
Earnings per share:
  Basic
     Income (loss) from continuing
       operations..........................  $   (1.39)  $  (0.44)  $   2.68   $  (1.99)  $   (8.04)
     Loss from discontinued operations.....      (0.93)     (0.00)     (0.04)     (0.06)      (0.36)
                                             ---------   --------   --------   --------   ---------
     Net income (loss).....................  $   (2.32)  $  (0.44)  $   2.64   $  (2.05)  $   (8.40)
                                             =========   ========   ========   ========   =========
  Diluted
     Income (loss) from continuing
       operations..........................  $   (1.39)  $  (0.44)  $   2.34   $  (1.99)  $   (8.04)
     Loss from discontinued operations.....      (0.93)     (0.00)     (0.04)     (0.06)      (0.36)
                                             ---------   --------   --------   --------   ---------
     Net income (loss).....................  $   (2.32)  $  (0.44)  $   2.30   $  (2.05)  $   (8.40)
                                             =========   ========   ========   ========   =========
BALANCE SHEET DATA:
Cash and cash equivalents..................  $   6,242   $     53   $108,950   $ 15,375   $  26,735
Working capital (deficit)..................     38,508     66,261    (11,620)  (132,529)     37,422
Total assets...............................    403,222    421,029    515,252    543,795     679,004
Long-term debt, net of current
  portion(8)...............................    302,662    242,162    150,428    266,641     439,309
Stockholders' equity (deficit).............    (21,699)    92,857    125,026    (21,842)     18,040
</TABLE>

                                       20
<PAGE>   22

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

     Earnings per common share amounts prior to 1997 have been restated 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. The financial data prior to 1999 has been restated to conform with
the 1999 presentation.

(1) In 1998, it was determined that the original reserve established in 1994 as
    a result of the Four Way Merger, the "Coram Consolidated Plan" was
    substantially complete and the reserve was reversed. In 1999, Coram
    initiated two company-wide restructuring plans and charged $5.8 million to
    operations as restructure charges. These plans resulted in the closing of
    facilities and a reduction of personnel. See Note 7 to the company's
    Consolidated Financial Statements.

(2) 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. In 1999, Coram recorded an
    additional $9.1 million charge as a result of impairment of goodwill and
    other assets.

(3) In 1995, Coram reduced the valuation of the acquired receivables related to
    the home infusion business acquired from Caremark International, Inc. and
    Caremark Inc. 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.

(4) 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 home infusion business
    in 1995.

(5) Interest expense increased significantly in 1995 due to increased borrowings
    to finance the acquisition of the Caremark home infusion business and other
    acquisitions, merger costs and other working capital requirements, as well
    as the related amortization of deferred financing costs and warrants.
    Interest expense decreased significantly in 1998 and 1999 due to a repayment
    of the company's former senior credit facility and a restructuring of its
    subordinated debt. The 1999 decrease was assisted by the forbearance of
    interest from November 15, 1999 through the earlier of (i) resolution of the
    litigation with Aetna or (ii) May 15, 2000, offset by an increase in the
    principal amount of the debt and an increase in the interest rate charged on
    the Series A notes, beginning in April 1999.

(6) In 1998 and 1997, Coram sold its lithotripsy business to Integrated Health
    Services and recorded a gain on sale of $0.7 million and $26.7 million,
    respectively.

(7) In 1997, the company received $21.0 million from the termination of a merger
    agreement with Integrated Health Services pursuant to which Integrated
    Health Services would have acquired Coram. As a result, the company recorded
    other income of $15.2 million, representing the $21.0 million termination
    fee less related costs.

(8) On October 13, 1995, two major lenders of the company, who issued credit in
    connection with the acquisition of the Caremark home infusion 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 $0.4 million, $0.3 million, $150.2 million,
    $198.0 million, and $67.1 million at December 31, 1999, 1998, 1997, 1996,
    and 1995, respectively. In 1998, the company's debt instruments were
    restructured and the maturity dates were extended.

                                       21
<PAGE>   23

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

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations 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. The company's actual results may vary materially from the
forward-looking statements made in this report due to important factors,
including, but not limited to: the company's lack of profitability;
uncertainties associated with the outcomes of certain pending legal proceedings;
the company's significant level of outstanding indebtedness; the company's need
to obtain additional financing or equity; uncertainties associated with the
dilution that would occur if the company's existing debt holders exercise their
equity conversion rights; the company's limited liquidity; and the company's
dependence upon the prices paid by third party payers for the company's
services; and certain other factors, all of which are described in greater
detail later in this Item 7 under the caption "Risk Factors." 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

     General. During 1999, Coram and its subsidiaries were engaged in three
principal lines of business: alternate site (outside the hospital) infusion
therapy and related services, ancillary network management services, and
pharmacy benefit management and specialty mail-order pharmacy services. Other
services offered by Coram include centralized management, administrative and
clinical support for clinical research trials, medical informatics and
non-intravenous home health products such as durable medical equipment and
respiratory therapy services.

     Business Strategy. In December 1999, Coram announced that it was
repositioning its business to focus on its core alternate site infusion therapy
business and the clinical research and medical informatics business operated by
its subsidiary, CTI. Accordingly, Coram's primary business strategy is to focus
its efforts on the delivery of its core infusion therapies, such as nutrition,
anti-infective therapies, IVIG and coagulant and blood clotting therapies for
persons with hemophilia. To that end, Coram has established product managers
with dedicated sales, marketing and clinical resources aimed at expanding
Coram's growth in these areas. Coram has also implemented programs focused on
the reduction and control of cost of services and operating expenses, assessment
of poorly performing branches and review of branch efficiencies. Coram
management is also reviewing the way the company provides nursing care and is
implementing changes to its practices to maintain Coram's high level of patient
satisfaction and effective clinical results while reducing the actual number of
nursing visits. Furthermore, management throughout the company is continuing to
concentrate on reimbursement by emphasizing improved billing and cash
collections methods, continued assessment of systems support for reimbursement
and concentration of the company's expertise and managerial resources into
certain reimbursement locations.

     Meanwhile, Coram's other divisions, R-Net and CPS, are being either
liquidated or reviewed for divestiture. The liquidation of R-Net is taking place
in the proceedings that are currently pending in the United States Bankruptcy
Court for the District of Delaware. These proceedings originated in August 1999
following the filing of an involuntary bankruptcy petition against Coram
Resource Network, Inc. in such court. In August 1999, Coram announced that it
had hired an investment advisor to assist it in pursuing strategic alternatives
for CPS. An auction of the CPS division is currently in progress. If Coram is
not able to reach an agreement to sell CPS on terms and conditions that are
acceptable to Coram, Coram will retain CPS and explore its options.

                                       22
<PAGE>   24

     While management believes the implementation of its overall business
strategy has begun improving operating performance throughout the company, no
assurances can be given as to its ultimate success.

     Events that impacted Coram in 1999 or which may impact Coram in the future
include, but are not limited to, the termination of the Master Agreement with
Aetna and the related litigation, the Chapter 11 bankruptcy proceedings filed by
the Resource Network Subsidiaries and their anticipated liquidation, the
restructuring of the former credit facilities of Coram and the related reduction
of interest expense and the reorganization of the company's operating structure
and the related restructuring charge that was recorded during the fourth quarter
of 1999. Strategic alternatives and initiatives currently being implemented by
Coram include, among others: (i) renewed focus on the growth in sales of the
core therapies provided by the infusion division, (ii) the potential divestiture
of the CPS division, (iii) the continued investment into and development of
services provided by CTI, (iv) cost reduction initiatives and (v) cash
collections. Combined, management believes that success in the foregoing will
improve Coram's financial prospects and improve and stabilize relationships with
payers and referral sources. There can be no assurance that any other strategic
alternatives will be consummated or will be available to Coram on commercially
acceptable terms.

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

     (i)    the termination of the Master Agreement with Aetna effective June
            30, 1999 and the related litigation between Aetna and the company;

     (ii)   the Chapter 11 bankruptcy filings involving the Resource Network
            Subsidiaries and their anticipated liquidation through such
            proceedings;

     (iii)  restructure of the company's credit facilities through the repayment
            of its former senior credit facility in January 1998, the exchange
            of its former subordinated debt for the issuance of the Series A
            Notes and the Series B Notes in June 1998 and subsequent amendments
            and the establishment of the new senior credit facility in August
            1998;

     (iv)   expansion and improved sales efforts in the CPS division;

     (v)    reorganization of the company's operating structure resulting in
            charges primarily in the fourth quarter of 1999;

     (vi)   ongoing pricing pressure in the company's infusion business as a
            result of an unfavorable shift in payer mix from private indemnity
            insurers to managed care organizations and other contracted payers,
            and intense competition among infusion providers. The following
            table sets forth the approximate percentages of the company's
            infusion therapy net revenue from certain categories of payers for
            the years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                            YEAR ENDED DECEMBER 31,
                                            -----------------------
                                            1999     1998     1997
                                            -----    -----    -----
<S>                                         <C>      <C>      <C>
Private Indemnity Insurance and Other
  Non-Contracted Payers...................   20%      25%      27%
Managed Care Organizations and Other
  Contracted Payers.......................   58%      51%      45%
Medicare and Medicaid Program.............   22%      24%      28%
                                            ----     ----     ----
          Total...........................  100%     100%     100%
                                            ====     ====     ====
</TABLE>

     (vii)  increased competition from hospitals and physicians that 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 that have entered into risk-bearing relationships
            with third-party payers pursuant to which they have been delegated
            control over the provision of a wide variety of health care
            services, including the services offered by the company;

                                       23
<PAGE>   25

     (viii) a four day increase in the average number of days that elapse
            between the date that the company, either through its infusion
            therapy division or through CPS, provides services to a patient and
            the date that the company actually receives reimbursement for that
            service from the patient or the applicable third party payer; and

     (ix)   increased costs associated with providing certain infusion therapy
            services offered by Coram, including increased costs for clinical
            staffing, product delivery, on-call personnel and other volume
            related costs associated with such therapies combined with increased
            costs for certain blood and blood derivative products that are in
            short supply and an increase in the number of patients receiving
            such therapies.

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,
                                                              ------------------------
                                                               1999     1998     1997
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Net revenue.................................................  100.0%   100.0%   100.0%
Cost of service.............................................   78.4     73.4     70.5
                                                              -----    -----    -----
Gross profit................................................   21.6     26.6     29.5
Operating expenses:
  Selling, general and administrative expenses..............   18.5     18.8     19.7
  Provision for estimated uncollectible accounts............    5.4      3.3      3.4
  Amortization of goodwill..................................    2.1      2.5      3.1
  Restructuring costs, net..................................    1.1     (0.9)      --
  Goodwill and other long-lived assets charge...............    1.7       --       --
  Income from litigation settlement.........................     --       --    (35.7)
                                                              -----    -----    -----
          Total operating expenses..........................   28.9     23.7     (9.5)
                                                              -----    -----    -----
Operating income (loss).....................................   (7.3)     2.9     39.0
Other income (expenses):
  Interest income...........................................    0.1      0.2      0.5
  Interest expense..........................................   (5.7)    (7.3)   (17.1)
  Termination fee...........................................     --       --      3.5
  Gains on sales of businesses..............................     --      0.1      6.1
  Loss on sale of property and equipment....................     --     (0.1)      --
  Other income (expense), net...............................    0.1       --      0.4
                                                              -----    -----    -----
Income (loss) from continuing operations before income taxes
  and minority interests....................................  (12.8)    (4.0)    32.4
  Income tax expense........................................    0.1      0.5      1.7
  Minority interests in net income of consolidated joint
     ventures...............................................    0.3      0.3      1.7
                                                              -----    -----    -----
Income (loss) from continuing operations after income taxes
  and minority interests....................................  (13.2)%   (4.8)%   29.0%
Discontinued Operations:
  Loss from operations......................................   (5.5)    (0.1)    (0.5)
  Loss from disposal........................................   (3.4)      --       --
                                                              -----    -----    -----
          Net income (loss).................................  (22.1)%   (4.9)%   28.5%
                                                              =====    =====    =====
</TABLE>

                                       24
<PAGE>   26

  1999 Compared to 1998

     Discontinued Operations. As discussed in Note 3 to the company's
Consolidated Financial Statements, the company restated prior year results due
to the discontinuance of R-Net in 1999. Had R-Net been included in continuing
operations, the following would have been contributed to the company's
operations (in millions):

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                              -------------
                                                              1999    1998
                                                              -----   -----
<S>                                                           <C>     <C>
Net revenue.................................................  $77.3   $61.6
Gross (loss) profit.........................................   (8.0)   13.6
Operating loss..............................................  (46.0)   (0.1)
</TABLE>

The following discussion of the results achieved in 1999 compared with the
results achieved in 1998 excludes the discontinued operations for R-Net to
provide for conformity of the periods presented.

     Consolidated Net Revenue from Continuing Operations. Net revenue increased
$76.1 million or 17.1% from $445.1 million in 1998 to $521.2 million in 1999.
The net revenue increase can be attributed to i) an increase in infusion therapy
business of $36.1 million resulting primarily from an 8.9% increase in net
revenue per patient; and ii) a $38.8 million increase in the CPS division
resulting from expansion of services and improved sales efforts.

     Consolidated Gross Profit from Continuing Operations. Gross profit
decreased $6.1 million from $118.4 million or a gross margin of 26.6% in 1998 to
$112.3 million or a gross margin of 21.6% in 1999. The gross margin percent
decrease is due to a shift in favor of therapies with higher costs of service
partially offset by a gross margin improvement in the CPS division.

     Consolidated Selling, General and Administrative ("SG&A") Expenses. SG&A
increased $13.5 million or 16.2 % from $83.3 million in 1998 to $96.8 million in
1999. Of this increase, $5.5 million was related to the expansion of the CPS
division. The remaining increase was related to an increase in personnel costs
in the normal course of business.

     Provision for Estimated Uncollectible Accounts. The provision for estimated
uncollectible accounts was $14.8 million or 3.3 % of net revenue in 1998
compared to $28.3 million or 5.4 % of net revenue in 1999. The increase is due
primarily to charges taken by the company in December 1999 relating to certain
receivables due from R-Net of $2.5 million and other charges of $11.2 million,
relating to certain accounts that have aged over 360 days that are no longer
deemed collectible, and receivables due from other health care providers or
payers that have filed for protection under applicable bankruptcy or
receivership laws.

     Restructuring Costs, Net. During 1999, Coram recorded pre-tax charges of
$5.8 million for estimated costs related to the Field Reorganization Plan and
the Coram Restructure Plan. Coram substantially completed the consolidation
plans reserved for in 1994 and 1995 and reversed restructure charges of $3.9
million in 1998. See Note 7 to the company's Consolidated Financial Statements.

     Goodwill and Other Long-Lived Asset Charge. During 1999, Coram recognized
impairment on goodwill and other assets of $9.1 million. The goodwill impairment
charge was taken primarily because of the operating losses of certain infusion
business branches that resulted following the termination of agreements with
Aetna, the discontinuance of R-Net, and other factors. The amount of the
impairment charge was determined using forecasted discounted cash flows of those
branches with indications of potential impairment of allocated long-lived
assets. The forecasted cash flows were based on budgeted Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) with an effective 8%
growth rate. Additionally a 10% discount rate was used.

     Consolidated Operating Income. Coram recorded operating income of $13.0
million for 1998 compared to an operating loss of $38.5 million for 1999. The
decrease is due primarily to charges of $28.6 million and an increase in SG&A
expense and the decrease in gross profit margin noted above.

                                       25
<PAGE>   27

     Interest Expense. Interest expense decreased by $2.9 million or 9.1%, from
$32.7 million in 1998 to $29.8 million in 1999 due primarily to decreases of
$14.9 million resulting from the completion of the restructuring of the
company's former credit facilities, offset by an increase of $3.0 million
attributable to draws of $44 million on the senior credit facility, an increase
in the principal amounts outstanding under the Series A and Series B Senior
Subordinated Unsecured Notes as a result of PIK interest payments and an
increase in the interest rate on the Series A Notes. See Notes 4 and 9 to the
company's Consolidated Financial Statements.

     Gains On Sales of Businesses. In 1998, the company recorded a gain on the
sale of business of $0.7 million in connection with the sale of the remaining
component of its lithotripsy business.

     Income Tax Expense. During 1999, Coram recorded income tax expense of $0.4
million compared to $2.3 million in 1998. The 1998 income tax expense is related
to a change in estimate related to the IRS examination described in Item 3
"Legal Proceedings."

     Consolidated Net Loss from Continuing Operations. During 1999, Coram
recognized a net loss of $68.8 million compared to a net loss of $21.7 million
for 1998. As discussed above, the increase in net loss is primarily due to the
operating loss offset by a decrease in interest expense and income tax expense
in 1999.

     Operating Loss from Discontinued Operations. During December 1999, as a
result of the bankruptcy proceeding pending against the Resource Network
Subsidiaries, Coram reclassified the operating losses of this division for all
prior periods presented to discontinued operations. See Note 3 to the company's
Consolidated Financial Statements.

     Loss on Discontinued Operations. During 1999, Coram recorded charges in the
aggregate amount of $17.6 million relating to severance, lease obligations,
asset impairment, legal costs related to the bankruptcy and wind-down of
operations of R-Net. See Note 3 to the company's Consolidated Financial
Statements.

  1998 Compared to 1997

     Sale of Lithotripsy Business. As discussed in Note 5 to the company's
Consolidated Financial Statements, Coram sold substantially all of its
lithotripsy business in 1997. The lithotripsy business provided the following to
the company's operations (in millions):

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                              ------------
                                                              1998   1997
                                                              ----   -----
<S>                                                           <C>    <C>
Net revenue.................................................  $0.7   $37.3
Gross profit................................................   0.4    23.5
Operating income............................................   0.4    17.6
</TABLE>

     Discontinued Operations. As discussed in Note 3 to the company's
Consolidated Financial Statements, the company restated prior year results for
the discontinuance R-Net in 1999. Had R-Net been included in the continuing
operations, the following would have been contributed to Coram's operations (in
millions):

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                              -------------
                                                              1998    1997
                                                              -----   -----
<S>                                                           <C>     <C>
Net revenue.................................................  $61.6   $20.3
Gross profit................................................   13.6     5.8
Operating loss..............................................   (0.1)   (2.1)
</TABLE>

The following discussion of Coram's financial condition and results of
operations during 1998 and 1997 includes separate disclosure of the impact of
the lithotripsy business and is restated to exclude the discontinued operations
for R-Net for conformity of the periods presented.

     Consolidated Net Revenue from Continuing Operations. Net revenue increased
$5.6 million or 1.3% from $439.5 million in 1997 to $445.1 million in 1998. The
increase in Net Revenue Excluding the Lithotripsy

                                       26
<PAGE>   28

Business of $42.3 million was offset by a decline in net revenue as a result of
the sale of the lithotripsy business, as noted above.

     Net Revenue Excluding the Lithotripsy Business. Net revenue increased $42.3
million or 10.5%, from $402.2 million in 1997 to $444.5 million 1998. The net
revenue increase can be attributed to i) an increase in alternate site infusion
therapy business of $23.0 million resulting primarily from an increase in
patient census of 4.0%; and ii) a $19.5 million increase in the CPS division
resulting from expansion of services and improved sales efforts.

     Consolidated Gross Profit from Continuing Operations. Gross profit
decreased $11.4 million from $129.8 million or a gross margin of 29.5% in 1997
to $118.4 million or a gross margin of 26.6% in 1998. The increase in Gross
Profit Excluding the Lithotripsy Business of $11.7 million was offset by a
reduction due to the sale of the lithotripsy business of $23.1 million. The
gross margin percent decrease is due to the sale of the lithotripsy business
which had a higher gross margin percentage than the other lines of business in
1998.

     Gross Profit Excluding the Lithotripsy Business. Gross profit increased
$11.7 million from $106.3 million or a gross margin of 26.4% in 1997 to $118.0
million or a gross margin of 26.5% in 1998. The increase results primarily from
the increase in net revenue noted above.

     Consolidated Selling, General and Administrative ("SG&A") Expenses. SG&A
decreased $3.2 million or 3.6% from $86.5 million in 1997 to $83.3 million in
1998. The sale of the Lithotripsy Business contributed to a $3.2 million
decrease offsetting the increase noted in S G&A Expenses Excluding the
Lithotripsy Business.

     SG&A Expenses Excluding the Lithotripsy Business. There was a minimal
increase in SG&A from $83.2 million in 1997 to $83.3 million in 1998.

     Provision for Estimated Uncollectible Accounts from Continuing
Operations. The provision for estimated uncollectible accounts was $15.0 million
or 3.4% of net revenue in 1997 compared to $14.8 million or 3.3% of net revenue
in 1998. The decrease is due primarily to the company's continuing concentration
on collection efforts and an increase in the capitated portion of net revenue in
1998. The sale of the lithotripsy business did not have a material impact on the
decrease.

     Consolidated Amortization of Goodwill. Amortization of goodwill decreased
$2.5 million from $13.6 million in 1997 to $11.1 million in 1998 due to the sale
of the lithotripsy business which had $2.6 million of goodwill amortization in
1997.

     Amortization of Goodwill Excluding the Lithotripsy Business. Amortization
of goodwill increased $0.1 million from $11.0 million in 1997 to $11.1 million
in 1998. The increase in amortization is due to the minimal acquisition activity
that occurred in 1998.

     Restructuring Costs, Net. The company substantially completed the
consolidation plans reserved for in 1994 and 1995 and reversed restructure
charges of $3.9 million in 1998. See Note 7 to the company's Consolidated
Financial Statements.

     Provision for (Income from) Litigation Settlement. During 1997, Coram
recorded income from litigation settlement, net of related costs, of $156.8
million in connection with the settlement of a lawsuit against Caremark
resulting from the purchase of the Caremark Business in 1995. See Notes 4 and 13
to the company's Consolidated Financial Statements.

     Consolidated Operating Income (Loss) from Continuing Operations. Coram
recorded operating income of $171.5 million for 1997 compared to $13.0 million
for 1998. The decrease is primarily due to the litigation settlement in 1997 of
$156.8 million and the sale of the lithotripsy business which had $17.6 million
of operating income in 1997.

     Operating Income Excluding the Lithotripsy Business. Coram recorded
operating income of $154.0 million for 1997 compared to $12.6 million for 1998.
The decrease is due primarily to non-recurring income of $156.8 million from the
settlement of the Caremark lawsuit offset by the growth of operations in 1998 of
$13.5 million.

                                       27
<PAGE>   29

     Interest Expense. Interest expense decreased by $42.3 million or 56.4%,
from $75.0 million in 1997 to $32.7 million in 1998 due primarily to decreases
of: (i) $24.1 million resulting from the completion of the restructuring of the
company's former credit facilities; (ii) $4.8 million related to the
payment-in-kind notes issued in 1995 in connection with the acquisition of the
Caremark business and forgiven in June 1997 as part of the settlement of the
Caremark lawsuit; and (iii) $9.3 million resulting from the payment and
termination of the former senior credit facility. See Notes 4 and 9 to the
company's Consolidated Financial Statements.

     Gains On Sales of Businesses. In 1997, Coram 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 Note 6 to the company's Consolidated Financial
Statements.

     Termination Fee. Coram recorded termination fee income, net of related
costs, of $15.2 million in 1997 in connection with the termination of the
proposed merger with Integrated Health Services. See Note 5 to the company's
Consolidated Financial Statements.

     Income Tax Expense. During 1998, Coram recorded income tax expense of $2.3
million compared to $7.6 million in 1997. The 1997 income tax expense is related
to the gain on the sale of the lithotripsy business and income from settlement
of the Caremark Lawsuit.

     Consolidated Net Income (Loss) from Continuing Operations. During 1998,
Coram recognized a net loss of $21.6 million compared to net income of $127.4
million for 1997. In addition to the explanation of the change noted below, the
lithotripsy business contributed $11.7 million of net income in 1997.

     Net Income (Loss) from Continuing Operations Excluding the Lithotripsy
Business. During 1998, Coram recognized a net loss of $21.9 million compared to
net income of $115.6 million for 1997. The change in net income is primarily due
to income from litigation settlement, gain on sale of business and termination
fee totaling $198.7 million in 1997 offset by an increase in operating income
before income from litigation settlement of $13.5 million and a reduction of
1998 expenses for interest of $42.3 million and income taxes of $5.3 million.

     Operating Loss from Discontinued Operations. During December 1999, as a
result of the bankruptcy proceedings pending against the Resource Network
Subsidiaries, the company reclassified the operating losses of this division for
all prior periods presented to discontinued operations. See Note 3 to the
company's Consolidated Financial Statements.

                                       28
<PAGE>   30

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>
                                            1999 QUARTER ENDED                          1998 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....................  $134,338   $132,939   $129,571   $124,348   $127,710   $113,933   $105,552   $ 97,917
Cost of service................   108,638    102,370    101,150     96,720     92,682     84,522     77,846     71,686
                                 --------   --------   --------   --------   --------   --------   --------   --------
Gross profit...................    25,700     30,569     28,421     27,628     35,028     29,411     27,706     26,231
Operating expenses:
  Selling, general and
    administrative Expenses....    30,718     23,538     23,612     18,941     24,562     20,209     19,397     19,169
  Provision for estimated
    uncollectible accounts.....    16,431      3,690      4,141      4,048      4,170      3,608      3,468      3,599
  Amortization of goodwill.....     2,625      2,711      2,716      2,732      2,802      2,794      2,778      2,765
  Restructuring costs, net.....     4,881         --         --        950     (3,900)        --         --         --
  Goodwill and other long-lived
    asset charge...............     9,100         --         --         --         --         --         --         --
                                 --------   --------   --------   --------   --------   --------   --------   --------
        Total operating
          expense..............    63,755     29,939     30,469     26,671     27,634     26,611     25,643     25,533
                                 --------   --------   --------   --------   --------   --------   --------   --------
Operating income (loss)........   (38,055)       630     (2,048)       957      7,394      2,800      2,063        698
Other income (expenses):
  Interest income..............       140        216        244         55        133        299        213        441
  Interest expense.............    (7,570)    (8,110)    (7,524)    (6,559)    (6,362)    (6,114)    (6,083)   (14,175)
  Gains (losses) on sales of
    businesses.................        --         --         --         --         25         --        746        300
  Other income (expense),
    net........................       307        355        (70)       148       (386)       105        (18)        33
                                 --------   --------   --------   --------   --------   --------   --------   --------
Income (loss) from continuing
  operations before income
  taxes and minority
  interests....................   (45,178)    (6,909)    (9,398)    (5,399)       804     (2,910)    (3,079)   (12,703)
  Income tax expense...........        65        125        175         75        450        450        400      1,000
  Minority interest in net
    income of Consolidated
    joint ventures.............       287        176        579        428        425        261        302        411
                                 --------   --------   --------   --------   --------   --------   --------   --------
Income (loss) from continuing
  operations after income taxes
  and minority interests.......   (45,530)    (7,210)   (10,152)    (5,902)       (71)    (3,621)    (3,781)   (14,114)
Discontinued Operations:
  Income (loss) from
    operations.................     1,870     (7,957)   (27,841)     5,517        877        772       (747)    (1,010)
  Loss from disposal...........   (17,618)        --         --         --         --         --         --         --
                                 --------   --------   --------   --------   --------   --------   --------   --------
Net income (loss)..............  $(61,278)  $(15,167)  $(37,993)  $   (385)  $    806   $ (2,849)  $ (4,528)  $(15,124)
                                 ========   ========   ========   ========   ========   ========   ========   ========
Earnings (loss) per common
  share........................  $  (0.91)  $  (0.15)  $  (0.21)  $  (0.12)  $   0.00   $  (0.07)  $  (0.08)  $  (0.29)
                                 ========   ========   ========   ========   ========   ========   ========   ========
Earnings per share:
  Basic
    Income (loss) from
      continuing operations....  $  (0.91)  $  (0.15)  $  (0.21)  $  (0.12)  $   0.00   $  (0.07)  $  (0.08)  $  (0.29)
                                 --------   --------   --------   --------   --------   --------   --------   --------
    Income (loss) from
      discontinued
      operations...............     (0.32)     (0.16)     (0.56)      0.11       0.02       0.02      (0.02)     (0.02)
                                 --------   --------   --------   --------   --------   --------   --------   --------
Net income (loss)..............  $  (1.23)  $  (0.31)  $  (0.77)  $  (0.01)  $   0.02   $  (0.05)  $  (0.10)  $  (0.31)
                                 ========   ========   ========   ========   ========   ========   ========   ========
  Diluted
    Income (loss) from
      continuing operations....  $  (0.91)  $  (0.15)  $  (0.21)  $  (0.12)  $   0.00   $  (0.07)  $  (0.08)  $  (0.29)
                                 --------   --------   --------   --------   --------   --------   --------   --------
    Income (loss) from
      discontinued
      operations...............     (0.32)     (0.16)     (0.56)      0.11       0.02       0.02      (0.02)     (0.02)
                                 --------   --------   --------   --------   --------   --------   --------   --------
Net income (loss)..............  $  (1.23)  $  (0.31)  $  (0.77)  $  (0.01)  $   0.02   $  (0.05)  $  (0.10)  $  (0.31)
                                 ========   ========   ========   ========   ========   ========   ========   ========
</TABLE>

     The quarterly results have historically varied based upon unusual and
infrequently occurring charges. See Note 15 to the company's Consolidated
Financial Statements.

                                       29
<PAGE>   31

LIQUIDITY AND CAPITAL RESOURCES

     Overview. Coram uses cash generated from operations and cash available
credit under its new senior credit facility to fund its working capital
requirements and operations. Coram's working capital as of December 31, 1999 was
$38.5 million compared to $66.3 million at December 31, 1998, a decrease of
$27.8 million. During the twelve months ended December 31, 1999, the primary
change in current assets related to (i) an increase in cash and cash equivalents
of $6.2 million; (ii) an increase in net accounts receivable of $8.5 million,
primarily due to an approximate four day increase in days sales outstanding
(DSO) and additional sales volume at the CPS division offset by an increase in
allowance for doubtful accounts of $16.2 million; and (iii) a decrease in
inventory of $4.2 million. The increase in cash and cash equivalents was
primarily due to borrowings, net of repayments, on the new senior credit
facility. Cash was expended to acquire property and equipment for $2.5 million
of computer systems and software, $1.8 million for furniture, equipment, and
improvements, and the purchase of durable medical equipment for $2.6 million.
Total current liabilities increased in the twelve months ended December 31, 1999
primarily due to an increase in the net liability of discontinued operations of
$25.8 million, an increase in accounts payable of $8.1 million primarily
associated with an increase in days payable outstanding and an increase in
accrued merger and restructuring costs of $3.5 million. Of the total net
liability of discontinued operations, $31.5 million is related to the Aetna
Master Agreement and the other liabilities associated with the obligations being
addressed in the bankruptcy proceedings involving the Resource Network
Subsidiaries. At this time, Coram cannot estimate the ultimate amount that will
be paid to discharge these liabilities. This recorded liability has been
decreased by an amount equal to $14.5 million, the amount drawn by Aetna under
letters of credit issued by Coram under its new senior credit facility in
accordance with the Aetna Master Agreement.

     As of December 31, 1999, the company did not have any material commitments
for capital expenditures.

     Under the terms of the company's new senior credit facility, the maximum
available to Coram is an amount equal to the lesser of (a) the company's
borrowing base as calculated pursuant to the agreement or (b) the total
revolving credit commitment of $60.0 million. As of December 31, 1999, the
amount available to Coram was $60.0 million. As of such date, the company had
used $2.5 million for letters of credit and $44.0 million for revolver
borrowings, including $14.5 million relating to the letters of credit that had
been delivered to Aetna in accordance with the Master Agreement in 1998 and
drawn upon in 1999. As a result, the total available credit under the new senior
credit facility was $13.5 million as of December 31, 1999. As of March 16, 2000,
the amount available to Coram was also $60.0 million. Of that amount, $40.5
million had been drawn as revolver borrowings and $2.5 million in letters of
credit, leaving $17.0 million available as of March 16, 2000.

     As of December 31, 1999, the company was not in compliance with certain
financial and other covenants set forth in its principal debt agreements. Coram
received waivers with regard to such non-compliance. In addition, Coram's
lenders have waived non-compliance with certain covenants under the new senior
credit facility through the period ending December 31, 2000. There can be no
assurance as to whether other covenant violations or defaults will occur in
future periods and whether any necessary waivers will be forthcoming at that
time. The company also entered into the Amendment Three and Forbearance in
respect of the Securities Exchange Agreement, dated as of November 15, 1999,
whereby no interest would be due on the Series A and Series B Notes for the
period from November 15, 1999 through the earlier of (i) final resolution of the
litigation with Aetna or (ii) May 15, 2000.

     As previously stated, Coram is in a dispute with the IRS regarding certain
tax refunds previously received by the company. Should it not prevail in the
majority of the issues in dispute, Coram would need to access funds that could
be in excess of $12.7 million. Furthermore, Coram cannot predict the outcome of
the R-Net bankruptcy proceedings or the Aetna litigation. Outcomes unfavorable
to the company or unknown additional actions could require Coram to need access
to significant additional funds. See Item 3. "Legal Proceedings."

     Coram has experienced pressure on liquidity due to the higher than expected
costs of service as described above with respect to the Aetna Master Agreement
and Aetna's draws on letters of credit that increased outstanding debt by $14.5
million. Although the company has sought to record a good faith estimate of all
service costs related to the Aetna Master Agreement, due to the uncertainties of
litigation, there can be no assurance that the exact amount and nature of all
such costs can be presently identified. Coram is continuing to assess the impact
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<PAGE>   32

of the Aetna Master Agreement. Coram has reviewed its business plan for
operations in light of the termination of the Aetna Master Agreement, the
liquidation of R-Net and the potential sale of the CPS division. Coram's
business plan does not provide for financial results that would guarantee
sufficient liquidity to discharge debt obligations coming due in Fiscal 2001 or
guarantee payment of cash interest on debt during Fiscal 2000.

     Coram is currently in discussions with the holders of the Series A and
Series B Notes regarding additional restructuring of the Series A and Series B
Notes. Such restructuring would likely include a conversion of a material
portion of this debt to some form and amount of equity. The amount, form and
timing of any conversion cannot be predicted at this time. The company cannot
guarantee that any restructuring agreement or other agreement providing for
additional funds to the company will be reached.

     Working Capital. In comparing the year end 1999 with 1998, the primary
changes of current assets were: an increase in cash of $6.2 million due
primarily to borrowings, net of payments, on the New Senior Credit Facility of
$44.0 million offset by purchases of property and equipment of $6.9 million and
use of cash in operating activities of $10.5 million; an increase in accounts
receivable of $8.5 million due to increases in sales volume and days sales
outstanding; and a decrease in inventories of $4.2 million due to inventory
management precedures. Significant property and equipment purchases of
approximately $0.9 million were made for the R-Net offices for office equipment
and furniture, communications systems and software, computer systems and
software to service major business agreements; and the purchase of medical pumps
and durable medical equipment for $2.6 million to service Coram's infusion
operations.

     Total current liabilities changed in 1999 primarily due to: an increase in
accounts payable of $8.1 million primarily due to an increase in days payable
outstanding, and other current liabilities of $30.0 million primarily due to
current net liabilities of discontinued operations associated with the R-Net
discontinued operations.

     Part A and Part B Medicare Surety Bonds. As previously discussed under Item
1. Government Regulation, HCFA is reviewing the bonding requirements for
providers of home health services and suppliers of durable medical equipment, as
a condition of their participation in Part A and Part B of the Medicare program,
respectively. The compliance date for having the necessary bonds in place will
be sixty days after the publication of the final rule. The company has estimated
that it would be required to obtain bonds in the minimum face amount of
approximately $11.5 million, if and when such regulations are finalized. Such
amounts may be funded in whole or in part through cash generated from operations
or the new senior credit facility. Any use of the new senior credit facility
could reduce amounts available under this facility to fund other company capital
requirements. In addition, depending upon the final regulations, the company may
be able to establish letters of credit for the bonding requirement in whole or
in part, however, such compliance would reduce any available amounts of capital
under the new senior credit facility to fund other capital requirements. Coram
also believes that another potential source for meeting a bonding requirement
would be to obtain bonds through a qualified insurance carrier. No assurance can
be given that capital generated by operations, or funds under the new senior
credit facility, or coverage from an insurance carrier will be available at a
reasonable cost to satisfy these requirements, if finalized.

     Accounts Receivable -- Recent Trends, Conditions and Impact. Coram
maintains systems and processes to collect its accounts receivable as quickly as
possible after the underlying service is rendered. Nevertheless, the spread
between collection of payment for service and the company's payment for
salaries, supplies and overhead to that service exceeds 40 days. As such, as
Coram grows its revenue, the need for working capital increases. As a result,
due to the timing difference between cash received from the growth in sales and
disbursement of cash to pay the expense associated with these sales, the amount
of cash generated from accounts receivable may not be sufficient to cover
expenses associated with the growth of the business. The use of the new senior
credit facility to fund operations would make less capital available to capital
requirements under current financing arrangements. If Coram incurs a significant
increase in its days outstanding of accounts receivable, the borrowing base
under the terms of the new senior credit facility could be reduced, which in
turn would reduce the amount of available credit under the facility.

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<PAGE>   33

YEAR 2000 ISSUES

     In 1998, Coram formed a team to identify year 2000 problems. They developed
and implemented a plan that included inventory, assessment, remediation, testing
and contingency planning. The company experienced no significant disruptions as
a result of the year end date change. Coram intends to monitor other critical
dates in the future, such as quarter-end dates. The company used internal and
external resources to reprogram or replace, test and implement the software and
equipment modifications required under this project. The total cost of the year
2000 project has been approximately $0.8 million to date. No further significant
costs are expected at this time.

     The impact of the Year 2000 issues on the company will continue to depend
on the way the issues have been addressed by third parties that provide services
to the company. To date, Coram has not been adversely impacted to any
significant extent by the failure of third parties to address year 2000 issues.

     Coram has developed contingency plans to address risks associated with year
2000 issues that may arise. There can be no assurance that these plans will
fully mitigate any problems, if any arise.

     The foregoing year 2000 discussions constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Readiness and Disclosure Act of
1998.

RISK FACTORS

  Coram has not been profitable and may not become profitable, in which event
  its business and stock price could be adversely affected.

     During the two years ended December 31, 1999, Coram has generated a
cumulative net loss of $136.5 million. Numerous factors have affected Coram's
performance and financial condition to date, including, among others (i) ongoing
pricing pressure in Coram's infusion therapy business as a result of a
continuing shift in payer mix from private indemnity insurance to managed care
and governmental payers and intense competition among infusion providers; (ii)
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 Coram; and (iii) increased competition from
hospitals and physicians which have entered into risk bearing relationships with
third-party payers pursuant to which they have been delegated control over the
provision of a wide variety of health care services, including the services
offered by Coram. There can be no assurance that the foregoing factors will not
continue to have an adverse effect on the company's financial condition and
results of operations in the future.

  The outcome of pending legal proceedings could adversely effect Coram's
  business.

     As described in Item 3. Legal Proceedings, Coram is involved in several
legal disputes, including two material legal disputes. One such dispute is the
lawsuit with Aetna over the operation and termination of the Master Agreement
that was executed with Aetna in 1998. In the litigation, which is on the court's
April 2000 trial calendar, Coram is seeking damages in the amount of $45.0
million or more and Aetna is seeking damages of $133 million or more. The other
dispute centers around the company's federal income tax return filed for its tax
year ended September 30, 1995. In a case presently pending in Tax Court, the
Internal Revenue Service (the "IRS") has claimed that Coram must pay more than
$12.7 million in back tax adjustments plus interest and penalties. Coram
disagrees with the position taken by the IRS.

     Event though Coram intends to pursue its claims and defend itself
vigorously in these matters, the company can not predict the outcome of either
of these matters due to the uncertainties inherent in litigation. If Coram does
not prevail in either or both of these matters, the financial condition, results
of operations and liquidity of the company may be materially adversely affected.

  Operations may be adversely affected by the significant outstanding
  indebtedness.

     At December 31, 1999, Coram had $91.5 million principal outstanding in the
form of Series B Notes at 8.0% interest, and $166.8 million principal
outstanding in the form of Series A Notes at 11.5% interest. The

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<PAGE>   34

company also had $44.0 million outstanding under its senior credit facility at
an interest rate of 10% as of December 31, 1999. This indebtedness may make the
company more vulnerable to economic downturns, competitive and payer pricing
pressures, adverse changes in government regulation or other adverse events or
circumstances. In addition, the lenders, pursuant to the new senior credit
facility and the Series B Notes are entitled to the benefits of various
restrictive covenants, and their consent is required to be obtained for the
company to engage in various activities and transactions. This consent could be
withheld which could adversely effect the operations of the company. See Item 7.
"Liquidity and Capital Resources." and Note 9 to the company's Consolidated
Financial Statements.

  Coram will require additional financing and it may not be able to obtain
  additional financing.

     Coram's Fiscal 2000 business plan does not provide for financial results
that would guarantee sufficient liquidity to discharge debt obligations coming
due in Fiscal 2001. Without sufficient revisions to Coram's existing debt
agreements, there can be no assurance that it will have sufficient liquidity to
continue to fund operations. At this time, Coram is not in discussions with any
financing sources other than the holders of its existing long term debt
instruments to replace or supply any future funding and the company can offer no
guarantees that these or any other parties would agree to a restructuring that
would provide future liquidity. See Note 9 to the company's Consolidated
Financial Statements.

  Coram will require additional equity in order to be able to avoid disruption
  in accepting referrals of certain patients from physicians who may own shares
  of Coram common stock.

     Coram has learned that certain physicians have, from time to time, owned
shares of its common stock. Under federal law, including certain provisions
contained in the Omnibus Budget Reconciliation Act of 1993 commonly know as the
Stark II law, the ownership of shares in a health care services provider is a
financial relationship subject to federal regulation. For example, the Stark II
law prohibits a physician from making Medicare or Medicaid referrals for certain
"designated health services," including durable medical equipment, parenteral
and enteral nutrition therapy and outpatient prescription drugs, to entities
with which the physician or an immediate family member has a financial
relationship, unless an exception to the law is available. Referrals to Coram
for designated health services after January 1, 2001 by physicians who own Coram
stock will be protected by an exception under Stark II for publicly traded
corporations if Coram's stockholder equity at December 31, 2000 is $75.0
million, or if Coram has had average stockholder equity of $75.0 million during
the preceding three (3) years. Absent such protection, Coram would, before
accepting a referral, be required to determine whether the physician (or an
immediate family member) owns Coram stock and could not accept referrals where
such ownership was present. Therefore, absent a significant increase in
stockholder equity, Coram may fail to meet the Stark II exception for the
publicly-traded corporations. Failure to meet this exception and operating
without the protection of the statutory exception under Stark II that Coram has
enjoyed in the past could be extremely onerous and could have a material adverse
impact on Coram's business or financial condition because of the costs and
uncertainties of compliance and Coram's inability to accept certain referrals
after January 1, 2001.

  Holders of Coram common stock may have their ownership interest diluted by the
  equity conversion rights held by existing debt holders.

     Cerberus Partners, L.P., Goldman Sachs Credit Partners, L.P. and Foothill
Capital Corporation (collectively, the "Series B Holders") are holders of the
Series B Notes, with an outstanding principal balance of $92.1 million as of
March 16, 2000. The Series B Notes mature April 2008, subject to the obligation
of Coram to offer to prepay all Series B Notes on the date of maturity of the
Series A Notes. The Series B Notes are currently convertible into shares of
common stock of Coram at a price of $2.00 per share. In addition, the Series B
Holders are holders of warrants to purchase more than 1.9 million shares of
common stock of the company at an exercise price of $.01 per share. Based upon
the number of shares of common stock currently outstanding, the Series B Holders
at a $2.00 conversion price beneficially own in the aggregate approximately
49.3% of the shares of Coram common stock. The Series B Holders would be in a
position to generally control the affairs of Coram as well as the outcome of
stockholder votes, including votes concerning the election of directors, the
adoption of amendments to Coram's Certificate of Incorporation or By-Laws and
the approval of significant corporate

                                       33
<PAGE>   35

transactions, including a sale of substantially all of Coram's assets or merger
of the company. Such control could also have the effect of delaying or
preventing a change in control of Coram.

  Coram may not be able to meet its increased cash requirements.

     Coram has experienced pressures from vendors to tighten payment terms for
needed drugs and supplies. Noncompliance with terms could result in the company
not having access to the necessary drugs and supplies to maintain or grow its
present business. At the same time, Coram has been experiencing increases in the
time it takes to receive payment for its services. There can be no assurance
that payers will not continue to extend the time they pay Coram for its
services, which will cause additional liquidity pressures on the company.

  The company's revenue and profitability are subject to prices paid by third
  party payers.

     The company receives payment from government programs and insurance
companies for the services it provides. The rates paid by these third parties
cannot be controlled by the company and may not be sufficient to allow Coram to
generate a profit from providing its services. Additionally, managed care payers
and even traditional indemnity insurers increasingly are requesting 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. The
failure of these third party payers to pay prices high enough to generate
profits could have a material adverse effect on the business, results of
operation or financial condition of Coram.

  The ongoing shift of services delivered to persons covered under benefit plans
  funded by governmental or managed care payers could have a material adverse
  effect on the company's business, financial condition and results of
  operations.

     Since the inception of Coram's business in 1994, it has been experiencing a
shift in its payer sources from private indemnity payers to governmental and
managed care payers. Private indemnity payers typically reimburse at a higher
amount for a given service and provide a broader range of benefits than
governmental and managed care payers. Congress has reduced reimbursement rates
applicable to certain home health and durable medical equipment services.
Similarly, other legislative and regulatory proposals have been made which, if
adopted, would have the effect of reducing the amount received by Coram for its
services. Moreover, intense competition among providers of health care services
have encouraged managed care payers to continue to reduce the prices paid for
services, including the services offered by Coram.

  Coram may find itself unable to procure the products necessary to serve its
  patients.

     During the last three fiscal years, there has been a national shortage of
certain blood and blood derivative products. At times, the company has had
difficulty in obtaining the products needed to service its patients and has been
forced to pursue such products from costly sources. This led to increases in the
costs the company has had to pay to obtain such supplies and has adversely
impacted the company's results of operations. In 1999, a manufacturer of a sole
source drug, Prolastin, which is used to treat persons with alpha 1 antitrypsin
deficiency, ceased making its products available to all pharmacy companies with
one exception. Accordingly, the company was forced to discharge a number of
patients from its service and direct them to the manufacturer's distributor of
the product. This same manufacturer has announced that it may implement similar
programs for other drugs that it manufactures including its brand of
immunoglobulin. Coram's inability to purchase the pharmaceutical products and
supplies required by its patients could have a material, adverse impact on
Coram's business.

  Consolidation in the health care industry could give increased pricing power
  to purchasers of the company's services and reduce the company's revenues and
  profits.

     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 health care economy. Managed
care plans have continued to consolidate to enhance their ability to influence
the delivery of health care services and to exert pressure to control health
care costs. This increased pressure may require the company to

                                       34
<PAGE>   36

reduce its prices or forfeit existing or new business which would have a
material adverse effect on its business, financial condition and results of
operations.

  Coram faces significant competition and may not be able to compete
  successfully.

     Coram competes in the alternate site infusion therapy and pharmacy benefit
management and specialty mail-order pharmacy markets, each of which is highly
competitive. Some of Coram's current and potential competitors include:

          (i)   integrated providers of alternate site health care services;

          (ii)  hospitals;

          (iii) local providers of multiple products and services offered for
                the alternate site health care market;

          (iv)  physicians and physician owned organizations such as independent
                practice associations and multi-specialty group practices;

          (v)   large national mail order pharmacies, including mail order
                pharmacies affiliated with or owned by managed care
                organizations; and

          (vi)  retail pharmacy stores.

Coram has experienced increased competition, particularly in its alternate site
infusion therapy business, from hospitals and physicians that have sought to
increase the scope of services offered at or through their facilities or
offices, including services similar to those offered by the company and from
hospitals and physicians that 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. Certain of the Coram's
competitors in various markets may have superior financial, marketing or
managerial resources, size, purchasing power or strategic relationships with
providers, referral sources, such as physicians and hospital discharge planners,
and traditional indemnity and managed care payers.

     There are relatively few barriers to entry in the infusion therapy services
market. Local or regional companies are currently competing in many of the
markets served by the company and others may do so in the future. Coram expects
its competitors to continue to improve their service offerings and price
competitiveness. Coram also expects its competitors to develop new strategic
relationships with providers, referral sources and payers, which could result in
increased competition. The introduction of new and enhanced services,
acquisitions and industry consolidation and the development of strategic
relationships by Coram's competitors could cause a decline in sales, loss of
market acceptance of Coram's services or price competition, or make the
company's services less attractive. There can be no assurance that Coram will be
able to compete successfully against current or future competitors or that
competitive pressures will not have a material adverse effect on Coram's
business, financial condition and results of operations. See Item 1.
"Competition," and Item 7. "Business Strategy" and "Factors Affecting Recent
Operating Results."

  The success of Coram's business is dependent on relationships with third
  parties.

     The profitability of Coram's business depends in part on its ability to
establish and maintain close working relationships with managed care
organizations, private and governmental third-party payers, 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 such as the
loss of its relationship with Aetna and its affiliated company, Prudential, or
the failure to continue to develop and maintain ongoing relationships in the
future could have a material adverse effect on the company's business, financial
condition and results of operations. See Item 7. "Business Strategy."

                                       35
<PAGE>   37

  Coram's business may suffer if it is unable to retain key personnel.

     Coram is substantially dependent upon the services of its key executive
officers, which include Daniel D. Crowley, Chairman and Chief Executive Officer
and Allen J. Marabito, Executive Vice President. 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.

  Coram may be unable to recruit appropriate personnel, which would have a
  material adverse effect on its business.

     Coram's continued operation of its business, as well as its future growth
and success, depends upon its ability to recruit and retain a staff of
professional personnel, including licensed pharmacists and nurses. Certain parts
of the United States, including certain states in which the company has
operations, are currently experiencing a shortage of these licensed
professionals. Coram has been affected by this shortage and believes that its
current financial position has made it more difficult for the company to recruit
and retain experienced professional personnel. As a result, the company has
experienced higher contract labor costs. A continued prolonged shortage of
either or both of these types of professionals being available to or interested
in working with Coram could have a material adverse effect on the company's
business, results of operations and financial condition.

  The price of our common stock may be volatile.

     There has historically been and may continue to be significant volatility
in the market price for Coram's common stock. Factors such as actual or
anticipated fluctuations in Coram's operating results, new products or services
introduced or new contracts entered into by the company or its competitors,
conditions and trends in the health care industry including changes in
government reimbursement policies, changes in financial estimates by securities
analysts, general market conditions and other factors could cause the market
price of Coram's 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 price for the common
stock of health care 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 Coram. There can be no
assurance that such litigation will not occur in the future with respect to
Coram. Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
upon Coram's business, financial condition and results of operations.

  The operation of Coram's business is subject to extensive government
  regulation.

     General. Coram's health care services business is subject to extensive and
frequently changing state and federal regulation. Specifically, Coram is subject
to state laws governing and regulating several aspects of its business,
including home infusion therapy services (including certificates of need and
licensure requirements in certain states); dispensing, distributing and
compounding of prescription products and home health services. Federal laws
governing Coram's activities include regulations of pharmacy operations and
regulations under the Medicare and Medicaid programs relating to, among other
things, the submission of claims for payment and certification of home health
agencies. Coram also is subject to certain state and federal laws prohibiting
the payment of remuneration for patient or business referrals and the provision
of services where a prohibited financial relationship exists between a referring
physician and the entity providing the service.

     New laws and regulations are enacted from time to time to regulate new and
existing services and products in the home infusion, pharmacy and home health
industries. Changes in the law or new interpretations of existing laws also
could have an adverse effect on the company's methods and costs of doing
business. Further, Coram's failure to comply with such laws could adversely
affect its ability to continue to provide, or receive reimbursement for, its
equipment, products and services, and also could subject Coram and its officers
and

                                       36
<PAGE>   38

employees to civil and criminal penalties. There can be no assurance that the
company will not encounter regulatory impediments that could adversely affect
its ability to open new branch offices and to expand the services currently
provided at its existing branch offices.

     Set forth below is a more detailed discussion of certain factors related to
federal and state regulation of Coram and its business.

     Medicare and Medicaid Regulations. As a provider of services under the
Medicare and Medicaid programs, Coram is subject to federal laws and regulations
governing its operations, arrangements with other providers and reimbursement
procedures and practices. These laws include the federal anti-kickback statute,
which prohibits the payment or receipt of any form of remuneration in return for
referring business or patients to providers of services for which payments are
made by a federal health care program. Violation of these laws may result in
civil and criminal penalties, including substantial fines, loss of the right to
participate in the Medicare and Medicaid programs and imprisonment. In addition,
the Health Insurance Portability and Accountability Act of 1996 ("HIPAA")
expanded the government's fraud and abuse elimination efforts. HIPAA, among
other provisions, expands the government's efforts for prosecuting fraud and
abuse beyond Medicare and Medicaid to all payers; makes exclusion from the
Medicare and Medicaid programs mandatory for a minimum of five years for any
felony conviction relating to fraud; requires that organizations contracting
with another organization or individual take steps to be informed as to whether
the organization or individual is excluded from Medicare and Medicaid
participation; and enhances civil penalties by increasing the amount of fines
permitted. The applicable federal laws also include prohibitions contained in
Stark II, which prohibits referrals by physicians for designated health
services, which include outpatient prescription drugs, parenteral and enteral
nutrition, equipment and supplies, durable medical equipment and home health
services, if such physician has a disqualifying investment or compensation
relationship with the supplier of such services and no exceptions applies. While
Coram believes it has structured its financial relationships with physicians to
comply with Stark II, a failure to comply with the provisions of Stark II could
have a material adverse effect on the company. In addition, various federal laws
impose civil and criminal penalties against participants in the Medicare or
Medicaid programs who make false claims for payment for services or otherwise
engage in false billing practices.

     Many states also have statutes prohibiting the payment or receipt (or the
offer or solicitation of) anything of value in return for, or to induce, a
referral for health care goods or services. There are several other state
statutes that, although they do not explicitly address payments for referrals,
could be interpreted as prohibiting the practice. While similar in many respects
to the federal laws, these state laws vary from state to state, are often vague
and have seldom been interpreted consistently by courts and regulatory agencies.
In addition, various state laws impose civil and criminal penalties against
participants in the Medicaid program who make false claims for payment for
services or otherwise engage in false billing practices. Private insurers and
various state enforcement agencies have recently increased their scrutiny of
health care providers' practices and claims, particularly in the home health and
home medical equipment areas.

     Enforcement of federal fraud and abuse laws, and regulatory scrutiny
generally have increasingly focused on the home health care industry. For
example, Medicare fiscal intermediaries have implemented "Wedge" audits, which
involve a review of a small sample of patient records to identify
non-compliance. Any adverse findings under these types of audits can result in
overpayment determinations and offsets against future payments. There can be no
assurance that Coram will not become the subject of a regulatory or other
investigation or proceeding or that its interpretations of applicable health
care laws and regulations will not be challenged. The defense of any such
challenge could result in substantial cost to the company and diversion of
management's time and attention. Any such challenge, should it ultimately be
sustained or not, could have a material adverse effect on Coram.

     Medicare Certification. Federal regulations governing the Medicare program
are also applicable to Coram's home health services. These regulations include
an annual review of health care facilities and personnel and provide criteria
for coverage and reimbursement. As of December 31, 1999, three of Coram's
branches were Medicare certified to provide home health services. A loss of
Medicare certification of the company's branch locations that provide such
services could have a material adverse effect on Coram.

     Permits and Licensure. Many states require companies providing pharmacy
services, home infusion therapy products and services, home health care
services, and other products and services of the type offered by Coram to
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<PAGE>   39

be licensed. Through its subsidiaries, Coram currently is licensed under state
law to provide nursing services in 23 states and currently is licensed to
provide pharmacy services in 50 states. Coram provides unit dose medications by
mail order in various states. Coram has obtained or, in certain cases, is in the
process of obtaining, licenses for its mail order pharmacy services from such
states.

     Certificates of Need. Many states require companies providing home health
care services, home infusion therapy and other services of the type offered by
Coram to have a certificate of need issued by a state health planning agency.
Certificates of need are often difficult to obtain and in many instances a
certificate of need is not obtainable at all (because an area is determined to
be adequately served by existing providers or for other reasons). If Coram
commences operations in a state, or expands its operations in a state where it
is currently operating, and those operations require a certificate of need, the
company will be required to obtain a certificate of need with respect to those
operations. There can be no assurance that Coram would be able to obtain
required certificates of need and the failure to obtain such certificates of
need could adversely affect Coram's ability to grow its business.

  Health Care Reform.

     The health care industry continues to undergo significant changes driven by
various efforts to reduce costs, including efforts at national health care
reform, trends toward managed care, limits in Medicare coverage and
reimbursement levels, consolidation of health care distribution companies and
collective purchasing arrangements by office-based health care practitioners.
The impact of third-party pricing pressures and low barriers to entry have
dramatically reduced profit margins for health care providers. Continued growth
in managed care and capitated plans have pressured health care providers to find
ways of becoming more cost competitive. This has also led to consolidation of
health care providers in the company's market areas. Coram's inability to react
effectively to these and other changes in the health care industry could
adversely affect its operating results.

     In addition, political, economic and regulatory influences are subjecting
the health care industry in the United States to extensive and dynamic change,
and many competing proposals have been introduced in Congress and various state
legislatures to reform the present health care system. It is possible that
health care reform at the federal or state level, whether implemented through
legislation or through action by federal or state administrative agencies, would
require Coram to make significant changes in the way it conducts business.
Certain aspects of health care reform such as proposed reductions in Medicare
and Medicaid payments, if successfully developed and adopted, could have a
material effect upon the company's business. Coram anticipates that Congress and
state legislatures will continue to review and assess alternative health care
delivery systems and payment methodologies, and public debate of these issues
will likely continue in the future. It is not possible at this time to predict
what, if any, further reforms will be adopted, or when such reforms will be
adopted and implemented. No assurance can be given that any such reforms will
not have a material adverse effect upon Coram's business, results of operations,
and financial condition.

  Insurance may not be sufficient to cover losses from professional liability
  and products liability exposure.

     The services performed and products sold by Coram involve an inherent risk
of professional and products liability. While the company maintains insurance
consistent with industry practice, there can be no assurance that the amount of
insurance currently maintained will satisfy any claims made against Coram or
that it will be able to obtain insurance in the future at commercially
reasonable rates or in adequate amounts. Coram 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 and
employees.

  We may be unable to respond to technological change effectively.

     Coram's alternate site infusion business 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/AIDS, and the

                                       38
<PAGE>   40

development of new medical treatments that cure certain complex diseases or
reduce the need for infusion therapy could adversely impact Coram's alternate
site infusion therapy business.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The following discusses the company's exposure to market risk related to
changes in interest rates. This discussion contains forward-looking statements
that are subject to risks and uncertainties. Actual results could vary
materially as a result of a number of factors, including but not limited to,
changes in interest rates, and those set forth under Item 7. "Management's
Discussion and Analysis of Results of Operations and Financial Condition:
Background -- Factors Affecting Recent Operating Results."

     As of December 31, 1999, the company had outstanding long-term debt of
$302.7 million of which $166.8 of this outstanding debt that matures in May 2001
bears interest at 11.5% per annum and $91.5 of the outstanding debt matures in
April 2008 and bears interest at the rate of 8% per annum. The company also has
a New Senior Credit Facility providing for the availability of up to $60.0
million for acquisitions, working capital, letters of credit and other corporate
purposes. The facility matures in February 2001 and bears an interest rate of
prime plus 1.5%, which was 10.0% as of December 31, 1999. As of December 31,
1999, the company has $44.0 million under the facility. Because substantially
all of the interest on the company's debt is fixed, a hypothetical 10.0%
decrease in interest rates would not have a material impact on the company.
Increases in interest rates could, however, increase interest expenses
associated with future borrowings by the company, if any. The company does not
hedge against interest rate changes. See Note 9 to the company's Consolidated
Financial Statements.

ITEM 8. FINANCIAL STATEMENTS

     The company's Consolidated Financial Statements, Notes to Consolidated
Financial Statements and financial statement schedule at December 31, 1999 and
1998 and for the years ended December 31, 1999, 1998 and 1997 and the Report of
Independent Auditors are included in this report as indicated on the Index to
Financial Statements and Schedule on page F-1.

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

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

BOARD OF DIRECTORS

     The following table sets forth certain information concerning each member
of the Board of Directors of Coram as of March 16, 2000. Except as provided
below, none of the directors entered into any arrangement or understanding
pursuant to which such person was to serve as a director.

<TABLE>
<CAPTION>
                                                                                            DIRECTOR
NAME                                                          AGE    POSITION WITH CORAM     SINCE
----                                                          ---    -------------------    --------
<S>                                                           <C>   <C>                     <C>
Daniel D. Crowley...........................................  52    Chairman of the Board       1999
Donald J. Amaral............................................  47    Director                    1995
William J. Casey............................................  55    Director                    1997
Stephen A. Feinberg.........................................  39    Director                    1998
L. Peter Smith..............................................  50    Director                    1994
Sandra L. Smoley............................................  63    Director                    2000
</TABLE>

     Mr. Crowley joined Coram as its Chairman, Chief Executive Officer and
President as of November 30, 1999. He is also Chairman of Winterland, a
privately held affinity merchandise company in the music and entertainment
industry, and Chairman, Chief Executive Officer and President of Dynamic
Healthcare Solutions, LLC, a privately held management consulting and investment
firm that he established in 1997. Prior to founding

                                       39
<PAGE>   41

Dynamic Healthcare Solutions, Mr. Crowley served as the Chairman, Chief
Executive Officer and President of Foundation Health Corporation, a post that he
had served in since 1989.

     Mr. Amaral served as Chairman of the company's Board of Directors from
September 1997 until November 30, 1999. Mr. Amaral has served as a director of
the company since October 1995, Chief Executive Officer of the company from
October 1995 through April 23, 1999 and October 22, 1999 through November 30,
1999, and as President from October 1995 through December 1997. Previously, he
was President and Chief Operating Officer of OrNda Healthcorp ("OrNda") from
April 1994 to August 1995, and served in various executive positions with Summit
Health Ltd. ("Summit") from October 1989 to April 1994, including President and
Chief Executive Officer between October 1991 and April 1994. Summit was merged
into OrNda in April 1994. Mr. Amaral is also a member of the Board of Directors
of CareMatrix Corporation.

     Mr. Casey has served as a director of Coram since September 1997. Since
1983, Mr. Casey has served as a consultant in the healthcare industry,
specializing in hospital management evaluation, hospital planning, managed care
contracting and turnaround services. From 1986 to 1997, Mr. Casey has also
served as Contract Administrator for Emergency Department Physicians' Medical
Group, Inc. and its affiliated medical groups, which provide physician services
to non-governmental facilities. In addition, from 1988 to 1997, Mr. Casey has
served as Contract Administrator for NP Medical Group, Inc., which provides
physician services to government facilities. Mr. Casey also serves as a director
of TriCounties Bank.

     Mr. Feinberg has served as a director of Coram since June 1998. He was
designated to serve on the Board of Directors pursuant to the Securities
Exchange Agreement. Pursuant to the terms of the Securities Exchange Agreement,
Mr. Feinberg has also been designated as a member of the Audit Committee and the
Compensation Committee. Mr. Feinberg has managed separate pools of capital since
1985. Through Cerberus Capital Management, L.P., and its affiliates, Mr.
Feinberg currently manages approximately ten funds which make investments in
publicly traded and private bank debt, trade claims, large and middle market
bank loans, distressed real estate and public and private equity, including
post-bankruptcy equity.

     Mr. L. Peter Smith has served as a director of Coram since July 1994.
Between November 1993 and July 1994, Mr. Smith was a director of Medisys, Inc.
Mr. Smith served as the Managing Partner of AllCare Health Services, Inc., which
was acquired by Medisys in December 1992. Mr. Smith is also Chief Executive
Officer and serves on the Board of Directors of Ralin Medical, Inc., a company
specializing in cardiac disease management. Mr. Smith also serves on the Board
of Directors of Gateway, Inc. and AMSYS, Inc. Mr. Smith previously served on the
Board of Directors of Sabratek Corporation from October 1992 through August 23,
1999. Sabratek Corporation filed a voluntary bankruptcy petition under Chapter
11 of the United States Code on December 17, 1999 and that proceeding is
presently pending before the United States Bankruptcy Court in Delaware.

     Ms. Smoley was elected to Coram's Board of Directors on February 10, 2000.
Ms. Smoley is the Chairman and Chief Executive Officer of The Sandra Smoley
company, a health care and local government consulting firm based in Sacramento,
California. From October 1993 to January 1999, she served as the Secretary of
the California Health and Welfare Agency. Prior to that time, she was Secretary
of the California State and Consumer Services Agency from January 1993 to
October 1993.

                                       40
<PAGE>   42

EXECUTIVE OFFICERS

     The following table sets forth certain information concerning each of the
executive officers of Coram. The executive officers serve at the pleasure of the
Board of Directors of Coram. Biographical information with respect to Daniel D.
Crowley is set forth under the caption "Board of Directors" above.

<TABLE>
<CAPTION>
NAME                                               AGE                POSITION(S) WITH CORAM
----                                               ---                ----------------------
<S>                                                <C>   <C>
Daniel D. Crowley................................  52    Chairman, Chief Executive Officer, President and
                                                         Director
Scott R. Danitz..................................  42    Senior Vice President, Finance and Chief
                                                         Accounting Officer
Scott T. Larson..................................  37    Senior Vice President, General Counsel and
                                                         Secretary
Allen J. Marabito................................  53    Executive Vice President
Domenic A. Meffe.................................  35    President, Coram Prescription Services Division
Vito Ponzio, Jr. ................................  45    Senior Vice President, Human Resources
Joseph D. Smith..................................  41    Chief Operating Officer
</TABLE>

     Scott R. Danitz has served as the company's Vice President and Controller
from January 1998 through December 1999 and as Senior Vice President, Finance
and Chief Accounting Officer since January 2000. Previously, Mr. Danitz was
employed by First Data Corporation from 1989 through 1997 and held various
positions, the most recent of which had been Vice President and Controller,
Payment Instruments division.

     Scott T. Larson has served as the company's Senior Vice President and
General Counsel since July 1998 and was elected Secretary in April 1999.
Previously, Mr. Larson served as the company's Vice President and Legal Counsel
from March 1996 to July 1998 and as Assistant General Counsel from July 1994
through February 1996. Between December 1991 and July 1994, Mr. Larson served as
Corporate Counsel and later as Assistant General Counsel for T(2) Medical, Inc.
("T(2) Medical"). Before joining T(2) Medical, Mr. Larson was employed as an
attorney with the Atlanta-based law firm of Alston & Bird.

     Allen J. Marabito joined Coram effective November 30, 1999 as Executive
Vice President. From 1997 to 1999, Mr. Marabito was in private law practice and
Senior Vice President with Dynamic Healthcare Solutions, LLC. From 1991 to 1997,
he served as the Senior Vice President, Secretary and General Counsel of
Foundation Health Corporation.

     Domenic A. Meffe has served as the Vice President and General Manager of
the company's Coram Prescription Services division since November 1997 and was
appointed to serve as the division's President in January 1998. Prior to joining
Coram, Mr. Meffe was the Chief Operating Officer of Columbia Pharmacy Solutions,
the prescription benefit management and mail order pharmacy division of
Columbia/HCA Healthcare Corporation. Mr. Meffe served in that position with
Columbia Pharmacy Solutions from March 1994 to October 1997.

     Vito Ponzio, Jr. has served as the company's Senior Vice President, Human
Resources since September 1998. Previously, Mr. Ponzio served as the company's
Vice President of Human Resources from February 1996 to September 1998 and as
Director of Human Resources from February 1994 to February 1996.

     Joseph D. Smith has served as the company's Chief Operating Officer since
January 1999 and was the President of the Resource Network division, from March
1998 until November 1999. Prior to that time, Mr. Smith served as Chief
Operating Officer of the East Area of the company beginning in December 1996.
Preceding that and since September 1994, Mr. Smith had served as Area Vice
President of the Northeast Area of the company. From 1993 until September 1994,
Mr. Smith was the Eastern Area Vice President of H.M.S.S., Inc., a regional home
infusion company acquired by Coram in September 1994.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Coram's directors, executive officers and persons who
beneficially own greater than 10% of a registered class of Coram's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange

                                       41
<PAGE>   43

Commission (the "Commission") and the New York Stock Exchange ("NYSE"). Based
solely upon its review of copies of the Section 16 reports Coram has received
and written representations from certain reporting persons, Coram believes that
during its fiscal year ended December 31, 1999, all of its directors, executive
officers and greater than 10% beneficial owners were in compliance with these
filing requirements.

ITEM 11. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

COMPENSATION OF DIRECTORS

     Fees for Board Service. Under current company policy, non-employee
directors earn $2,000 for each Board of Directors meeting attended in person and
$750 for each Board of Directors meeting attended by telephone conference call.
No compensation is earned for participating at meetings of committees of the
Board of Directors. Employee directors earn no additional compensation for
services as a director. All directors are entitled to reimbursement for expenses
incurred in connection with attending meetings of the Board of Directors or
committees thereof. Compensation for participation in the Board of Directors is
at the discretion of the Board. The Board has adopted resolutions approving an
annual retainer of $12,000 for each non-employee director beginning April 1,
2000.

     Mr. Crowley, the only director who is currently an employee, received no
additional compensation for service on the Board of Directors. Mr. Amaral, who
served in capacities as an employee at certain times during 1999 and solely as a
director at other times during 1999, received the amount indicated below for his
service solely as a director after November 30, 1999. In addition to the
reimbursement of out-of-pocket expenses relating to meeting attendance,
non-employee directors of Coram earned the following compensation for Board
meetings attended during fiscal 1999:

<TABLE>
<S>                                                          <C>
Donald J. Amaral..........................................   $ 2,250
William J. Casey..........................................    21,000
Richard A. Fink...........................................    19,750(1)
Stephen A. Feinberg.......................................    13,750
Stephen G. Pagliuca.......................................     5,000(2)
L. Peter Smith............................................    17,500
</TABLE>

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

        (1) Mr. Fink resigned from Coram's Board of Directors effective February
            10, 2000.

        (2) Mr. Pagliuca resigned from Coram's Board of Directors effective June
            30, 1999.

     Outside Directors' Automatic Option Grant Program. Non-employee members of
the Board of Directors participate in the Automatic Option Grant Program in
effect under Coram's 1994 stock option/issuance plan. On the date of each annual
meeting of Coram's stockholders, each individual who will continue to serve as a
non-employee Board member receives a non-statutory stock option to purchase
2,500 shares of Coram common stock at an exercise price equal to the fair market
value of the Coram common stock on the automatic option grant date. Each
individual who continued to serve as a non-employee Board member on August 5,
1999 received an automatic option grant under the program for 2,500 shares of
Coram common stock at an exercise price of $1.25 per share, the fair market
value on such date. Additionally, each non-employee individual, upon being newly
appointed or elected to Coram's Board of Directors, is automatically granted, at
the time of such initial election or appointment, a non-statutory option to
purchase 75,000 shares of Common Stock. In 2000, options to purchase 75,000
shares relating to newly appointed/elected individuals were granted to Ms.
Smoley upon her appointment to the Board on February 10, 2000, at an exercise
price of $0.6875 per share. With regard to the stock options for both the newly
appointed/elected Board members and the continuing Board members, each option is
immediately exercisable for all of the option shares. However, any shares
purchased under the option will be subject to repurchase by Coram at the
original exercise price paid per share upon the optionee's cessation of Board
service prior to vesting of such shares. The optionee's option shares will vest
in a series of equal monthly installments over twelve (12) months of Board
service measured from the automatic option grant date. The shares subject to
each automatic option grant under the 1994 Stock Option Plan will, however, vest
in full upon (i) the optionee's cessation of Board service due to death or
disability, (ii) an acquisition of Coram by merger or asset sale or (iii) a
change in control of Coram.

                                       42
<PAGE>   44

     Each automatic option granted to the non-employee Board members includes a
limited stock appreciation right which allows the optionee, upon the successful
completion of a hostile tender offer for more than 50% of Coram's outstanding
securities, to surrender that option to Coram, in return for a cash distribution
in an amount per surrendered option share equal to the highest price per share
of Coram Common Stock paid in the tender offer less the exercise price payable
per share.

     Following Richard A. Fink's resignation from Coram's Board of Directors on
February 10, 2000, the Board granted a request made by Mr. Fink to amend Mr.
Fink's Stock Option Agreement, dated September 9, 1998, pursuant to which Mr.
Fink was granted options to purchase 75,000 shares of Coram common stock at
$1.6875 per share. Under the amendment, all such options became immediately
exercisable and all such options may be exercised at any time through the stated
maximum expiration date, September 9, 2008.

     Coram has entered into indemnification agreements with each of its
directors and executive officers that would require Coram to provide
indemnification to each such person in certain circumstances for claims made
against them in connection with their service on behalf of the company.

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS

     The following table sets forth the annual and long-term compensation earned
by the Chief Executive Officer serving in that capacity at December 31, 1999,
the four most highly compensated executive officers of the company (other than
such Chief Executive Officer) who were serving as executive officers of the
company at the end of 1999 (collectively the "Named Executive Officers") for
services rendered in all capacities to the company and its subsidiaries for the
years ended December 31, 1999, 1998 and 1997. In addition, the table shows the
same information for the individuals who served as Coram's chief executive
officer during 1999, but who were not serving as such at December 31, 1999.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                    LONG-TERM
                                                                                                   COMPENSATION
                                                                 ANNUAL COMPENSATION                  AWARDS
                                                       ---------------------------------------     ------------
                                                                                OTHER ANNUAL          STOCK
NAME AND PRINCIPAL POSITION(1)                  YEAR    SALARY     BONUS(2)    COMPENSATION(3)      OPTIONS(#)
------------------------------                  ----   --------   ----------   ---------------     ------------
<S>                                             <C>    <C>        <C>          <C>                 <C>
Daniel D. Crowley.............................  1999   $ 50,000   $       --      $     --           1,000,000
  Director and Chairman                         1998         --           --            --                  --
  of the Board, Chief Executive Officer and
    President                                   1997         --           --            --                  --
Donald J. Amaral..............................  1999   $365,473   $       --      $     --                  --
  Director, and former                          1998    325,000    1,000,000(4)     325,000(4)              --
  Chairman of the Board,                        1997    623,076       90,000            --             300,000
  Chief Executive Officer and President(4)
Richard M. Smith..............................  1999   $369,104   $       --      $124,254             500,000
  Former Chief Executive                        1998    320,000      187,500(6)          --            175,000
  Officer, President and Director(5)..........  1997    252,732      250,000            --             650,000(7)
Joseph D. Smith...............................  1999   $311,767   $       --      $     --             350,000
  Chief Operating Officer                       1998    264,827      217,500(6)          --             50,000
  and President, Resource                       1997    235,809       50,000            --             300,000(8)
  Network division
Scott R. Danitz...............................  1999   $132,867   $  100,000      $     --                  --
  Senior Vice President and                     1998    107,231       10,000(6)          --             45,000
  Chief Accounting Officer                      1997         --           --            --                  --
Domenic A. Meffe..............................  1999   $144,769   $   50,000      $     --                  --
  President of CPS                              1998    130,000           --            --              90,000
                                                1997         --           --            --                  --
Scott T. Larson...............................  1999   $184,914   $       --      $     --                  --
  Senior Vice President,                        1998    163,481      105,000(6)          --             75,000
  General Counsel and                           1997    164,538       15,000            --              75,000(9)
  Secretary
</TABLE>

                                       43
<PAGE>   45

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

(1) Unless otherwise indicated, see information above under captions "Board of
    Directors" and "Executive Officers" for employment history.

(2) Unless otherwise indicated, reflects performance, retention and
    discretionary bonuses paid in 1998 and 1997 for services rendered to the
    company in 1997 and 1996, respectively. Bonuses paid in 1999 were earned in
    1999 unless otherwise indicated.

(3) Does not include perquisites aggregating in dollar value less than the
    lesser of $50,000 or 10% of the individual's annual salary and bonus
    reported for such individual for the year presented.

(4) Mr. Amaral served as Coram's Chief Executive Officer from January 1, 1999
    through April 21, 1999 and from October 23, 1999 through November 29, 1999.
    Mr. Amaral's 1998 bonus represents payment of contingent bonus upon
    completion of the refinancing of the company's debt. The Other Annual
    Compensation represents base salary received in Common Stock. The shares
    were valued at the time the compensation was paid based upon the lesser of
    the closing price of the Common Stock or the average closing price for the
    prior 30 days.

(5) Mr. Smith served as Chief Executive Officer and a director from April 22,
    1999 through October 22, 1999. Mr. Smith departed from the company and
    resigned his position on the Board of Directors in November 1999.

(6) Represents retention bonuses earned in 1998 and paid in 1999 except as to
    Mr. J. Smith which $30,000 of the amount disclosed represents a performance
    bonus earned and paid in 1998.

(7) Consists of 325,000 newly issued stock options under the 1994 Stock Option
    Plan and the reissuance of 325,000 stock options under the 1994 Stock Option
    Plan.

(8) Consists of 150,000 newly issued stock options under the 1994 Stock Option
    Plan and the reissuance of 150,000 stock options under the 1994 Stock Option
    Plan.

(9) Consists of 25,000 newly issued stock options under the 1994 Stock Option
    Plan and the reissuance of 50,000 stock options under the 1994 Stock Option
    Plan.

OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information concerning options granted to
each of the Named Executive Officers during the year ended December 31, 1999. In
addition, in accordance with the rules of the Commission, hypothetical gains or
"option spreads" that would exist for the respective options are also shown.
These gains are based on assumed rates of annual compounded stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. No stock appreciation rights were granted to the Named Executive
Officers during the fiscal year ended December 31, 1999.

<TABLE>
<CAPTION>
                                             INDIVIDUAL GRANTS
                       -------------------------------------------------------------
                                    % OF TOTAL                                         POTENTIAL REALIZABLE VALUE AT
                       NUMBER OF      OPTIONS                                             ASSUMED ANNUAL RATES OF
                       SECURITIES   GRANTED TO                                          STOCK PRICE APPRECIATION FOR
                       UNDERLYING    EMPLOYEES                                                 OPTION TERM(1)
                        OPTIONS         IN        EXERCISE PRICE      EXPIRATION       ------------------------------
NAME                    GRANTED     FISCAL YEAR     PER SHARE            DATE           0%       5%           10%
----                   ----------   -----------   --------------      ----------       ----   ---------   -----------
<S>                    <C>          <C>           <C>              <C>                 <C>    <C>         <C>
Daniel D. Crowley....  1,000,000       30.37%         $0.75        November 29, 2009   $--    $471,671    $1,195,307
Joseph D. Smith......    350,000       10.63           2.00         April 26, 2009      --     440,226     1,115,620
Scott R. Danitz......         --          --             --               --            --          --            --
Domenic A. Meffe.....         --          --             --               --            --          --            --
Scott T. Larson......         --          --             --               --            --          --            --
</TABLE>

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

(1) Potential realizable value is determined by taking the exercise price per
    share and applying the stated annual appreciation rate compounded annually
    for the term of the option, subtracting the exercise price per share at the
    end of the period and multiplying the remaining number by the number of
    options granted. Actual gains, if any, on stock option exercises and Common
    Stock holdings are dependent on the future performance of the Coram Common
    Stock and overall stock market conditions. Does not reflect changes in the
    market price of Coram Common Stock subsequent to December 31, 1999.

                                       44
<PAGE>   46

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

     The following table sets forth information concerning the aggregate number
of options exercised during the year ended December 31, 1999 by each of the
Named Executive Officers and outstanding options held by each such officer at
December 31, 1999. None of the Named Executive Officers exercised any stock
appreciation rights during the 1999 fiscal year. No stock appreciation rights
were held by the Named Executive Officers at the end of the 1999 fiscal year.

<TABLE>
<CAPTION>
                                                          NUMBER OF UNEXERCISED             IN-THE-MONEY
                                                               OPTIONS AT                    OPTIONS AT
                                SHARES                      DECEMBER 31, 1999           DECEMBER 31, 1999(1)
                               ACQUIRED      VALUE     ---------------------------   ---------------------------
NAME                          ON EXERCISE   REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                          -----------   --------   -----------   -------------   -----------   -------------
<S>                           <C>           <C>        <C>           <C>             <C>           <C>
Daniel D. Crowley...........      --           --             --       1,000,000        $ --         $250,000
Joseph D. Smith.............      --           --        260,937         439,063          --               --
Scott R. Danitz.............      --           --         17,603          27,397          --               --
Domenic A. Meffe............      --           --         34,166          55,834          --               --
Scott T. Larson.............      --           --         90,625          59,375          --               --
</TABLE>

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

(1) Whether an option is "in-the-money" is determined by subtracting the
    exercise price of the option from the closing price for the Common Stock as
    reported by the NYSE on December 31, 1999 ($1.00). If the amount is greater
    than zero, the option is "in-the-money." For the purpose of such
    calculation, the exercise price per share is the applicable exercise price
    as of December 31, 1999 and does not reflect market price changes subsequent
    to December 31, 1999.

     Shares subject to options granted under the 1994 Stock Option Plan to the
company's Named Executive Officers will immediately vest in full upon (i) an
acquisition of the company by merger or asset sale in which such options are not
to be assumed by the acquiring entity or, (ii) if such options are so assumed,
the subsequent involuntary termination of the optionee's employment within
eighteen months following such acquisition. In addition, the Compensation
Committee, as the 1994 Stock Option Plan administrator, has the authority to
provide for the accelerated vesting of the shares of the company's Common Stock
subject to outstanding options held by the company's executive officers, or any
unvested shares actually held by those individuals under the 1994 Stock Option
Plan, in connection with a hostile take-over of the company effected through a
successful tender offer for more than 50% of the company's outstanding
securities or through a change in the majority of the Board as a result of one
or more contested elections for Board membership or in the event such
individual's employment were to be involuntarily terminated following such
hostile take-over.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

     The company has entered into or anticipates entering into employment and/or
severance agreements with its Named Executive Officers and certain other
executive officers as described below.

     Daniel D. Crowley. Effective November 30, 1999, Coram entered into an
employment agreement with Daniel Crowley, for a three-year term commencing on
such date, unless otherwise terminated in accordance with its terms. Under the
agreement, Mr. Crowley serves as Chairman of the Board, President and Chief
Executive Officer of the Company. He receives a base salary of $650,000 per
year, and the right to receive a performance bonus between 60% and 300% of his
base salary, if the company's EBITDA exceeds the EBITDA target for that year. He
is also eligible to receive an acquisition bonus of approximately three times
his base salary in the event the company merges with or is acquired by another
company. If Mr. Crowley's employment is terminated by the company other than for
cause or by Mr. Crowley in the event that the company fails to comply with any
material provision of the agreement, Mr. Crowley would be entitled to receive
his base salary through the longer of (i) the remaining term of the agreement or
(ii) twenty four months, plus the EBITDA target bonus. Under the agreement, Mr.
Crowley was also granted options to purchase 1,000,000 shares of Common Stock of
the company at $0.75 per share (the stock price of the company on November 30,
1999). The options vest and become exercisable in three equal annual
installments upon Mr. Crowley's completion of each year of service. Mr. Crowley
also receives life, health and dental insurance, four weeks of vacation, a car
allowance in the amount of $1,800 per month, and corporate housing in Denver. As
part of the agreement, Mr. Crowley agreed that during the term of his employment
at the company and for one year thereafter, he will not directly or indirectly
own, manage, control, participate in, consult with, render services to, or in
any manner engage in any business which

                                       45
<PAGE>   47

competes with the company's business in the company's geographical area. In
addition, Mr. Crowley may not solicit the company's employees, customers or
suppliers during the term of his employment at the company and for one year
thereafter.

     Allen J. Marabito. Effective November 30, 1999, Coram entered into an
employment agreement with Allen Marabito, for a three-year term commencing on
such date, unless otherwise terminated in accordance with its terms. Under the
agreement, Mr. Marabito serves as Executive Vice President of the Company. He
receives a base salary of $310,000 per year, and the right to receive a
performance bonus between 60% and 300% of his base salary, if the company's
EBITDA exceeds the EBITDA target for that year. He is also eligible to receive
an acquisition bonus of approximately three times his base salary in the event
the company merges with or is acquired by another company. If Mr. Marabito's
employment is terminated by the company other than for cause or by Mr. Marabito
in the event that the company fails to comply with any material provision of the
agreement, Mr. Marabito would be entitled to receive his base salary through the
longer of (i) the remaining term of the agreement or (ii) twenty four months,
plus the EBITDA target bonus. Under the agreement, Mr. Marabito was also granted
options to purchase 500,000 shares of Common Stock of the company at $0.8125 per
share (the stock price of the company on November 30, 1999). The options vest
and become exercisable in three equal annual installments upon Mr. Marabito's
completion of each year of service. Mr. Marabito also receives life, health and
dental insurance, four weeks of vacation, a car allowance in the amount of
$1,000 per month, and corporate housing in Denver. As part of the agreement, Mr.
Marabito agreed that during the term of his employment at the company and for
one year thereafter, he will not directly or indirectly own, manage, control,
participate in, consult with, render services to, or in any manner engage in any
business which competes the company's business in the company's geographical
area. In addition, Mr. Marabito may not solicit the company's employees,
customers or suppliers during the term of his employment at the company and for
one year thereafter.

     Other Named Executive Officers. Coram has entered employment agreements
with Joseph D. Smith and Scott T. Larson.

     With respect to Mr. Smith, his employment agreement provides (i) an initial
term of two years (through April 30, 2001); (ii) salary of $310,000 annually;
(iii) a severance payment of a minimum of two years annual salary; and (iv) a
payment of $375,000 upon the occurrence of a "change of control."

     With respect to Mr. Larson, his employment agreement provides (i) an
initial term of one year (through April 26, 2000); (ii) salary of $185,000
annually; (iii) a severance payment of a minimum of one year's annual salary;
and (iv) a payment of $150,000 upon the occurrence of a "change of control."

     A "change in control" is defined in each of the agreements for Mr. Smith
and Larson and certain other executive officers as (i) a merger or consolidation
in which the company is not the surviving entity; (ii) the sale, transfer or
other disposition of all or substantially all the assets of the company; (iii)
any reverse merger in which the company is the surviving entity but in which
securities possessing more than fifty percent of the total combined voting power
of Coram's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
merger. The term "change of control" has been defined in a way that would
disqualify any change of control resulting from the conversion by Coram's
current debtholders of their current convertible debt instruments into stock of
Coram. The company has also entered into an employment agreement with Mr. Ponzio
which provides for a payment of $150,000 and minimum severance equal to one year
of salary upon the occurrence of a "change in control." The severance amounts
represent minimum severance, including health and welfare benefits, due upon
termination by the company (other than for cause) or involuntary termination
following a "change in control."

     Coram has entered into certain arrangements with Mr. Danitz and Mr. Meffe
regarding compensation payable in certain instances. With respect to Mr. Danitz,
the company has agreed that it will provide him with severance payments equal to
a minimum of six month's salary upon the occurrence of certain events. With
respect to Mr. Meffe, Coram has agreed to provide him with severance payments
equal to a minimum of two year's annual salary, a transaction bonus equal of
$500,000 upon the closing of a sale of the CPS division and a retention payment
of $72,500 in the event that Mr. Meffe remains employed through the consummation
of any such sale.

                                       46
<PAGE>   48

ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

     The following table sets forth as of February 29, 2000 (unless otherwise
noted below) the number of shares of outstanding Coram Common Stock beneficially
owned by (i) each person known to Coram to be the owner of more than 5% of the
outstanding Common Stock, (ii) each of the executive officers of the company,
(iii) each of the Directors of the company, and (iv) all Directors and executive
officers of Coram as a group. All information is taken from or based upon
ownership filings made by such persons with the Commission or upon information
provided by such persons to Coram.

<TABLE>
<CAPTION>
                                                                                PERCENTAGE OF
                                                                                  SHARES OF
                                                                 NUMBER OF          COMMON
                                                                 SHARES OF          STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                       COMMON STOCK(2)   OUTSTANDING(3)
---------------------------------------                       ---------------   --------------
<S>                                                           <C>               <C>
Donald J. Amaral............................................     2,524,296            4.9%
William J. Casey............................................        35,753              *
Daniel D. Crowley...........................................            --              0%
Scott R. Danitz.............................................        24,130              *
Stephen A. Feinberg(4)......................................    22,097,514           30.8%
Scott T. Larson.............................................       106,182              *
Allen J. Marabito...........................................            --              0%
Domenic A. Meffe............................................        46,463              *
Vito Ponzio, Jr. ...........................................       120,172              *
Joseph D. Smith.............................................       369,476              *
L. Peter Smith..............................................        71,434              *
Sandra R. Smoley............................................            --              0%
All executive officers and directors, as a group (12
  Persons)..................................................    25,395,420           33.9%
Cerberus Entities(4)........................................    22,061,473           30.8%
Foothill(5).................................................     8,990,066           15.3%
Goldman, Sachs(6)...........................................    21,756,288           30.5%
</TABLE>

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

 *  Less than 1%

(1) Unless otherwise indicated, the address of each person named above is 1125
    Seventeenth Street, Suite 2100, Denver, Colorado 80202.

(2) The aggregate ownership numbers presented include the following shares of
    Common Stock subject to options for the following persons: Mr. Amaral
    2,400,000; Mr. Casey 33,853; Mr. Danitz 21,353; Mr. Feinberg 36,041; Mr.
    Larson 98,958; Mr. Meffe 41,666; Mr. Ponzio 113,148; Mr. Joseph D. Smith
    367,186; Mr. L. Peter Smith 41,353. Except as indicated by footnote, Coram
    has been advised that the persons and entities named in the table above have
    sole voting and investment power with respect to all shares of Common Stock
    shown as beneficially owned by them.

(3) Shares of Common Stock issuable upon exercise of options or warrants or
    conversion of securities convertible into shares of Common Stock that are
    currently exercisable or exercisable within 60 days are deemed outstanding
    for purposes of computing the percentage ownership of the person or entity
    holding such options, warrants or convertible securities but not for
    purposes of computing the percentage of any other person or entity.
    Percentage computations are based on 49,638,452 shares of Common Stock
    outstanding as of February 29, 2000.

(4) Information with respect to Stephen A. Feinberg and Cerberus Partners, L.P.
    ("Cerberus"), Cerberus International, Ltd. ("International"), Ultra Cerberus
    Fund, Ltd. ("Ultra") and certain private investment funds (the "Funds")
    (Cerberus, International, Ultra and the Funds are collectively referred to
    as the "Cerberus Entities.") are based on the Schedule 13D, Amendment No. 1
    and Amendment No. 2 thereto, dated June 30, 1998, August 26, 1998 and April
    9, 1999, respectively, filed with the Commission and on Coram records
    reflecting additional Series B Notes issued to the Cerberus Entities in lieu
    of interest. The Cerberus Entities hold $42,380,152 principal amount of
    Series B Notes of the company. The Series B Notes are convertible, at the
    option of the holder thereof, into shares of Common Stock of Coram at the
    rate of $2.00 per share. Mr. Feinberg exercises voting and/or investment
    control over the securities thereof. Also, the Cerberus Entities are the
    holders of warrants to purchase 871,397 additional shares of Common Stock of
    the

                                       47
<PAGE>   49

    Coram. Mr. Feinberg possesses voting and/or investment control over such
    warrants. Thus, for the purposes of Rule 13d-3 of the Exchange Act, Mr.
    Feinberg is deemed to beneficially own 22,061,473 shares of Common Stock, or
    30.8% of those deemed issued and outstanding pursuant to Rule 13d-3 through
    his affiliation with the Cerberus Entities.

   Pursuant to an agreement between Cerberus and Goldman Sachs Credit Partners,
   L.P. ("GSCP"), dated as of April 22, 1997 (the "GSCP Agreement"), GSCP has
   the right to receive the dividends from, and the proceeds from the sale of,
   $8,992,159 principal amount (the "GSCP Interest") of the $15,892,557
   principal amount of Series B Notes held by Cerberus and the shares of Common
   Stock into which such Series B Notes relating to the GSCP Interest are
   convertible. In addition, certain unaffiliated entities, in the aggregate,
   have the right to receive the dividends from, and the proceeds from the sale
   of, $7,581,360 principal amount of Series B Notes and the shares of Common
   Stock into which such Series B Notes are convertible and warrants to purchase
   16,488 shares and the Shares underlying such 16,488 warrants. The address for
   Mr. Feinberg and the Cerberus Entities is 450 Park Avenue, 28th Floor, New
   York, New York 10022.

(5) Information with respect to Foothill Capital Corporation is based on the
    Schedule 13G, Amendment No. 1 and Amendment No. 2 thereto dated June 30,
    1998, August 26, 1998 and April 9, 1999, respectively, filed with the
    Commission and on Coram records reflecting additional Series B Notes issued
    to Foothill Capital Corporation. The Foothill Group, Inc., a Delaware
    Corporation ("Group"), Foothill Capital Corporation, a California
    corporation ("Capital"), Foothill Partners II, L.P., a Delaware limited
    partnership ("Partners"), Foothill Income Trust, L.P., a Delaware limited
    partnership ("Foothill Trust"), FIT GP, LLC, a Delaware limited liability
    company ("FIT") and M. Edward Stearns, Karen S. Sandler, Dennis R. Ascher,
    Jeffrey T. Nikora, and John F. Nickoll (collectively, the "Managing
    Partners/Members") and Peter E. Schwab and David C. Hilton (the "Managing
    Partners") (Group, Capital, Partners, Foothill Trust, FIT, the Managing
    Partners/Members and the Managing Partners are collectively referred to as
    "Foothill"). Group, the Managing Partners/Members and the Managing Partners
    are the general partners of Partners. Capital is a wholly-owned subsidiary
    of Group. FIT is the general partner of Foothill Trust and the Managing
    Partners/ Members are the managing members of FIT. Accordingly, (i) Group,
    the Managing Partners/Members and the Managing Partners may be deemed to
    beneficially own the shares of Common Stock held by Partners, as its general
    partners, (ii) the Managing Partners/Members may be deemed to beneficially
    own the shares of Common Stock held by Foothill Trust as the managing
    members of the general partner of Foothill Trust, (iii) FIT may be deemed to
    beneficially own the shares of Common Stock held by Foothill Trust, as its
    general partner, and (iv) Group may be deemed to beneficially own the shares
    held by Foothill Capital as its sole shareholder. Foothill has a beneficial
    interest in all or part of $17,267,557 principal amount of the company's
    Series B Notes, which are convertible into the company's Common Stock at a
    conversion price of $2.00 per share. In addition, certain Foothill entities
    own warrants that are exercisable into 356,288 shares of the company's
    Common Stock. The address for Foothill is 11111 Santa Monica Boulevard,
    Suite 1500, Los Angeles, California 90025.

(6) Goldman, Sachs & Co. ("GS") is an indirect wholly-owned subsidiary of The
    Goldman Sachs Group, Inc. ("GSG"). GSG is the 99% owner of GS Global
    Holdings L.L.C. ("GSGH"). GSGH is the general partner of Goldman Sachs
    Credit Partners, L.P. ("GSCP").

   As of February 29, 2000, GS, GSG and GSGH may be deemed to own beneficially
   and indirectly in the aggregate 20,714,273 shares of Common Stock by reason
   of the ownership by GSCP of (a) $32,436,389 principal amount of Series B
   Convertible Subordinated Notes of the company ("Convertible Notes") issued
   pursuant to the Securities Exchange Agreement dated May 6, 1998, as amended
   (the "Securities Exchange Agreement") which are convertible into 16,218,194
   shares of Common Stock and (b) $8,992,158.80 principal amount of Convertible
   Notes issued pursuant to the Securities Exchange Agreement with the company
   and Coram, Inc. Under the terms of the Convertible Notes the company has the
   right, in lieu of payment of interest on the Convertible Notes in cash, to
   pay interest on each interest payment date through the issuance of additional
   Convertible Notes in principal amount equal to the amount of interest then
   due and owing. Such interest accrues quarterly at the rate of 8% per annum
   until maturity. GS, GSG and GSGH each disclaim beneficial ownership of the
   securities reported herein except to the extent of their pecuniary interest
   therein.

                                       48
<PAGE>   50

   GSCP may be deemed to own beneficially and directly $32,436,389 principal
   amount of Convertible Notes issued pursuant to the Securities Exchange
   Agreement which are convertible into 16,218,194 shares of Common Stock and
   beneficially and indirectly $8,992,158.80 principal amount of Risk
   Participation Notes which are convertible into 4,496,079 shares of Common
   Stock. Under the terms of the Convertible Notes the company has the right, in
   lieu of payment of interest on the Convertible Notes in cash, to pay interest
   on each interest payment date through the issuance of additional Convertible
   Notes in principal amount equal to the amount of interest then due and owing.

   GS may be deemed to own beneficially and directly and GSG may be deemed to
   own beneficially and indirectly warrants to purchase 1,042,015 shares of
   Common Stock of Coram. GSG disclaims beneficial ownership of the securities
   reported herein except to the extent of its pecuniary interest therein. GSG
   is deemed to own beneficially 21,756,288 shares of the Common Stock of Coram.

   GS, an NASD member, is an investment banking firm that regularly performs
   services such as acting as a financial advisor and serving as principal or
   agent in the purchase and sale of securities.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     L. Peter Smith previously served on the Board of Directors of Sabratek
Corporation, a manufacturer of medical devices. Sabratek filed for Chapter 11
bankruptcy protection on December 17, 1999. In December 1998, Coram agreed to
amend its agreement with Sabratek Corporation to be the company's sole supplier
of multi-therapy infusion pumps and related proprietary telemedicine technology
during the next ten (10) years. This agreement contains a provision that allows
either party to cancel the agreement upon 90 days notice. The pricing schedule
applicable to the infusion pumps and related technology to be purchased was
negotiated by certain of Coram's management after proposals from other
manufacturers for comparable equipment had been solicited. The company purchased
approximately $2.8 and $7.8 million of multi-therapy infusion pumps and related
proprietary telemedicine technology from Sabratek Corporation in 1999 and 1998,
respectively.

     Stephen A. Feinberg, a director of the company, is the managing member of
Cerberus Associates, L.L.C., which is the general partner of Cerberus and the
investment manager for each of International, Ultra and the Funds. As of March
16, 2000, the Cerberus Entities in the aggregate hold $42,380,152 principal
amount of the Series B Notes and warrants to purchase 871,397 shares of Common
Stock, respectively. Cerberus holds approximately $77,514,015 and $15,381,541
principal amount of Series A Notes and notes under the New Senior Credit
Facility, respectively. In addition, Cerberus owns an interest in Winterland,
the privately held affinity merchandise company of which Mr. Crowley is the
Chairman of the Board of Directors.

                                    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 Report of Independent Auditors are presented on pages F-1 and
thereafter:

           Report of Independent Auditors

           Consolidated Balance Sheets -- December 31, 1999 and 1998

           Consolidated Statements of Operations -- Years ended December 31,
           1999, 1998 and 1997

           Consolidated Statements of Stockholders' Equity -- Years ended
           December 31, 1999, 1998 and 1997

           Consolidated Statements of Cash Flows -- Years ended December 31,
           1999, 1998 and 1997

           Notes to Consolidated Financial Statements

                                       49
<PAGE>   51

     2. Financial Statement Schedules. The following consolidated financial
statement schedule of the Registrant for the years ended December 31, 1999, 1998
and 1997 is presented following the Notes to 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 November 9, 1999, the company filed a report on
Form 8-K announcing the departure of Richard M. Smith as Chief Executive Officer
and President.

     On December 8, 1999, the company filed a report on Form 8-K announcing
Coram's agreement with its lenders to enter into Amendment Three and Forbearance
in respect of the Securities Exchange Agreement, the resignation of its former
Chief Financial Officer, Wendy L. Simpson and the employment of its new
Chairman, Chief Executive Officer and President, Daniel D. Crowley. See Note 9
in the company's Consolidated Financial Statements.

     (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.

<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, T(2), Curaflex,
                              HealthInfusion, Medisys, T(2) 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, T(2)
                              Curaflex, HealthInfusion, Medisys, T(2) 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, T(2),
                              Curaflex, HealthInfusion, Medisys, T(2) 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).(a)
          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).(a)
          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).
</TABLE>

                                       50
<PAGE>   52

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
          2.7              -- Purchase Agreement by and between Integrated Health
                              Services, Inc., T(2) 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, T(2) 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 1, 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 (Incorporated by reference to Exhibit
                              3.3 of the Registrant's Annual Report on Form 10-K for
                              the year ended December 31, 1997).
          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, T(2),
                              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).(a)
         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).
</TABLE>

                                       51
<PAGE>   53

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         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). Revised Incorporated by reference to
                              Exhibit 10.7 of the Registrant's Quarterly Report on Form
                              10-Q for the quarter ended September 30, 1999.
         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 T(2) dated December 8, 1989 (Incorporated
                              herein by Reference to Exhibit 10(s) of T(2) 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 T(2), 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).(a)
         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).(a)
</TABLE>

                                       52
<PAGE>   54

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         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).(a)
         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).(a)
         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).(a)
         10.25             -- Form of Employment Agreement, Amendment No. 1 and
                              Amendment No. 2 dated as of April 23, 1999, of Employment
                              Agreement between the Registrant and Donald J. Amaral.
                              (Incorporated by reference to Exhibit 10.25 and 10.04 of
                              the Registrant's Quarterly Report on Form 10-Q for the
                              quarters ended September 30, 1995, June 30, 1998, and
                              September 30, 1999, respectively).
         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).(a)
         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>

                                       53
<PAGE>   55

<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).(a)
         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).(a)
         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).(a)
         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.(a)
         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.(a)
         10.36             -- Amended Agreement, dated as of March 28, 1997 by and
                              among the Registrant, Coram Inc., and Donaldson, Lufkin &
                              Jenrette.(a)
         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).
         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 (as defined therein), the
                              Financial Institutions named therein and The Chase
                              Manhattan Bank, as collateral agent for the Lenders named
                              therein (Incorporated by reference Exhibit 99 of the
                              Registrant's Current Report on Form 8-K dated as of June
                              2, 1997).(a)
</TABLE>

                                       54
<PAGE>   56

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         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. (Incorporated by reference to Exhibit 10.40
                              of the Registrant's Annual Report on Form 10-K for the
                              year ended December 31, 1997).
         10.41             -- Prime Vendor Agreement and Letter Amendment, dated
                              October 14, 1999, between Coram Healthcare Corporation
                              and Cardinal Health. Certain portions of the Prime Vendor
                              Agreement have been omitted pursuant to a request for
                              confidential treatment. The entire Prime Vendor Agreement
                              has been filed confidentially with the Securities
                              Exchange Commission. (Incorporated by reference to
                              Exhibit 10.1 of the Registrant's Quarterly Report on Form
                              10-Q for the quarters ended September 30, 1998 and 1999,
                              respectively).
         10.42             -- Amendment No. 1 and Waiver to the Securities Exchange
                              Agreement among the Registrant, Cerberus Partners, L.P.,
                              Goldman Sachs Credit Partners L.P., and Foothill Capital
                              Corporation. (Incorporated by reference to Exhibit 10.01
                              of the Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended June 30, 1998).
         10.43             -- Promissory Notes and Security Agreement dated July 21,
                              1998 among the Registrant and Foothill Capital
                              Corporation, as collateral agent for Cerberus Partners,
                              L.P., Goldman Sachs Credit Partners L.P. and Foothill
                              Partners III, L.P. and their respective successors and
                              assigns. (Incorporated by reference to Exhibit 10.02 of
                              the Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended June 30, 1998).
         10.44             -- Request for Deferral of Interest Payment Under the Series
                              B Convertible Subordinated Notes due 2008 and the related
                              Securities Exchange Agreement, dated May 6, 1998, by and
                              between Coram, Inc., Coram Healthcare Corporation,
                              Cerberus Partners, L.P., Goldman SachsCredit Partners,
                              L.P. and Foothill Capital Corporation, as amended
                              (Incorporated by reference to Exhibit 10.03 of the
                              Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended June 30, 1998).
         10.45             -- Securities Exchange Agreement among the company, Cerberus
                              Partners, L.P., Goldman Sachs Credit Partners, L.P., and
                              Foothill Capital Corporation. (Incorporated by reference
                              to Exhibit 10.01 of the Registrant's Quarterly Report on
                              Form 10-Q for the quarter ended March 31, 1998).(a)
         10.46             -- Form of Letter of Credit required by the Master Agreement
                              by and between the Registrant and its applicable
                              affiliates and Aetna U.S.Healthcare, Inc. and its
                              applicable affiliates (Incorporated by reference to
                              Exhibit 10.02 of the Registrant's Quarterly Report on
                              Form 10-Q for the quarter ended March 31, 1998).
         10.47             -- Addendum amendment to Sabratek Corporation and Coram
                              Healthcare for IV Infusion pumps, IV Disposable Sets and
                              Related Items, dated as of February 26, 1997, as of
                              December 7, 1998.
         10.48             -- Employment Agreement and Agreement between the company
                              and Richard M. Smith, dated as of April 26, 1999 and
                              November 11, 1999, respectively. (Incorporated by
                              reference to Exhibits 10.4 and 10.2, respectively of the
                              Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended September 30, 1999).
</TABLE>

                                       55
<PAGE>   57

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         10.49             -- Employment Agreement, between the company and Wendy L.
                              Simpson, dated as of April 26, 1999. (Incorporated by
                              reference to Exhibit 10.5 of the Registrant's Quarterly
                              Report on Form 10-Q for the quarter ended September 30,
                              1999).
         10.50             -- Employment Agreement, between the company and Joseph D.
                              Smith, dated as of April 26, 1999. (Incorporated by
                              reference to Exhibit 10.6 of the Registrant's Quarterly
                              Report on Form 10-Q for the quarter ended September 30,
                              1999).
         10.51             -- Employment Agreement, between the company and Daniel
                              Crowley, dated as of November 30, 1999, together with
                              Amendment No. 1 thereto.*
         10.52             -- Employment Agreement, between the company and Allen
                              Marabito, dated as of November 30, 1999, together with
                              amendment No. 1 thereto.*
         10.53             -- First Amendment to Prime Vendor Agreement, dated as of
                              January 1, 2000 by and between the company and Cardinal
                              Health.*
         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.*
         27.3              -- Second restated Financial Data Schedule.*
</TABLE>

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

(a)  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.

 *  Filed herewith.

                                       56
<PAGE>   58

                                   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
30, 2000.

                                                CORAM HEALTHCARE CORPORATION

                                            By:     /s/ DANIEL D. CROWLEY
                                              ----------------------------------
                                                      Daniel D. Crowley
                                              Chairman, Chief Executive Officer,
                                                         and President

                                            By:      /s/ SCOTT R. DANITZ
                                              ----------------------------------
                                                       Scott R. Danitz
                                              Senior Vice President, Finance and
                                                             Chief
                                                      Accounting Officer

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

<TABLE>
<C>                                                     <S>                                     <C>

                /s/ DANIEL D. CROWLEY                   Chairman, Chief Executive Officer,      March 30, 2000
-----------------------------------------------------     and President
                  Daniel D. Crowley

                /s/ WILLIAM J. CASEY                    Director                                March 30, 2000
-----------------------------------------------------
                  William J. Casey

                /s/ DONALD J. AMARAL                    Director                                March 30, 2000
-----------------------------------------------------
                  Donald J. Amaral

                /s/ SANDRA R. SMOLEY                    Director                                March 30, 2000
-----------------------------------------------------
                  Sandra R. Smoley

                 /s/ L. PETER SMITH                     Director                                March 30, 2000
-----------------------------------------------------
                   L. Peter Smith

               /s/ STEPHEN A. FEINBERG                  Director                                March 30, 2000
-----------------------------------------------------
                 Stephen A. Feinberg
</TABLE>

                                       57
<PAGE>   59

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Auditors..............................   F-2
Consolidated Balance Sheets -- As of December 31, 1999 and
  1998......................................................   F-3
Consolidated Statements of Operations -- Years Ended
  December 31, 1999, 1998 and 1997..........................   F-4
Consolidated Statements of Stockholders' Equity
  (Deficit) -- Years Ended December 31, 1999, 1998
  and 1997..................................................   F-5
Consolidated Statements of Cash Flows -- Years Ended
  December 31, 1999, 1998 and 1997..........................   F-6
Notes to Consolidated Financial Statements..................   F-7
Schedule II -- Valuation and Qualifying Accounts............   S-1
</TABLE>

                                       F-1
<PAGE>   60

                         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, 1999 and 1998, 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, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. 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 9, 2000

                                       F-2
<PAGE>   61

                          CORAM HEALTHCARE CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $   6,242   $      53
  Cash limited as to use....................................      1,004       1,557
  Accounts receivable, net of allowances of $30,448 and
     $14,297................................................    107,406      98,889
  Inventories...............................................     22,966      27,203
  Deferred income taxes, net................................        364         705
  Other current assets......................................      5,614       4,883
                                                              ---------   ---------
          Total current assets..............................    143,596     133,290
Property and equipment, net.................................     22,198      24,861
Deferred income taxes, non-current, net.....................      1,481       4,365
Other deferred costs........................................      2,434       5,243
Goodwill, net of accumulated amortization of $78,027 and
  $67,247...................................................    216,062     235,696
Other assets................................................     17,451      17,574
                                                              ---------   ---------
          Total assets......................................  $ 403,222   $ 421,029
                                                              =========   =========

                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable..........................................  $  36,090   $  28,036
  Accrued compensation......................................     11,273      10,834
  Interest payable..........................................      5,100       4,671
  Current maturities of long-term debt......................        390         260
  Income taxes payable......................................        240         300
  Deferred income taxes.....................................        419       1,060
  Reserve for litigation....................................         --       2,987
  Accrued merger and restructuring..........................      7,392       3,935
  Other accrued liabilities.................................      9,666       6,271
  Net liabilities of discontinued operations................     34,518       8,675
                                                              ---------   ---------
          Total current liabilities.........................    105,088      67,029
Long-term debt..............................................    302,662     242,162
Minority interest in consolidated joint ventures............      1,652       2,024
Other liabilities...........................................     14,092      12,947
Deferred income taxes, non-current..........................      1,427       4,010
Commitment and contingencies................................
                                                              ---------   ---------
          Total liabilities.................................    424,921     328,172
Stockholders' equity (deficit):
Preferred stock, par value $.001, authorized 10,000 shares,
  none issued...............................................         --          --
Common stock, par value $.001, authorized 100,000 shares,
  issued and outstanding 49,638 at December 31, 1999 and
  49,201 at December 31, 1998...............................         50          49
Additional paid-in capital..................................    427,399     427,133
Accumulated deficit.........................................   (449,148)   (334,325)
                                                              ---------   ---------
          Total stockholders' equity (deficit)..............    (21,699)     92,857
                                                              ---------   ---------
          Total liabilities and stockholders' equity
            (deficit).......................................  $ 403,222   $ 421,029
                                                              =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>   62

                          CORAM HEALTHCARE CORPORATION

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

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              --------------------------------
                                                                1999        1998       1997
                                                              ---------   --------   ---------
<S>                                                           <C>         <C>        <C>
Net revenue.................................................  $ 521,196   $445,112   $ 439,472
Cost of service.............................................    408,878    326,736     309,693
                                                              ---------   --------   ---------
Gross profit................................................    112,318    118,376     129,779
Operating expenses:
  Selling, general and administrative expenses..............     96,809     83,337      86,457
  Provision for estimated uncollectible accounts............     28,310     14,845      14,983
  Amortization of goodwill..................................     10,784     11,139      13,586
  Income from litigation settlements........................         --         --    (156,792)
  Accrual for (reversal of) restructuring costs.............      5,831     (3,900)         --
  Loss on impairment of assets..............................      9,100         --          --
                                                              ---------   --------   ---------
          Total operating expenses..........................    150,834    105,421     (41,766)
                                                              ---------   --------   ---------
Operating income (loss) from continuing operations..........    (38,516)    12,955     171,545
Other income (expenses):
  Interest income...........................................        655      1,086       2,236
  Interest expense..........................................    (29,763)   (32,734)    (75,026)
  Termination fee...........................................         --         --      15,182
  Equity in net income of unconsolidated joint ventures.....        442         69       1,245
  Gains on sales of businesses..............................         --      1,071      26,744
  Losses on sales of property and equipment, net............       (107)      (363)        (61)
  Other income, net.........................................        405         28         333
                                                              ---------   --------   ---------
Income (loss) from continuing operations before income taxes
  and
     minority interests.....................................    (66,884)   (17,888)    142,198
  Income tax expense........................................        440      2,300       7,550
  Minority interests in net income of consolidated joint
     ventures...............................................      1,470      1,399       7,283
                                                              ---------   --------   ---------
Income (loss) from continuing operations after income taxes
  and
     minority interests.....................................    (68,794)   (21,587)    127,365
                                                              ---------   --------   ---------
Discontinued Operations:
  Loss from operations......................................    (28,411)      (108)     (2,105)
  Loss from disposal........................................    (17,618)        --          --
                                                              ---------   --------   ---------
Net income (loss)...........................................  $(114,823)  $(21,695)  $ 125,260
                                                              =========   ========   =========
Earnings per share:
  Basic
     Income (loss) from continuing operations...............  $   (1.39)  $  (0.44)  $    2.68
     Loss from discontinued operations......................      (0.93)     (0.00)      (0.04)
                                                              ---------   --------   ---------
     Net income (loss)......................................  $   (2.32)  $  (0.44)  $    2.64
                                                              =========   ========   =========
  Diluted
     Income (loss) from continuing operations...............  $   (1.39)  $  (0.44)  $    2.34
     Loss from discontinued operations......................      (0.93)     (0.00)      (0.04)
                                                              ---------   --------   ---------
     Net income (loss)......................................  $   (2.32)  $  (0.44)  $    2.30
                                                              =========   ========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>   63

                          CORAM HEALTHCARE CORPORATION

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  COMMON
                                   COMMON STOCK     ADDITIONAL    STOCK
                                  ---------------    PAID-IN      TO BE     ACCUMULATED
                                  SHARES   AMOUNT    CAPITAL      ISSUED      DEFICIT       TOTAL
                                  ------   ------   ----------   --------   -----------   ---------
<S>                               <C>      <C>      <C>          <C>        <C>           <C>
Balance, January 1, 1997........  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
  Issuance of common stock and
     Warrants, net..............   1,132      1         2,225          --           --        2,226
  Warrant cancellation..........      --     --       (12,700)         --           --      (12,700)
  Net loss......................      --     --            --          --      (21,695)     (21,695)
                                  ------    ---      --------    --------    ---------    ---------
Balance, December 31, 1998......  49,201     49       427,133          --     (334,325)      92,857
  Issuance of common stock and
     warrants, net..............     437      1           266          --           --          267
  Net loss......................      --     --            --          --     (114,823)    (114,823)
                                  ------    ---      --------    --------    ---------    ---------
Balance, December 31, 1999......  49,638    $50      $427,399    $     --    $(449,148)   $ (21,699)
                                  ======    ===      ========    ========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>   64

                          CORAM HEALTHCARE CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations................  $ (68,794)  $ (21,587)  $ 127,365
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Provision for estimated uncollectible accounts............     28,310      14,846      14,983
  Depreciation and amortization.............................     23,892      28,566      55,989
  Debt interest accrued.....................................     16,591      10,280      30,229
  Reversal of accrual for restructuring costs...............         --      (3,900)         --
  Litigation settlements not requiring cash.................         --          --    (120,079)
  Minority interest in net income of consolidated joint
    ventures, net...........................................       (371)       (126)       (784)
  Losses (gains) on sales of long-term assets...............        107         363          (2)
  Gains on sales of businesses..............................         --      (1,071)    (26,744)
  Equity in net income of unconsolidated joint ventures,
    net.....................................................       (303)        193        (498)
  Loss on impairment of assets..............................      9,100          --          --
  Other, net................................................         --      (3,140)        179
  Changes in operating assets and liabilities, net of
    acquisitions and dispositions:
    Accounts receivable.....................................    (36,828)    (29,426)       (491)
    Prepaid expenses, inventories and other assets..........      3,678     (13,098)     (9,466)
    Current and other liabilities...........................     13,644       2,309       2,919
    Litigation reserve......................................     (2,987)         --          --
    Accrued merger and restructuring........................      3,456        (915)     (4,762)
                                                              ---------   ---------   ---------
Net cash provided by (used in) continuing operations........    (10,505)    (16,706)     68,838
                                                              ---------   ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.........................     (6,947)    (11,556)    (19,057)
Cash receipts on sale (payments for acquisitions) of
  businesses, net...........................................       (481)     (3,285)    124,196
Proceeds from sales of long-term assets.....................        159         179         680
                                                              ---------   ---------   ---------
Net cash provided by (used in) investing activities.........     (7,269)    (14,662)    105,819
                                                              ---------   ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on issuance of promissory notes....................         --       6,000          --
Cash consideration for warrant cancellation.................         --      (4,300)         --
Debt borrowings.............................................     50,000      29,250      10,000
Repayments of debt..........................................     (6,061)   (115,932)    (89,370)
Cash paid for debt financing costs..........................         --        (856)         --
Purchases of stock and exercise of warrants and options,
  net.......................................................        210          89       1,234
                                                              ---------   ---------   ---------
Net cash provided by (used in) financing activities.........     44,149     (85,749)    (78,136)
                                                              ---------   ---------   ---------
NET INCREASE (DECREASE) IN CASH FROM CONTINUING
  OPERATIONS................................................     26,375    (117,117)     96,521
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATION.......    (20,186)      8,220      (2,946)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................         53     108,950      15,375
                                                              ---------   ---------   ---------
CASH AND CASH EQUIVALENTS, END OF YEAR......................  $   6,242   $      53   $ 108,950
                                                              =========   =========   =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
  Interest..................................................  $   9,974   $   8,525   $  12,399
  Income taxes..............................................        554       2,470      (1,074)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
  ACTIVITIES:
  Deferred interest.........................................  $      --   $      --   $   4,802
  Warrants issued in connection with debt financing.........         --       1,863      18,965
  Debt issued in consideration for cancellation of
    warrants................................................         --       8,400          --
  Common stock issued in settlement of litigation...........         --          --      25,625
  Issuance of stock in connection with acquisitions.........         --          --         870
  Capital lease obligations incurred on equipment lease.....         --          --          41
  Common stock issued in connection with employment
    agreements..............................................         --         103          --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-6
<PAGE>   65

                          CORAM HEALTHCARE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

     Business Activity. Coram Healthcare Corporation and its subsidiaries
("Coram" or the "company") during 1999 were engaged in three principal lines of
business: alternate site (outside the hospital) infusion therapy and related
services, ancillary network management services, and pharmacy benefit management
and specialty mail-order pharmacy services. Other services offered by Coram
includes centralized management, administrative and clinical support for
clinical research trials, medical information and non-intravenous home health
products such as durable medical equipment and respiratory therapy services.

     Coram delivers its alternate site infusion therapy services through
approximately 80 branch offices located in 41 states and Ontario, Canada. In
December 1999, Coram announced that it was repositioning its business to focus
on its core alternate site infusion therapy business and the clinical research
and medical informatics business operated by its subsidiary, CTI Network, Inc.
("CTI"). Accordingly, Coram's primary business strategy is to focus its efforts
on the delivery of its core infusion therapies, such as nutrition,
anti-infective therapies, intravenous immunoglobulin ("IVIG"), therapy for
persons receiving transplants, and coagulant and blood clotting therapies for
persons with hemophilia. Coram has also implemented programs focused on the
reduction and control of the cost of providing services and operating expenses,
assessment of under performing branches and review of branch efficiencies.
Pursuant to this review, several branches have been closed or scaled back to
serve as satellites for other branches and personnel have been eliminated. See
Note 7. Most of the company's alternate site infusion therapy net revenue is
from third-party payers such as private indemnity insurers, managed care
organizations and governmental payers. Competition in this market, combined with
the efforts by third-party payers to contain or reduce health care costs,
contributed to reduced reimbursement rates for services. Meanwhile, Coram's
other divisions are being reviewed for divestiture or liquidated.

     The company provided ancillary network management services through its
subsidiaries, Coram Resource Network, Inc. and Coram Independent Practice
Association, Inc. (the "Resource Network Subsidiaries" or "R-Net"), which
managed networks of home health care providers on behalf of HMOs, PPOs, at-risk
physician groups and other managed care organizations. R-Net served its
customers through two primary call centers and three satellite offices. In April
1998, the company entered into a five-year capitated agreement with Aetna U.S.
Healthcare, Inc. ("Aetna") (Master Agreement) for the management and provision
of certain home health services, including home infusion, home nursing,
respiratory therapy, durable medical equipment, hospice care and home nursing
support for several of Aetna's disease management programs. Effective July 1,
1998, the company began receiving capitated payments on a monthly basis for
covered members, assumed certain financial risk for certain home health services
and began providing management services for a network of home health providers
through R-Net. The agreements that R-Net had for the provision of ancillary
network management services have been terminated, and R-Net is no longer
providing any ancillary network management services. Coram and Aetna are
pursuing breach of contract claims against each other in court. See Note 13. The
R-Net business is being liquidated pursuant to a Board of Directors resolution
and the Resource Network Subsidiaries' filing of voluntary bankruptcy petitions
on November 12, 1999 with the U.S. Bankruptcy Court for the District of Delaware
under Chapter 11 of the U.S. Bankruptcy Code. See Note 3.

     The company delivers pharmacy benefit management and specialty mail-order
pharmacy services through its Coram Prescription Services division ("CPS"),
which provides pharmacy benefit management services as well as specialty
mail-order prescription drugs for chronically ill patients from two primary mail
order facilities and three branch locations. The pharmacy benefit management
service provides on-line claims administration, formulary management and certain
drug utilization review services through a nationwide network of retail
pharmacies. CPS's specialty mail-order pharmacy services are delivered through
two main facilities which provide centralized distribution, compliance
monitoring, patient education and clinical support to a wide variety of
patients. In August 1999, the company announced that it had hired an investment
advisor to assist it in pursuing strategic alternatives for CPS. With the
assistance of its investment advisor, the company is currently conducting an
auction of the CPS division.

                                       F-7
<PAGE>   66
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Company History. The company was formed on July 8, 1994, as a result of a
merger by and among T(2) Medical, Inc. ("T(2) Medical"), 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 7.

     In 1997, the company provided lithotripsy services through a controlling
interest in 11 lithotripsy partnerships, two wholly-owned lithotripsy entities,
a lithotripsy management company and stock in an equipment service company and
certain related assets (the "Lithotripsy Business"). Effective September 30,
1997, the company completed the sale of all of its Lithotripsy Business other
than its interests in three lithotripsy partnerships. Two of the remaining
partnerships were sold effective October 3, 1997. Effective June 1, 1998, the
company completed the sale of its remaining lithotripsy partnership.

     Debt Restructuring and Refinancing. At December 31, 1997, the company had
two principal long-term debt instruments, the Former Senior Credit Facility and
the Rollover Note and related warrants, the combined outstanding balance of
which was approximately $299.2 million. During 1998, the company completed the
restructuring of this debt. The debt restructuring included repayment of all
amounts due under the Former Senior Credit Facility, the consummation of an
exchange of the Rollover Note and related warrants for certain senior
subordinated debt and the execution of a new senior credit facility. In 1999,
the company entered into Amendment 3 and Forbearance whereby no interest would
be due on the senior subordinated debt for a period based on terms in the
amendment. See Note 9.

     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, 1999, substantially all
of the company's cash was deposited with Harris Trust and Savings Bank. Daily
cash balances may be in excess of the FDIC insurance limits, but credit risk is
mitigated as deposits are kept only with high credit quality institutions.
Accounts receivable are primarily from third-party payers, including private
indemnity insurers, managed care organizations and state and federal
governmental payers such as Medicare and Medicaid, and are unsecured. Credit
risk is mitigated by the large number of entities that comprise the third-party
payer base and credit evaluations of patients and third-party payers.

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 which are 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 of 50% or less.

     Reclassifications. Certain amounts in the 1998 and 1997 financial
statements have been reclassified to conform to the 1999 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 payers, including insurance companies, managed care plans,
governmental payers and contracted institutions. Revenue is recorded net of
contractual adjustments and related discounts. Contractual adjustments represent
estimated differences between service revenue at established
                                       F-8
<PAGE>   67
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

rates and amounts expected to be realized from third-party payers 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 immaterial in 1999 and approximately $0.2 million
and $2.0 million in 1998 and 1997, respectively.

     In certain cases, particularly during the term of operations for R-Net, the
company agreed to accept fixed fee or capitated fee arrangements. Under a
capitated arrangement, the company will agree to deliver or arrange for the
delivery of certain home health services required under the payer customer's
health plan in exchange for a fixed per member per month service fee. The total
per member per month fee is calculated using all members enrolled in the
particular health plan as of certain dates. The per member per month service
fees are recognized as revenue in the month the fees are designated to cover
home health services. As of January 1, 2000, Coram was a party to six capitated
arrangements, excluding the Master Agreement signed with Aetna in April 1998 for
R-Net services that was terminated on June 30, 1999.

     Revenue from the Medicare and Medicaid programs accounted for approximately
20%, 24%, and 23% of the company's net revenue from continuing operations for
the years ended December 31, 1999, 1998 and 1997, 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. A portion of the
company's cash balance that was limited as to its use includes cash of
partnerships that may only be used for partnership operations.

     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 five years for equipment, furniture, fixtures
and vehicles. Leasehold improvements are amortized over the shorter of the lease
term or estimated useful lives of the related assets.

     In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued SOP 98-1, Accounting for the Costs of Computer Software
Developed For or Obtained For Internal Use. SOP 98-1, which was adopted by the
company as of January 1, 1998, requires capitalization of certain costs incurred
in connection with developing or obtaining internal use software. In prior
years, the company expensed such costs as incurred. SOP 98-1 requires companies
to adopt its provisions as of the beginning of the year and restate previously
reported interim results. In the fourth quarter of 1998, the company capitalized
certain costs as software to be amortized over three years. The effect of this
accounting change was to decrease the net loss for the year ended December 31,
1998 by approximately $0.6 million.

     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 25 years. 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, based on undiscounted estimated cash flows over their remaining
depreciation and amortization period, their carrying value is reduced to
estimated fair market value based on discounted cash flow estimates. Impairment
indicators include, among other conditions, cash flow deficits; an historical or
anticipated decline in revenue or operating profit; adverse legal, regulatory or
                                       F-9
<PAGE>   68
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reimbursement developments; or a material decrease in the fair value of some or
all of the assets. A review is done separately for each of the separately
identifiable markets in which the company operates. During 1999, Coram
recognized impairment on goodwill from continuing operations and other assets of
$9.1 million. The goodwill impairment charge was taken primarily because of
operating losses of the infusion business that had resulted following the
termination of the Master Agreement with Aetna and the discontinuance of R-Net.
The amount of impairment charge was determined using forecasted discounted cash
flows of those branches with indications of potential impairment of allocated
long-lived assets. The forecasted cash flows were based on budgeted Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA) with an effective
8% growth rate. Additionally a 10% discount rate was used.

     If future cash flows from operations decrease, Coram may be required to
record additional write downs of its goodwill and other long-lived assets. Any
such write-down could have a material adverse effect on the company's financial
position and results of operations.

     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 payer classification to
determine the allowance for estimated uncollectible accounts. Additionally, the
company establishes appropriate additional reserves for accounts that are deemed
uncollectible due to occurrences such as bankruptcy filings by the payer. 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.

     Earnings per Share. In 1997, the Financial Accounting Standards Board
("FASB") 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 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.

                                      F-10
<PAGE>   69
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                       1999         1998        1997
                                                     ---------    --------    --------
<S>                                                  <C>          <C>         <C>
Numerator for basic and diluted earnings per share
  Income (loss) from continuing operations.........  $ (68,794)   $(21,587)   $127,365
  Loss from Discontinued Operations................    (46,029)       (108)     (2,105)
                                                     ---------    --------    --------
Net income (loss)..................................  $(114,823)   $(21,695)   $125,260
                                                     =========    ========    ========
Denominator:
  Weighted average shares..........................     49,512      48,870      44,321
  Contingently issuable shares.....................         --          --       3,142
                                                     ---------    --------    --------
  Denominator for basic earnings per share.........     49,512      48,870      47,463
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............................     49,512      48,870      54,481
                                                     =========    ========    ========
Earnings per share:
  Basic
     Income (loss) from continuing operations......  $   (1.39)   $  (0.44)   $   2.68
     Loss from discontinued operations.............      (0.93)      (0.00)      (0.04)
                                                     ---------    --------    --------
     Net income (loss).............................  $   (2.32)   $  (0.44)   $   2.64
                                                     =========    ========    ========
  Diluted
     Income (loss) from continuing operations......  $   (1.39)   $  (0.44)   $   2.34
     Loss from discontinued operations.............      (0.93)      (0.00)      (0.04)
                                                     ---------    --------    --------
     Net income (loss).............................  $   (2.32)   $  (0.44)   $   2.30
                                                     =========    ========    ========
</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. The 1998 and 1999 computations do
not give effect to options, warrants or the Series B Senior Subordinated
Convertible Notes, as their effect would have been anti-dilutive.

     Comprehensive Income. In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("Statement 130"),
which establishes rules for reporting and displaying comprehensive income.
Statement 130 is effective for fiscal years beginning after December 15, 1997.
Comprehensive income is defined as essentially all changes in stockholders'
equity exclusive of transactions with owners (e.g., dividends, stock options)
and includes net income plus changes in certain assets and liabilities that are
reported directly in equity, referred to as "Other Comprehensive Income." Other
Comprehensive Income includes unrealized gains or losses on available-for-sale
securities, translation adjustments on investments in foreign subsidiaries, and
certain changes in minimum pension liabilities. The company has no material
activity that requires disclosure under Statement 130.

     Segment Reporting. In June 1997, the FASB 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

                                      F-11
<PAGE>   70
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

standards for related disclosures about products and services, geographic areas
and major customers. The company adopted the new requirements in 1998. See Note
16.

     Derivatives and Hedging Activities. In June 1998, the FASB issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("Statement 133"), which requires recording all
derivative instruments as assets or liabilities, measured at fair value.
Statement 133 is effective for fiscal years beginning after June 15, 1999. In
June 1999, the FASB issued Statement of Financial Accounting Standards no. 137,
Accounting for Derivative Instruments and Hedging Activities-Deferral of the
effective date of FASB No. 133, which deferred the effective date of Statement
133 to fiscal years beginning after June 15, 2000. Therefore, Coram will adopt
the new requirement effective January 1, 2001. The company does not believe that
adoption of the new requirement will have a material effect on the company's
future financial position or operating results.

     Start-up Costs. In 1998, the AICPA issued SOP 98-5 "Reporting on the Costs
of Start-Up Activities," which requires that the costs of start-up activities be
expensed as incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The company adopted the SOP 98-5 effective January 1, 1999
and such adoption did not have a significant effect on the results of operations
or financial position.

     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. LOSS ON DISCONTINUED OPERATIONS

     In November 1999, following the filing of voluntary bankruptcy petitions
for the Resource Network subsidiaries and the plan to liquidate the R-Net
division, as indicated in Note 1, Coram disclosed as Net Liabilities of R-Net
Segment in the Consolidated Financial Statements, the excess of R-Net's
liabilities over assets. Coram also reflected separately R-Net's operating
results in the Consolidated Statement of Operation as Discontinued Operations.

     The Loss from Operations of Discontinued Operations of R-Net reflected in
the company's Consolidated Statement of Operations includes the following (in
thousands):

<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                      --------------------------------
                                                        1999        1998        1997
                                                      --------    --------    --------
<S>                                                   <C>         <C>         <C>
Net Sales...........................................  $ 74,432    $ 61,596    $ 20,266
                                                      ========    ========    ========
Gross Profit (Loss).................................  $ (8,003)   $ 13,608    $  5,825
                                                      ========    ========    ========
Loss from Operations of Discontinued Operations.....  $(28,411)   $   (108)   $ (2,105)
                                                      ========    ========    ========
</TABLE>

     The $17.6 million Loss from Disposal of Discontinued Operations of the
segment includes $1.5 million of loss from operations from the November 12, 1999
measurement date to December 31, 1999, including $2.9 of Net Sales during this
period. The Loss from Operations of Discontinued Operations also includes $5.5
million of reserves for severance, litigation, facility costs and other
wind-down costs, and $10.6 million for asset impairment reserves.

                                      F-12
<PAGE>   71
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The components of the net liabilities of the discontinued operations
included in the Consolidated Balance Sheets are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1999        1998
                                                              --------    --------
<S>                                                           <C>         <C>
  Cash......................................................  $  2,022    $     --
  Accounts Receivable, net..................................        --      14,808
  Other Current Assets......................................        --          80
  Property, Plant, & Equipment, net.........................        --       1,702
  Intercompany payable......................................      (437)         --
  Accounts payable..........................................   (31,490)    (24,894)
  Accrued expenses..........................................    (4,613)       (371)
                                                              --------    --------
  Net liabilities of R-Net Segment..........................  $(34,518)   $ (8,675)
                                                              ========    ========
</TABLE>

4. CAREMARK LITIGATION SETTLEMENT

     In June 1997, the company recorded settlement income of $156.8 million
which represents a $165.0 million settlement with Caremark, less related costs
of $8.2 million. The company and Caremark settled certain litigation arising out
of the purchase of the Caremark Business in 1995. 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, which were settled at a nominal gain in June 1998. 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 (now known as PricewaterhouseCoopers LLP) related to the lawsuit.
See Note 13.

5. TERMINATED MERGER WITH IHS

     On October 19, 1996, the company, 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. 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.

6. SALE OF LITHOTRIPSY BUSINESS

     In 1997, the company owned two lithotripsy partnerships and a controlling
interest in 11 lithotripsy partnerships. The company also owned a lithotripsy
management company and a lithotripter maintenance company. On August 20, 1997,
the company signed an agreement with IHS for the sale of the company's interest
in the lithotripsy business. Effective September 30, 1997, the company completed
the transaction as to all of its

                                      F-13
<PAGE>   72
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Lithotripsy Business other than its interests in three lithotripsy partnerships.
The company's interests in two of these partnerships were conveyed to IHS
effective October 3, 1997. Proceeds on the sale of the Lithotripsy Business in
1997 totaled $126.6 million and the company recognized a gain of $26.7 million.

     Effective June 1, 1998, the company signed an agreement with IHS for the
sale of the company's remaining lithotripsy partnership for an aggregate
purchase price of $1.0 million payable in common stock of IHS. As a result, the
company recognized a gain of $0.7 million in 1998.

7. ACQUISITIONS AND RESTRUCTURING

     Acquisitions. The acquisition activity during the year ended December 31,
1998 was limited to the completion of the purchase of two infusion branches for
approximately $2.5 million in cash. The acquisition was accounted for as a
purchase. Individually and in the aggregate, the results of operations of this
business for periods prior to its 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,
1999, the company may be required to pay, under such contingent obligations,
approximately $1.7 million which are subject to increase based 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, approximately $0.9 million of these contingent obligations,
subject to increase, may be paid in cash. In the period these payments become
probable, they are recorded as additional goodwill. Payments made during the
years ended December 31, 1999, 1998 and 1997 were $0.4 million, $0.3 million,
and $0.6 million, respectively.

     Merger and Restructuring. As a result of the formation of Coram and the
acquisition of substantially all of the assets of the alternate site infusion
business of Caremark, Inc., a subsidiary of Caremark International, Inc. (the
"Caremark Business"), during May 1995, the company initiated a restructuring
plan (the "Caremark Business Consolidation Plan") and charged $25.8 million to
operations as a restructuring cost. Certain additional restructuring costs
totaling approximately $11.4 million were incurred and accounted for as
adjustments to the purchase price of the Caremark Business in 1995. In December
1998 and 1999, the company evaluated the estimated costs to complete the
Caremark Business Consolidation Plan and other accruals and recognized a
restructure reversal benefit of $0.7 million and $0.2 million, respectively.

     During January 1999, the company undertook an organizational realignment to
affect a functional reporting structure (the "Field Reorganization Plan") and
charged $1.0 million to operations as a restructuring cost. The Field
Reorganization Plan's restructuring cost relates to severance payments, fringe
benefits and taxes for approximately 25 severed employees.

     During December 1999, the company initiated an organizational restructure
and strategic repositioning plan (the "Coram Restructure Plan") and charged $4.8
million to operations as a restructuring cost. The Coram Restructure Plan will
result in the closing of facilities and reduction of personnel. Personnel
reduction costs of $2.5 million include severance payments, fringe benefits and
taxes related to over 200 employees to be terminated. Facility closing costs
include $2.3 million of rent, common area maintenance and utility costs, offset
by sublease arrangements as applicable, for fulfilling lease commitments on
approximately fifteen branch and corporate facilities that will be closed as
part of the restructuring.

     During July 1999, the company adopted a restructuring plan associated with
the reorganization of the R-Net call center operations responsible for managing
the Master Agreement with Aetna (the "R-Net Restructure Plan"). The R-Net
Restructure Plan resulted in an initial charge to operations of $5.1 million. In
November 1999, prior to the R-Net decision to file voluntary Chapter 11
bankruptcy petitions, the company evaluated the estimated cost to complete the
R-Net Plan and revised the initial charge to $4.3 million, which consisted of
accruals for restructuring of $2.8 million for facility costs and $0.6 million
for personnel reduction costs, and a
                                      F-14
<PAGE>   73
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

loss on impairment of assets charge for $0.9 million. As a result of the plan
for R-Net liquidation as described in Note 1 and 3, these charges are included
in the Loss from Discontinued Operations for the year-ended December 31, 1999
and the related restructuring accrual and impairment of fixed assets is
reflected in the net liability of discontinued operations as of December 31,
1999.

     Under the Caremark Business Consolidation Plan, the Field Reorganization
Plan and the Coram Restructure Plan, the company has made total payments,
disposals and reversals as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                         BALANCE AT
                                             THROUGH DECEMBER 31, 1999                DECEMBER 31, 1999
                                  -----------------------------------------------   ---------------------
                                      CASH       NON-CASH             RESTRUCTURE   FUTURE CASH    TOTAL
                                  EXPENDITURES   CHARGES     TOTAL     REVERSAL     EXPENDITURE   CHARGES
                                  ------------   --------   -------   -----------   -----------   -------
<S>                               <C>            <C>        <C>       <C>           <C>           <C>
Caremark Business Consolidation
  Plan:
  Personnel Reduction Costs.....    $11,300       $   --    $11,300      $ --         $   --      $11,300
  Facility Reduction Costs......      9,664        3,900     13,564       943          2,193       16,700
                                    -------       ------    -------      ----         ------      -------
          Total Restructuring
            Costs...............    $20,964       $3,900    $24,864      $943         $2,193      $28,000
                                    =======       ======    =======      ====         ======      =======
Field Reorganization Plan:
  Personnel Reduction Costs.....    $   909       $   --    $   909      $ --         $   41      $   950
                                    -------       ------    -------      ----         ------      -------
          Total Restructuring
            Costs...............    $   909       $   --    $   909      $ --         $   41      $   950
                                    =======       ======    =======      ====         ======      =======
Coram Restructure Plan:
  Personnel Reduction Costs.....    $     3       $   --    $     3      $ --         $2,559      $ 2,562
  Facility Reduction Costs......         --           --         --        --          2,294        2,294
                                    -------       ------    -------      ----         ------      -------
          Total Restructuring
            Costs...............    $     3       $   --    $     3      $ --         $4,853      $ 4,856
                                    =======       ======    =======      ====         ======      =======
</TABLE>

     The balance in the "Accrued Merger and Restructuring" liability at December
31, 1999 consists of future cash expenditures related to the Caremark Business
Consolidation Plan of $2.2 million, the Coram Restructure Plan of $4.9 million,
and other accruals of $0.3 million. The other accruals are for estimated
expenditures for other closed facilities and personnel reduction costs.

     The Company estimates that the future cash expenditures related to the
restructuring plans stated above will be made in the following periods: 55%
through December 31, 2000, 14% through December 31, 2001, 14% through December
31, 2002, and 17% thereafter.

8. PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Leasehold improvements......................................  $  4,503   $  4,486
Equipment and other.........................................    46,078     44,490
Furniture and fixtures......................................     6,898      6,421
                                                              --------   --------
                                                                57,479     55,397
Less accumulated depreciation and amortization..............   (35,281)   (30,536)
                                                              --------   --------
                                                              $ 22,198   $ 24,861
                                                              ========   ========
</TABLE>

     The above includes immaterial amounts of equipment under capital leases.

                                      F-15
<PAGE>   74
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Capital expenditures in 1999 and 1998, respectively, have consisted
primarily of $2.6 million and $6.2 million, respectively, of multi-therapy
infusion pumps and related equipment and supplies to service the growth in the
alternate site infusion therapy business. In 1999 and 1998, the company also
purchased $2.5 million and $3.3 million, respectively, of communication and
information systems.

9. LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Series A Senior Subordinated Unsecured Notes................  $166,825   $153,785
Series B Senior Subordinated Unsecured Convertible Notes....    91,474     87,922
New Senior Credit Facility..................................    44,000         --
Other obligations, including capital leases, at interest
  rates ranging from 11% to 15%, collateralized by certain
  property and equipment....................................       753        715
                                                              --------   --------
                                                               303,052    242,422
Less current scheduled maturities...........................      (390)      (260)
                                                              --------   --------
                                                              $302,662   $242,162
                                                              ========   ========
</TABLE>

     As of December 31, 1999, the company's principal credit and debt agreements
included (i) a Securities Exchange Agreement (the "Securities Exchange
Agreement") dated May 6, 1998 with Cerberus Partners, L.P., Goldman Sachs Credit
Partners, L.P. and Foothill Capital Corporation (collectively known as the
"Holders") and the related Series A Senior Subordinated Unsecured Notes (the
"Series A Notes") and the Series B Senior Subordinated Unsecured Convertible
Notes (the "Series B Notes") contemplated thereby and (ii) a new senior credit
facility with Foothill Income Trust, L.P., Cerberus Partners, L.P. and Goldman
Sachs Credit Partners L.P. (collectively known as the "Lenders") and Foothill
Capital Corporation, as Agent. Under the outstanding credit and debt agreements,
the company is precluded from paying cash dividends during the term of
indebtedness.

     Securities Exchange Agreement. On May 6, 1998, the company entered into the
Securities Exchange Agreement with the Holders of its subordinated rollover note
(the "Rollover Note"). As long as the Rollover Note was outstanding, the Holders
had the right to receive warrants to purchase up to 20% of the outstanding
shares of the common stock of the company (the "Warrants") on a fully diluted
basis. The Securities Exchange Agreement provided for the cancellation of the
Rollover Note (including deferred interest and fees) and the Warrants in an
exchange (the "Exchange"), effective April 13, 1998, for the payment of $4.3
million in cash and the issuance by the company to the Holders of (i) $150.0
million in principal amount Series A Notes and (ii) $87.9 million in original
principal amount of 8% Series B Notes. In addition, under the Securities
Exchange Agreement, the Holders of the Series A and Series B Notes were given
the right to approve certain new debt and the right to name one director to the
company's Board of Directors, who was elected to the board in June 1998 and
reelected in August 1999.

     On April 9, 1999, the company entered into Amendment No. 2 (the "Note
Amendment") to the Securities Exchange Agreement with the Holders. Pursuant to
the Note Amendment, the outstanding principal amount of Series B Notes is
convertible into shares of the company's common stock, par value $.001 per share
(the "Common Stock"), at a price of $2.00 per share (subject to customary
anti-dilution adjustments). Prior to entering into the Note Amendment, the
Series B Notes were convertible into Common Stock at a price of $3.00, which
price was subject to downward (but not upward) adjustment based on prevailing
market prices for the Common Stock on each of April 13, 1999 and October 13,
1999. Based on reported closing prices for trading in the Common Stock prior to
April 13, 1999, this conversion price would have been adjusted to below $2.00 on
such date had the company not entered into the Note Amendment. Pursuant to the
Note Amendment, the parties

                                      F-16
<PAGE>   75
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

also increased the interest rate applicable to the Series A Notes from 9.875% to
11.5% per annum. The Securities Exchange Agreements, pursuant to which the
Series A Notes and the Series B Notes were issued, contains certain other
customary covenants and events of default. At December 31, 1999, the company was
in compliance with all of these covenants, other than covenants relating to
certain contractual relationships its Coram Resource Network, Inc. and Coram
Independent Practice Association, Inc. subsidiaries had with certain parties
that were contracted to provide services pursuant to the Master Agreement,
effective May 1, 1998, with Aetna and to certain covenants relating to the
capitalization of certain subsidiaries. The company has, however, received
waivers from its lenders regarding such noncompliance. In addition, the filing
of the voluntary chapter 11 bankruptcy petitions by Coram Resource Network, Inc.
and Coram Independent Practice Association, Inc. caused defaults under the
Exchange Agreement; however, such defaults were waived by the Lenders. In
connection with such waivers and the waivers provided for certain matters of
non-compliance with certain covenants set forth in the New Senior Credit
Facility (as described below), the company and the Holders entered into an
amendment on November 15, 1999 which the Holders agreed that no interest on the
Series A and Series B Notes would be due for the period from November 15, 1999
through the earlier of (i) final resolution of the litigation with Aetna or (ii)
May 15, 2000. There can be no assurance as to whether further covenant
violations or defaults will occur in future periods and whether any necessary
waivers will be forthcoming at that time.

     Series A Notes. The Series A Notes mature in May 2001 and bore interest at
an initial rate of 9.875% per annum payable quarterly in arrears in cash or
through the issuance of additional Series A Notes at the election of the company
except that Holders can require the company to pay interest in cash if the
company exceeds a certain interest coverage ratio. Pursuant to the Note
Amendment, the parties increased the interest rate applicable to the Series A
Notes to 11.5% per annum. During the year ended December 31, 1999, interest
expense on the Series A Notes was approximately $16.9 million. On January 15,
2000, Series A Notes totaling approximately $1.6 million were issued in lieu of
a cash payment for interest due on such date.

     As described above, no interest will accrue on the outstanding balance
under the Series A Notes for the period from November 15, 1999 through the
earlier of (i) resolution of the litigation with Aetna or (ii) May 15, 2000.
Following the expiration of such period of time, the interest rate applicable to
the Series A Notes shall return to the prior rate, 11.5% per annum.

     Series B Notes. The Series B Notes mature in April 2008 and bear interest
at the rate of 8% per annum, payable quarterly in arrears in cash or through the
issuance of additional Series B Notes at the election of the company. Pursuant
to the Note Amendment, the outstanding principal amount of Series B Notes are
convertible into shares of the company's Common Stock at a price of $2.00 per
share subject to customary anti-dilution adjustments including adjustments for
sale of common stock other than pursuant to existing obligations or employee
benefit plans at a price below the conversion price prevailing at the time of
such sale. Cash will be paid in lieu of fractional shares upon conversion of the
Series B Notes. During the year ended December 31, 1999, interest expense on the
Series B Notes was $7.1 million. On January 15, 2000 additional Series B Notes
totaling approximately $0.6 million were issued in lieu of a cash payment for
interest due on such date.

     As described above, no interest will be due on the outstanding balance
under the Series B Notes for the period from November 15, 1999 through the
earlier of (i) resolution of the litigation with Aetna or (ii) May 15, 2000.
Following the expiration of such period of time, the interest rate applicable to
the Series B Notes shall return to the prior rate, 8.0% per annum.

     The Series A and Series B Notes are redeemable, in whole or in part, at the
option of the Holders thereof in connection with any change of control of the
company (as defined in the Securities Exchange Agreement), if the company ceases
to hold and control certain interests in its significant subsidiaries, or upon
the acquisition of the company or certain of its subsidiaries by a third party.
In such instances, the Series A and Series B Notes are redeemable at 103% of the
then outstanding principal amount plus accrued interest. The Series B Notes are
also redeemable at the option of the Holders thereof upon maturity of the Series
A Notes at the outstanding principal

                                      F-17
<PAGE>   76
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

amount thereof plus accrued interest. In addition, the Series A Notes are
callable at 103% of the then outstanding principal amount plus accrued interest
at the option of the company.

     Exchange; New Senior Credit Facility. The consummation of the Exchange was
contingent upon the satisfaction of certain conditions prior to closing of the
Securities Exchange Agreement on June 30, 1998. All conditions were satisfied
with the exception of the condition requiring the company to execute an
agreement for a new senior credit facility. Accordingly, on June 30, 1998, the
company entered into the First Amendment and Waiver (the "Amendment") to the
Securities Exchange Agreement, and the Exchange was consummated. The Amendment
waived the condition under the Securities Exchange Agreement requiring the
company to execute an agreement for a new senior credit facility on or prior to
June 30, 1998. In addition, under the Amendment, the Holders of the Series A and
Series B Notes agreed to extend the company up to $60.0 million of senior
secured debt (the "New Senior Credit Facility"), subject to the completion of
definitive agreements on or prior to September 30, 1998. On August 20, 1998, the
company entered into a definitive agreement for the New Senior Credit Facility
providing for the availability of the $60.0 million facility for acquisitions,
working capital, letters of credit and other corporate purposes. The
availability is subject to certain borrowing base calculations as defined in the
underlying agreement. The New Senior Credit Facility matures February 26, 2001
and bears an interest rate of prime plus 1.5%, payable in arrears on the first
business day of each month. The interest rate was 10.0% at December 31, 1999.
The New Senior Credit Facility is secured by the capital stock of the company's
subsidiaries, as well as the accounts receivable and certain other assets held
by the company and its subsidiaries. Under the New Senior Credit Facility, among
other nominal fees, the company was required to pay an upfront fee of 1.0% or
$0.6 million and is liable for commitment fees on the unused facility of 3/8 of
1.0% per annum, due quarterly in arrears. During the year ended December 31,
1999, interest and related fees on the New Senior Credit Facility were $3.0
million. In addition, the terms of the New Senior Credit Facility provide for
the issuance of warrants to purchase up to 1.9 million shares of common stock of
the company at $0.01 per share, subject to customary adjustments (the "1998
Warrants"). The 1998 Warrants were valued at their fair value at the date of
issuance, and were accounted for as deferred costs to be amortized over the life
of the New Senior Credit Facility. The company charged $1.6 million to interest
expense during the year ended December 31, 1999 related to the 1998 Warrants.
The terms of the New Senior Credit Facility also provide for the issuance of
letters of credit of up to $25.0 million provided that available credit would
not fall below zero. As of December 31, 1999, the Holders had issued letters of
credit totaling $2.5 million thereby reducing the company's availability under
the New Senior Credit Facility by that amount. The terms of the New Senior
Credit Facility also provide for a fee of 1.0% per annum on the outstanding
letter of credit obligations that is due in arrears on the first business day of
each month. The terms of the New Senior Credit Facility also provide for
additional fees to be paid on demand to any letter of credit issuer pursuant to
the application and related documentation under which such letters of credit are
issued. As of December 31, 1999, such fees were 0.825% per annum on the amount
of outstanding letter of credit obligations. The New Senior Credit Facility
contains certain other customary covenants and events of default. At December
31, 1999, the company received waivers of non-compliance with such covenants
through December 31, 2000. There can be no assurance as to whether further
covenant violations will occur in periods ending after December 31, 2000 and
whether necessary waivers will be forthcoming at that time.

     At March 16, 2000, the New Senior Credit Facility had an available
borrowing base of $60.0 million, of which, $40.5 million had been drawn,
including $14.5 million relating to the letters of credit that had been
delivered in accordance with the Master Agreement with Aetna. In addition, after
deducting from the borrowing base the other letters of credit obligations
totaling $2.5 million, the total available under the facility is $17.0 million
as of March 16, 2000.

     Secured Promissory Notes. In July 1998, the company issued secured
promissory notes (the "Promissory Notes") in the aggregate principal amount of
$6.0 million to the Holders of the Series A and B Notes. The Promissory Notes
matured August 20, 1998 and carried an interest rate of 12% per annum, payable
in cash on the maturity date of the Promissory Notes. In August 1998, the
company repaid in full all principal and interest totaling approximately $6.1
million.
                                      F-18
<PAGE>   77
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of December 31, 1997, the company's principal credit and debt agreements
consisted of arrangements that were entered into on April 6, 1995, at the time
of the acquisition of the Caremark Business and included (i) borrowings under a
Credit Agreement with Chase Manhattan Bank (formerly Chemical Bank), as Agent,
(the "Former Senior Credit Facility") and (ii) the Rollover Note.

     Former Senior Credit Facility. In January 1998, the company repaid all
principal, interest and related fees totaling approximately $80.1 million due
under the Former Senior Credit Facility and terminated such facility. Interest
on the Former Senior Credit Facility was based on margins over certain domestic
and foreign indices and was accruing at the annual rate of 8.94% upon repayment.
Additionally, in 1995, warrants were issued to the company's lenders under the
former Senior Credit Facility valued at approximately $8.0 million, their value
at the date of issuance, and were accounted for as interest expense through
March 1997. Accordingly, the company incurred interest of approximately $1.6
million for the year ended December 31, 1997 in relation to these warrants.

     Rollover Note. Through April 13, 1998, the Rollover Note carried an
interest rate that was based on various indices plus a margin that increased by
0.25% quarterly and was 16.75% upon the effective cancellation date. During the
years ended December 31, 1998 and 1997, $10.3 million and $30.2 million was
accrued on the Rollover Note, respectively. The Warrants related to the Rollover
Note were accounted for as interest expense and additional paid-in capital.
Accordingly, the company recorded interest expense related to the Warrants of
$3.2 million and $18.2 million in the years ended December 31, 1998 and 1997
respectively.

     At December 31, 1999, 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>
2000.....................................................   $    390
2001.....................................................    211,164
2002.....................................................          8
2003.....................................................         10
2004.....................................................          6
Thereafter...............................................     91,474
                                                            --------
                                                            $303,052
                                                            ========
</TABLE>

10. INCOME TAXES

     The amount of income tax expense allocated to continuing operations and
discontinued operations are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
                                                              1999     1998      1997
                                                              -----   -------   -------
<S>                                                           <C>     <C>       <C>
Continuing Operations.......................................  $440    $2,300    $7,550
Discontinued Operations.....................................    --        --        --
                                                              ----    ------    ------
          Total income tax expense..........................  $440    $2,300    $7,550
                                                              ====    ======    ======
</TABLE>

                                      F-19
<PAGE>   78
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The components of the consolidated income tax expense attributable to
continuing operations were as follows (in thousands):

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
                                                              1999     1998      1997
                                                              -----   -------   -------
<S>                                                           <C>     <C>       <C>
Current:
  Federal...................................................  $ 41    $1,750    $5,000
  State.....................................................   399       550     2,550
                                                              ----    ------    ------
          Total Current.....................................   440     2,300     7,550
                                                              ----    ------    ------
Deferred:
  Federal...................................................    --        --        --
  State.....................................................    --        --        --
                                                              ----    ------    ------
          Total Deferred....................................    --        --        --
                                                              ----    ------    ------
  Income tax expense........................................  $440    $2,300    $7,550
                                                              ====    ======    ======
</TABLE>

     The following table reconciles the federal statutory rate to the effective
income tax expense rate attributable to continuing operations:

<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                           ---------------------------
                                                           1999       1998       1997
                                                           -----      -----      -----
<S>                                                        <C>        <C>        <C>
Federal statutory rate...................................  (35.0)%    (35.0)%     35.0%
Valuation allowance......................................   37.5       25.3      (43.0)
State income taxes, net of federal income tax benefit....   (6.0)      (1.8)       4.8
Goodwill.................................................    3.7       13.2        1.2
Other....................................................    0.4       10.2        7.6
                                                           -----      -----      -----
Effective income tax expense rate........................    0.6%      11.9%       5.6%
                                                           =====      =====      =====
</TABLE>

     The 1999 effective income tax rate is higher than the statutory rate
because the company is not recognizing the benefit of the current year loss. The
1998 effective income tax rate is substantially higher than the statutory rate
because the company is not recognizing the benefit of the current year loss and
is adjusting its estimate for the dispute with the Internal Revenue Service
described below. 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.

                                      F-20
<PAGE>   79
                          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,
                                                              ---------------------
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
Deferred tax assets:
  Goodwill, net of amortization.............................  $  47,331   $  49,508
  Restructuring costs.......................................      6,312       3,289
  Net operating loss carryforwards..........................     84,784      49,262
  AMT credit carryforwards..................................      4,478       4,478
  Accrued litigation........................................         --       1,226
  Allowance for notes receivable............................        481         739
  Allowance for doubtful accounts...........................     14,353       7,441
  Intangible assets.........................................      3,355       2,906
  Resource Network reserves.................................      9,547          --
  Accrued bonuses...........................................        903       1,819
  Accrued vacation..........................................        719         422
  Other accruals............................................      1,961       1,855
  Other.....................................................      1,763       1,446
                                                              ---------   ---------
          Total gross deferred tax asset....................    175,987     124,391
  Less valuation allowance..................................   (174,142)   (119,321)
                                                              ---------   ---------
          Total deferred tax asset..........................      1,845       5,070
Deferred tax liabilities:
  Property and equipment....................................     (1,427)     (3,841)
  Amortization of intangibles...............................         --        (169)
  Partnerships..............................................         --        (144)
  Other.....................................................       (418)       (916)
                                                              ---------   ---------
          Total deferred tax liabilities....................     (1,845)     (5,070)
                                                              ---------   ---------
          Net deferred tax asset (liability)................  $      --   $      --
                                                              =========   =========
</TABLE>

     Deferred tax assets have been limited to amounts expected to be recovered,
offset against deferred tax liabilities that would otherwise become payable in
the carryforward period for 1999 and 1998. 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, 1999, the company had net operating loss carryforwards
("NOLs") for federal income taxes of approximately $214.7 million which are
available to offset future federal taxable income, expiring in varying amounts
in the years 2002 through 2019. This includes approximately $46.1 million
generated prior to the Four-Way Merger subject to an annual usage limitation of
approximately $4.5 million.

     In January 1999, the Internal Revenue Service ("IRS") completed the
examination of the federal income tax return of the company for the year ended
September 30, 1995, and proposed substantial adjustments to the prior tax
liabilities of the company. The company has agreed to adjustments of $24.4
million that affect only the net operating loss carryforwards available. The
company does not agree with the other proposed adjustments regarding the
deduction of warrants, write-off of goodwill and the specified liability portion
of the 1995 loss which would, if the IRS prevails, affect the prior years' tax
liabilities. In May 1999, the company received a statutory notice of deficiency
with respect to the proposed adjustments. The alleged deficiency totaled
approximately $12.7 million plus interest and penalties to be determined. The
company is contesting the notice of deficiency through administrative
proceedings and litigation, and will vigorously defend its position. The most

                                      F-21
<PAGE>   80
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

significant adjustment proposed by the IRS relates to the ability of the company
to categorize certain net operating losses as specified liability losses and
offset income in prior years, for which the company has previously received
refunds in the amount of approximately $12.7 million. In August 1999, the
company filed a petition with the United States Tax Court contesting the notice
of deficiency. The IRS responded to the petition and requested the petition be
denied. The IRS Appeals office currently has jurisdiction over the case. Due to
the uncertainty of final resolution, the company's financial statements include
a reserve for these potential liabilities. No assurance can be given that the
company will prevail given the early phase of this matter and the uncertainties
inherent in any proceeding with the IRS or in litigation. If the company does
not prevail with respect to the proposed material adjustments, the financial
position and liquidity of the company could be materially adversely affected.

11. 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.

     In 1997, the company's Board of Directors approved a contingent bonus to
Donald J. Amaral, former Chairman and Chief Executive Officer and current
Director, for his success in the financial turnaround of Coram. Under the
agreement, subject to certain material terms and conditions, Mr. Amaral was paid
$1.0 million following the refinancing of the company's debt and to be paid $4.0
million following a sale of the company. The company recorded a $1.0 million
expense for the refinancing payment in 1998 and paid $0.5 million in 1998 and
$0.5 million in the first quarter of 1999.

     A director of the company also previously served on the Board of Directors
of Sabratek Corporation ("Sabratek") from October 1992 through August 23, 1999.
In 1997, the company purchased from Sabratek approximately $11.5 million in
multi-therapy infusion pumps and $4.3 million in related equipment and supplies.
In 1999 and 1998, the company purchased $2.8 and $7.8 million from Sabratek for
equipment and supplies. Sabratek filed for Chapter 11 bankruptcy in January
2000.

     The Chairman, CEO and President, Daniel D. Crowley, owns a consulting
company from which the company purchases services. In 1999, the company paid
$0.2 million for consulting services.

12. STOCKHOLDERS' EQUITY

     At December 31, 1999, 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, 1999, 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 a 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 Stockholders Rights Agreement expired in accordance
with its terms in 1999.

     The Exchange provided for the cancellation of the Warrants related to the
Rollover Note. In April 1998, the company cancelled 8.4 million warrants with a
fair value of $12.7 million in exchange for payment of $4.3 million in cash and
$8.4 million in the original principal amount of the Series B Notes.

     In August 1998, in connection with its New Senior Credit Facility, the
company provided for the issuance of the 1998 Warrants to purchase up to 1.9
million shares of the company's common stock to the Holders. The 1998 Warrants
have an exercise price of $0.01 per share, subject to customary adjustments.

                                      F-22
<PAGE>   81
                          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 1997, the Purchase Plan was amended to increase the number of
common shares issuable from 0.3 million to 1.0 million. The Purchase Plan was
re-activated in January 1998 after a suspension in the fourth quarter of 1996.
The Purchase Plan was re-suspended in December 1999.

     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 10.0 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.

     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 1999, 1998, and 1997, respectively:
risk free interest rates ranging from 5.28% to 6.03%, 4.38% to 5.59%, and 5.73%
to 6.57%; a dividend yield of 0% for each year; volatility factors of the
expected market price of the company's common stock of $0.95, $0.62, and $0.62;
and an expected life of the option of one year past vesting for each year.

     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 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

                                      F-23
<PAGE>   82
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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>
                                                           YEARS ENDED DECEMBER 31,
                                                        ------------------------------
                                                          1999       1998       1997
                                                        --------   --------   --------
<S>                                                     <C>        <C>        <C>
Pro forma income (loss) from continuing operations....  $(70,295)  $(24,256)  $122,743
Pro forma earnings (loss) from continuing operations
  per common share....................................  $  (1.42)  $  (0.50)  $   2.59
Pro forma earnings (loss) from continuing operations
  per share -- assuming dilution......................  $  (1.42)  $  (0.50)  $   2.25
</TABLE>

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

<TABLE>
<CAPTION>
                                            1999                  1998                  1997
                                     -------------------   -------------------   -------------------
                                               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...   9,221      $2.77      7,561      $3.39      6,611      $5.41
  Granted:
     Price equal to fair value.....   3,302       1.41      3,119       2.18      5,153       2.77
     Exercised.....................       0          0         (1)      2.63       (327)      3.21
     Forfeited.....................  (2,619)      2.41     (1,458)      4.65     (3,876)      5.98
                                     ------                ------                ------
Outstanding -- end of year.........   9,904       2.42      9,221       2.77      7,561       3.39
                                     ======                ======                ======
Exercisable at end of year.........   5,669                 4,601                 3,375
                                     ======                ======                ======
Weighted-average fair value of
  options granted during the year:
  Price equal to fair value........  $ 0.91                $ 1.05                $ 1.19
</TABLE>

     Exercise prices for options outstanding and the weighted-average remaining
contractual life of those options at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                      OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE
                       -------------------------------------------------   ------------------------------
                         NUMBER      WEIGHTED-AVERAGE                        NUMBER
RANGE OF               OUTSTANDING      REMAINING       WEIGHTED-AVERAGE   EXERCISABLE   WEIGHTED-AVERAGE
EXERCISE PRICES          (000)S      CONTRACTUAL LIFE    EXERCISE PRICE      (000)S       EXERCISE PRICE
---------------        -----------   ----------------   ----------------   -----------   ----------------
<S>                    <C>           <C>                <C>                <C>           <C>
$ .63 - $  .63.......        10            9.71              $ .63                0           $   0
$ .75 - $  .75.......     1,000            9.91                .75                0               0
$ .81 - $ 1.81.......       915            9.48               1.17              108            1.68
$2.00 - $ 2.00.......     1,221            9.18               2.00              103            2.00
$2.25 - $ 2.25.......     1,177            8.61               2.25              446            2.25
$2.38 - $ 2.50.......     1,267            7.64               2.47              902            2.46
$2.63 - $ 2.63.......     1,810            6.09               2.63            1,670            2.63
$3.13 - $ 3.13.......        92            7.96               3.13               92            3.13
$3.40 - $ 3.40.......     2,200            5.78               3.40            2,200            3.40
$4.38 - $30.56.......       212            6.58               6.55              148            7.24
$ .63 - $30.56.......     9,904            7.63              $2.42            5,669           $2.97
</TABLE>

                                      F-24
<PAGE>   83
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Common shares reserved for future issuance include approximately 1.3
million shares related to options outside of the 1994 Plan, 0.4 million shares
related to the Purchase Plan and 3.3 million shares related to stock purchase
warrants.

     Warrants to Purchase Common Stock. The following warrants are outstanding
or issuable at December 31, 1999:

<TABLE>
<CAPTION>
                                                EXERCISE PRICE
                                     SHARES       PER SHARE              EXPIRATION DATE
                                    ---------   --------------           ---------------
<S>                                 <C>         <C>              <C>
Issued to lenders under Former
  Senior Credit Facility (Note
  9)..............................  1,357,469   Nominal          October 13, 2000
Issued by Merged Entities prior to
  Four-Way Merger.................     34,718   $12.58 - $18.79  March 6, 2001 to none
Issued to Senior Lenders (Note
  9)..............................  1,900,000   $ 0.01           Expiration is earlier of New
                                                                 Senior Credit Facility
                                                                 cancellation or termination
                                                                 date, or maturity of February
                                                                 26, 2001.
</TABLE>

13. 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, 1999, 1998 and 1997 was
approximately $12.2 million, $11.6 million and $12.3 million, respectively,
exclusive of amounts charged to restructuring reserves. At December 31, 1999 the
aggregate future minimum lease commitments were as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING                                                  CAPITAL    OPERATING
DECEMBER 31,                                                  LEASES      LEASES
------------                                                  -------    ---------
<S>                                                           <C>        <C>
2000........................................................   $263       $11,846
2001........................................................    158         8,640
2002........................................................     11         5,977
2003........................................................     11         5,160
2004........................................................      6         3,189
Thereafter..................................................     --         2,162
                                                               ----       -------
          Total minimum lease payments......................    449        36,974
Less amounts representing interest..........................    (46)           --
                                                               ----       -------
Net minimum lease payments..................................   $403       $36,974
                                                               ====       =======
</TABLE>

     Capital lease obligations are included in other obligations. Operating
lease obligations are net of sublease rentals. Operating lease obligations
include $5.5 million, less $1.1 million of sublease rentals, accrued for as part
of the restructuring costs under the Caremark Business Consolidation Plan and
Coram Restructure Plan. Also included are lease obligations for R-Net of $4.7
million. As a result of the plan for disposition as described in Note 1 and Note
3, an accrual of $4.7 million for operating lease obligations of R-Net, less
$1.8 million of estimated sublease rentals are included in Loss from Disposal of
Discontinued Operation for the year-ended December 31, 1999 and accrued for in
the net liability for discontinued operations as of December 31, 1999.

     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

                                      F-25
<PAGE>   84
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees include all individuals over the age of 21 who have completed six
months of benefit-eligible service with the company. The company offered a
matching program of $.50 for every $1 contributed up to the first 6% of the
employee's 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, 1999,
1998 and 1997, the company's total contributions to these plans were
approximately $1.3 million, $2.0 million and $1.7 million, respectively.
Effective October 1, 1999, Coram amended its 401K benefit plan to make the
employer match discretionary. Currently, Coram is not matching employees'
contributions.

     Litigation. Coram filed a complaint (the "Coram Complaint") against Aetna
in the United States District Court for the Eastern District of Pennsylvania
(Civil Action No. 99-CV-3330) on June 30, 1999. The Coram Complaint sets forth
claims against Aetna for fraud, misrepresentation, breach of contract and
rescission relating to the Master Agreement between the parties for ancillary
network management services through the R-Net. Coram provided its notice of
termination of the Master Agreement effective June 30, 1999. Under the
arrangement, that was expected to last for five years, Coram managed and
provided home health care services for over 2,000,000 Aetna enrollees in eight
states for a stated monthly fee per enrollee. Coram began serving Aetna
enrollees under the Master Agreement on approximately July 1, 1998. On June 30,
1999, Coram received a copy of a complaint (the "Aetna Complaint") that had been
filed by Aetna on June 29, 1999 in the Court of Common Pleas of Montgomery
County, Pennsylvania (Case No. 99-11025). The Aetna Complaint sought specific
performance, injunctive relief and declaratory relief to compel Coram to perform
under the Agreement, including the payment of compensation to the healthcare
providers that have rendered and continue to render services to Aetna's health
plan members. As stated in the Aetna Complaint, Aetna disputes Coram's right to
terminate the Agreement. Coram removed the Aetna Complaint to federal court, and
the Aetna Complaint is also pending in the United States District Court for the
Eastern District of Pennsylvania (Civil Action No. 99-CV-3378).

     On July 20, 1999, Aetna filed a counterclaim against Coram in the federal
court lawsuit brought by Coram (Civil Action No. 99-CV-3330). In its
counterclaim, Aetna has sued Coram for, among other things, breach of the Master
Agreement and fraudulent misrepresentation, contending Coram never intended to
perform the Master Agreement, defamation, interference with contractual
relations with providers and for interference with prospective contractual
relations with other companies that allegedly bid for the Master Agreement.
Aetna seeks in excess of $133.0 million in the lawsuit.

     The parties filed summary judgment motions with respect to various claims
raised by the other party. In February 2000, the Court issued a series of orders
regarding the summary judgment motions filed by the parties. Specifically, the
court granted Coram's summary judgment motions regarding the claims for specific
performance and injunctive relief made by Aetna in the Aetna Complaint
dismissing such claims as moot. The Court also granted a motion dismissing
Aetna's counterclaims against Coram and the other related Coram parties for
fraud, defamation, interference with contractual relations with providers and
for interference with prospective contractual relationships with other companies
that allegedly bid for the Master Agreement. Finally, the Court granted Aetna's
motion for summary judgement dismissing Coram's claims for misrepresentation,
fraud, and rescission. As a result of the Court's rulings, the tort claims of
both Coram and Aetna have been dismissed, and each party is pursuing breach of
contract claims against the other. Aetna seeks approximately $133 million for
its breach of contract claims against Coram and Coram seeks over $45 million for
its breach of contract claims against Aetna. The case has been placed on the
Court's April 2000 trial calendar.

     Coram intends to pursue its claims against Aetna vigorously and to put
forth a vigorous defense against all of the claims brought by Aetna against
Coram. Due to the uncertainties inherent in litigation, the ultimate disposition
of the Aetna litigation described in the preceding paragraphs cannot presently
be determined and no provision has been recorded in the company's Consolidated
Financial Statements for any recovery or loss that may result upon resolution of
the Aetna litigation described above. An adverse outcome in such litigation
could

                                      F-26
<PAGE>   85
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

have a material adverse effect on the financial position, results of operations
and liquidity of the company. See Note 3.

     On November 12, 1999, the Resource Network Subsidiaries filed voluntary
petitions under Chapter 11 of the United States Code in the United States
Bankruptcy Court for the District of Delaware, Case No. 99-2889 (MFW). On August
19, 1999, a small group of parties with claims against the R-Net filed an
involuntary bankruptcy petition under Chapter 11 against Coram Resource Network,
Inc. ("CRN") in the United States Bankruptcy Court for the District of Delaware.
The two proceedings were consolidated by stipulation of the parties and the case
is pending under the style, In Re Coram Resource Network, Inc. and Coram
Independent Practice Association, Inc., Case No. 99-2889 (MFW).

     Apria Healthcare, Inc. and one of its affiliates (collectively "Apria")
have also filed suit against the company and the Resource Network Subsidiaries
in the Superior Court of Orange County, California (Apria Healthcare, Inc. and
Apria Healthcare of New York State, Inc. v. Coram Healthcare Corporation, Coram
Resource Network, Inc. and Coram Independent Practice Association, Inc, Case No.
813264) regarding Apria's specific provider claims. The claims relate to
services that rendered as part of a network in connection with the Master
Agreement with Aetna. Apria's complaint alleges, among other things, that the
Resource Network Subsidiaries operated as the alter ego of Coram and, as a
result, Coram should be declared responsible for the alleged breaches of the
contracts that the Resource Network Subsidiaries had with Apria. The complaint
includes requests for declaratory, compensatory and other relief in excess of
$1.4 million. A notice has been filed with the Court notifying it of the
bankruptcy proceedings and contending that the case has, by operation of certain
provisions of the United States Bankruptcy Code, been stayed. If the case is
prosecuted against Coram despite the stay of the proceedings, Coram will pursue
all available grounds for dismissal and defend itself vigorously in the matter.
Due to the uncertainties inherent in litigation, the ultimate disposition of
this matter cannot presently be determined and no provision has been recorded in
the company's Consolidated Financial Statements for any loss that may result
upon resolution of the litigation with Apria. See Note 3.

     In January 1999, the Internal Revenue Service ("IRS") completed the
examination of Coram's federal income tax return of the company for the year
ended September 30, 1995, and proposed substantial adjustments to the prior tax
liabilities of the company. Coram has agreed to adjustments of $24.4 million
that only affect the net operating loss carryforwards available. Coram does not
agree with the other proposed adjustments regarding the deduction of warrants,
write-off of goodwill and the specified liability portion of the 1995 loss which
affects the prior year's tax liability. On May 14, 1999, Coram received a
statutory notice of deficiency, and the alleged deficiency totaled approximately
$12.7 million plus interest and penalties to be determined. The most significant
proposed adjustment relates to the ability of Coram to categorize certain net
operating losses as specified liability losses and offset income in prior years,
for which the company has previously received refunds in the amount of
approximately $12.7 million. On August 11, 1999, Coram filed a petition in the
United States Tax Court contesting the deficiency and the IRS filed a response
arguing that Coram's petition should be denied. Coram and the IRS have agreed to
pursue a trial date in the early part of 2001 with discovery proceeding during
2000. Coram is contesting the notice of deficiency through administrative
proceedings with the IRS and through the litigation in the Tax Court described
above. Coram will vigorously defend its current position. Due to the uncertainty
of final resolution, Coram's financial statements include a reserve for these
issues. Coram would, however, be required to pay from its cash resources any
deficiency resulting from resolution of the proposed adjustments, plus interest.
Due to the early phase of this matter and the uncertainties inherent in any
proceeding with the IRS or in litigation, no assurance can be given that Coram
will prevail. If Coram does not prevail with respect to the proposed material
adjustments, the financial position and long-term liquidity of Coram could be
materially adversely affected. See Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations: Risk Factors" and Note 10.

     Coram intends vigorously to defend itself in the matters described above.
Nevertheless, due to the uncertainties inherent in litigation and IRS
proceedings, the ultimate disposition of the matters described in the

                                      F-27
<PAGE>   86
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

preceding paragraphs cannot presently be determined. Accordingly, charges
recorded for various litigation settlements that are not individually material
to Coram and the reserve established for the tax case as discussed above, 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 in any such litigation or proceedings could have a material
adverse effect to the financial position, results of operations and liquidity of
the company.

     On July 7, 1997, Coram filed suit against Price Waterhouse LLP (now known
as PricewaterhouseCoopers LLP) in the Superior Court of San Francisco,
California, seeking damages in excess of $165.0 million. As part of the
settlement that resolved a case filed by the company against Caremark
International, Inc. and Caremark, Inc. (collectively "Caremark"), Caremark
assigned and transferred to the company all of Caremark's claims and causes of
action against Caremark's auditors, PricewaterhouseCoopers LLP, related to the
lawsuit filed by Coram against Caremark. This assignment of claims includes
claims for damages sustained by Caremark in defending and settling its lawsuit
with Coram. The case was dismissed from the court in California because of
inconvenience to witnesses with a right to re-file in Illinois. Coram re-filed
the lawsuit in state court in Illinois. PricewaterhouseCoopers LLP filed a
motion to dismiss Coram's lawsuit in the state court in Illinois on several
grounds, but their motion was denied on March 15, 1999. PricewaterhouseCoopers
LLP filed an additional motion to dismiss Coram's lawsuit in May 1999, and that
motion was dismissed on January 28, 2000. The lawsuit has progressed into the
discovery stage. There can be no assurance of any recovery from
PricewaterhouseCoopers LLP. See Note 4.

     Coram 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 financial
position, results of operations or liquidity of the company. Nevertheless, due
to the uncertainties inherent in litigation, the ultimate disposition of these
actions cannot presently be determined.

     Government Regulation. Under the Omnibus Budget Reconciliation Act of 1933
("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, unless the
financial relationship fits within an exception enumerated in Stark II or
regulations promulgated thereunder. 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. Coram has financial relationships with physicians and physician
owned entities in the form of medical director agreements and services
agreements pursuant to which the company provides pharmacy products. In each
case the relationship has been structured using an arrangement the company
believes to be consistent with applicable exceptions set forth in Stark II.

     In addition, the company is aware of certain referring physicians that have
had financial interest in the company through ownership of shares of the
company's common stock. The Stark II law includes an exception for the ownership
of publicly traded stock in certain companies with equity above certain levels.
This exception of Stark II requires the issuing company to have stockholders'
equity of at least $75 million either as of the end of its most recent fiscal
year or during the last three fiscal years. As of December 31, 1999, the
company's stockholders equity was below the required level, but average
stockholders' equity over the prior three years was above the required level.
Without an increase in Coram's stockholders' equity level prior to the end of
the fiscal year ending December 31, 2000, Coram would no longer qualify for such
exception and would be forced to cease accepting referrals of patients with
government sponsored benefit programs from physicians who own shares of Coram's
common stock.

                                      F-28
<PAGE>   87
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. 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, 1999 and 1998, the company's ability to borrow was limited.
At December 31, 1999 and 1998, the company had total debt carried at $303.1
million and $242.4 million, respectively. At December 31, 1999, the Series A and
Series B Notes were carried at $258.3 million and the Senior Credit Facility at
$44.0. The company estimates that its fair value of these financial instruments
approximates their face value based on the interest rate, security, covenants
and remaining term to maturity.

     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 9.

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

     The 1999 and 1998 quarterly results have been restated from the amounts
previously reported by the company on Form 10-Q for consistent presentation with
the fourth quarter of 1999 presentation to reflect the R-Net division as
Discontinued Operations.

<TABLE>
<CAPTION>
                                                      FOURTH     THIRD      SECOND     FIRST
                                                     QUARTER    QUARTER    QUARTER    QUARTER
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Year Ended December 31, 1999
  Net revenue......................................  $134,338   $132,939   $129,571   $124,348
                                                     ========   ========   ========   ========
  Gross profit.....................................  $ 25,700   $ 30,569   $ 28,421   $ 27,628
                                                     ========   ========   ========   ========
  Loss from continuing operations after income
     taxes and minority interests..................  $(45,530)  $ (7,210)  $(10,152)  $ (5,902)
  Income (loss) from discontinued operations.......  $(15,748)  $ (7,957)  $(27,841)  $  5,517
                                                     --------   --------   --------   --------
  Net Loss.........................................  $(61,278)  $(15,167)  $(37,993)  $   (385)
                                                     ========   ========   ========   ========
Earnings per share:
  Basic
     Income (loss) from continuing operations......  $  (0.91)  $  (0.15)  $  (0.21)  $  (0.12)
     Income (loss) from discontinued operations....     (0.32)     (0.16)     (0.56)      0.11
                                                     --------   --------   --------   --------
     Net income (loss).............................  $  (1.23)  $  (0.31)  $  (0.77)  $  (0.01)
                                                     ========   ========   ========   ========
  Diluted
     Income (loss) from continuing operations......  $  (0.91)  $  (0.15)  $  (0.21)  $  (0.12)
     Income (loss) from discontinued operations....     (0.32)     (0.16)     (0.56)      0.11
                                                     --------   --------   --------   --------
     Net income (loss).............................  $  (1.23)  $  (0.31)  $  (0.77)  $  (0.01)
                                                     ========   ========   ========   ========
</TABLE>

                                      F-29
<PAGE>   88
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                      FOURTH     THIRD      SECOND     FIRST
                                                     QUARTER    QUARTER    QUARTER    QUARTER
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Year Ended December 31, 1998
  Net revenue......................................  $127,710   $113,933   $105,552   $ 97,917
                                                     ========   ========   ========   ========
  Gross profit.....................................  $ 35,028   $ 29,411   $ 27,706   $ 26,231
                                                     ========   ========   ========   ========
  Loss from continuing operations after income
     taxes and minority interests..................  $    (71)  $ (3,621)  $ (3,781)  $(14,114)
  Income (loss) from discontinued operations.......  $    877   $    772   $   (747)  $ (1,010)
                                                     --------   --------   --------   --------
  Net income (loss)................................  $    806   $ (2,849)  $ (4,528)  $(15,124)
                                                     ========   ========   ========   ========
Earnings per share:
  Basic
     Income (loss) from continuing operations......  $   0.00   $  (0.07)  $  (0.08)  $  (0.29)
     Income (loss) from discontinued operations....      0.02       0.02      (0.02)     (0.02)
                                                     --------   --------   --------   --------
     Net income (loss).............................  $   0.02      (0.05)  $  (0.10)  $  (0.31)
                                                     ========   ========   ========   ========
  Diluted
     Income (loss) from continuing operations......  $   0.00   $  (0.07)  $  (0.08)  $  (0.29)
     Income (loss) from discontinued operations....      0.02       0.02      (0.02)     (0.02)
                                                     --------   --------   --------   --------
     Net income (loss).............................  $   0.02   $  (0.05)  $  (0.10)  $  (0.31)
                                                     ========   ========   ========   ========
</TABLE>

     In 1998, unusual or infrequently occurring charges included the reversal of
$3.9 million of restructuring reserves in the fourth quarter. In 1999, Coram
initiated three restructuring plans and charged $5.8 million to continuing
operations as restructuring charges. Coram also recognized impairment on
goodwill and other assets of $9.1 million in 1999. See Note 7.

16. INDUSTRY SEGMENT AND GEOGRAPHIC AREA OPERATIONS

     Management regularly evaluates the operating performance of the company by
reviewing results on a product or service provided basis. The company's
reportable segments are Infusion, CPS, and Lithotripsy. Infusion is the
company's base business, which derives its revenue primarily from alternate site
infusion therapy. CPS primarily provides specialty mail-order pharmacy and
pharmacy benefit management services. Lithotripsy, a discontinued operation,
derived its revenue from a non-invasive technique that used shock waves to
disintegrate kidney stones. The other non-reportable segment represents clinical
trials and informatics services. R-Net, also a discontinued operation, is no
longer identified as a reportable segments. See Note 3.

     Coram uses earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA") for purposes of performance measurement. The measurement
basis for segment assets includes net accounts receivable, inventory, net
property and equipment, and other current assets.

                                      F-30
<PAGE>   89
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Summary information by segment is as follows (in thousands):

<TABLE>
<CAPTION>
                                                             AS OF AND FOR THE
                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                         1999       1998       1997
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
INFUSION
Revenue from external customers......................  $432,823   $396,669   $373,684
Intersegment revenue.................................    22,284     18,274     13,358
Interest income......................................        78         72         --
Equity in net income of unconsolidated joint
  ventures...........................................       442        107        636
Segment EBITDA profit................................    35,819     61,874     54,935
Segment assets.......................................   131,893    142,970    123,113
Segment asset expenditures...........................     5,302     11,153     17,554
CPS
Revenue from external customers......................  $ 86,625   $ 47,783   $ 28,280
Intersegment revenue.................................     2,452      1,534         45
Interest income......................................        --         --         --
Equity in net income of unconsolidated joint
  ventures...........................................        --         --         --
Segment EBITDA profit (loss).........................       662      2,000       (919)
Segment assets.......................................    24,003     11,992      4,106
Segment asset expenditures...........................     1,645        403         51
LITHOTRIPSY
Revenue from external customers......................        --        658   $ 37,282
Intersegment revenue.................................        --         --         --
Interest income......................................        --         --        125
Equity in net income of unconsolidated joint
  ventures...........................................        --         --        431
Segment EBITDA profit................................        --      *         16,140
Segment assets.......................................        --         --        262
Segment asset expenditures...........................        --         --      1,452
ALL OTHER
Revenue from external customers......................  $  1,748   $      2   $    226
Intersegment revenue.................................        --         --         --
Interest income......................................        --         --         --
Equity in net income of unconsolidated joint
  ventures...........................................        --         --         --
Segment EBITDA profit (loss).........................       103         --       (337)
Segment assets.......................................       492         --         --
Segment asset expenditures...........................        --         --         --
</TABLE>

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

 *  Represents less than 2% of total category, therefore, no disclosure is made.

                                      F-31
<PAGE>   90
                          CORAM HEALTHCARE CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A reconciliation of the company's segment revenue, segment EBITDA profit
(loss), segment assets and other significant items to the corresponding amounts
in the Consolidated Financial Statements are as follows (in thousands):

<TABLE>
<CAPTION>
                                                             AS OF AND FOR THE
                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                         1999       1998       1997
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
REVENUES
Total for reportable segments........................  $544,184   $464,918   $452,649
Other revenue........................................     1,748          2        226
Elimination of intersegment revenue..................   (24,736)   (19,808)   (13,403)
                                                       --------   --------   --------
Total consolidated revenue...........................  $521,196   $445,112   $439,472
                                                       ========   ========   ========
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
  INCOME TAXES AND MINORITY INTERESTS
Total EBITDA profit for reportable segments..........  $ 36,481   $ 63,874   $ 70,156
Other EBITDA profit (loss)...........................       103         --       (337)
Goodwill amortization expense........................   (10,784)   (11,139)   (13,586)
Depreciation and other amortization expense..........   (10,598)   (11,040)   (12,486)
Interest expense.....................................   (29,763)   (32,734)   (75,026)
All other income (expense), net......................   (52,323)   (26,849)   173,477
                                                       --------   --------   --------
Income (loss) from continuing operations before
  income taxes and minority interests................  $(66,884)  $(17,888)  $142,198
                                                       ========   ========   ========
ASSETS
Total assets for reportable segment..................  $155,896   $154,962   $127,481
Other assets.........................................   247,326    266,067    387,771
                                                       --------   --------   --------
Consolidated total assets............................  $403,222   $421,029   $515,252
                                                       ========   ========   ========
</TABLE>

     For each of the years presented, the company's primary operations and
assets were within the United States. The company maintains an infusion
operation in Canada; however, the assets and revenue generated from this
business are not material to the company's operations.

     Sales to Aetna U.S. Healthcare and its affiliated payers for the company's
Infusion segment represented approximately 7% of the company's total net revenue
from continuing operations in 1999. Sales from the Medicare and Medicaid
programs for all segments of the company represented 20%, 24% and 23% of the
company's total consolidated net revenue for 1999, 1998 and 1997, respectively.

                                      F-32
<PAGE>   91

                          CORAM HEALTHCARE CORPORATION

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

<TABLE>
<CAPTION>
                                   BALANCE AT   CHARGED TO   CHARGED TO                     BALANCE AT
                                   BEGINNING    COSTS AND      OTHER                          END OF
           DESCRIPTION             OF PERIOD     EXPENSES     ACCOUNTS    DEDUCTIONS          PERIOD
           -----------             ----------   ----------   ----------   ----------        ----------
<S>                                <C>          <C>          <C>          <C>               <C>
Year ended December 31, 1999
Reserves and allowances deducted
  from asset accounts:
  Allowance for uncollectible
     accounts....................   $14,297      $28,310       $   --      $(12,159)(1)      $30,448
  Allowance for long-term
     receivable..................   $ 1,763      $    --       $   --      $   (691)         $ 1,072
Year ended December 31, 1998
Reserves and allowances deducted
  from asset accounts:
  Allowance for uncollectible
     accounts....................   $22,716      $14,845       $   --      $(23,264)(1)      $14,297
  Allowance for long-term
     receivable..................   $ 1,763      $    --       $   --      $     --          $ 1,763
Year ended December 31, 1997
Reserves and allowances deducted
  from asset accounts:
  Allowance for uncollectible
     accounts....................   $39,572      $14,983       $   --      $(31,839)(2)(1)   $22,716
  Allowance for long-term
     receivable..................   $    --      $ 1,763       $   --      $     --          $ 1,763
</TABLE>

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

(1) Accounts written off, net of recoveries.

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

                                       S-1
<PAGE>   92

                                 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, T(2), Curaflex,
                              HealthInfusion, Medisys, T(2) 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, T(2)
                              Curaflex, HealthInfusion, Medisys, T(2) 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, T(2),
                              Curaflex, HealthInfusion, Medisys, T(2) 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).(a)
          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).(a)
          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., T(2) 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, T(2) 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 1, 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 (Incorporated by reference to Exhibit
                              3.3 of the Registrant's Annual Report on Form 10-K for
                              the year ended December 31, 1997).
          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).
</TABLE>
<PAGE>   93

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
          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, T(2),
                              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).(a)
         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). Revised Incorporated by reference to
                              Exhibit 10.7 of the Registrant's Quarterly Report on Form
                              10-Q for the quarter ended September 30, 1999.
         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 T(2) dated December 8, 1989 (Incorporated
                              herein by Reference to Exhibit 10(s) of T(2) 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 T(2), 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).
</TABLE>
<PAGE>   94

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         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).(a)
         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).(a)
         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).(a)
         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).(a)
         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).(a)
</TABLE>
<PAGE>   95

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         10.25             -- Form of Employment Agreement, Amendment No. 1 and
                              Amendment No. 2 dated as of April 23, 1999, of Employment
                              Agreement between the Registrant and Donald J. Amaral.
                              (Incorporated by reference to Exhibit 10.25 and 10.04 of
                              the Registrant's Quarterly Report on Form 10-Q for the
                              quarters ended September 30, 1995, June 30, 1998, and
                              September 30, 1999, respectively).
         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).(a)
         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).
         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).(a)
         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).(a)
         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).(a)
         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.(a)
</TABLE>
<PAGE>   96

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         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.(a)
         10.36             -- Amended Agreement, dated as of March 28, 1997 by and
                              among the Registrant, Coram Inc., and Donaldson, Lufkin &
                              Jenrette.(a)
         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.)
         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 (as defined therein), the
                              Financial Institutions named therein and The Chase
                              Manhattan Bank, as collateral agent for the Lenders named
                              therein (Incorporated by reference Exhibit 99 of the
                              Registrant's Current Report on Form 8-K dated as of June
                              2, 1997).(a)
         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. (Incorporated by reference to Exhibit 10.40
                              of the Registrant's Annual Report on Form 10-K for the
                              year ended December 31, 1997)
         10.41             -- Prime Vendor Agreement and Letter Amendment, dated
                              October 14, 1999, between Coram Healthcare Corporation
                              and Cardinal Health. Certain portions of the Prime Vendor
                              Agreement have been omitted pursuant to a request for
                              confidential treatment. The entire Prime Vendor Agreement
                              has been filed confidentially with the Securities
                              Exchange Commission. (Incorporated by reference to
                              Exhibit 10.1 of the Registrant's Quarterly Report on Form
                              10-Q for the quarters ended September 30, 1998 and 1999,
                              respectively).
         10.42             -- Amendment No. 1 and Waiver to the Securities Exchange
                              Agreement among the Registrant, Cerberus Partners, L.P.,
                              Goldman Sachs Credit Partners L.P., and Foothill Capital
                              Corporation. (Incorporated by reference to Exhibit 10.01
                              of the Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended June 30, 1998).
         10.43             -- Promissory Notes and Security Agreement dated July 21,
                              1998 among the Registrant and Foothill Capital
                              Corporation, as collateral agent for Cerberus Partners,
                              L.P., Goldman Sachs Credit Partners L.P. and Foothill
                              Partners III, L.P. and their respective successors and
                              assigns. (Incorporated by reference to Exhibit 10.02 of
                              the Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended June 30, 1998).
</TABLE>
<PAGE>   97

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         10.44             -- Request for Deferral of Interest Payment Under the Series
                              B Convertible Subordinated Notes due 2008 and the related
                              Securities Exchange Agreement, dated May 6, 1998, by and
                              between Coram, Inc., Coram Healthcare Corporation,
                              Cerberus Partners, L.P., Goldman SachsCredit Partners,
                              L.P. and Foothill Capital Corporation, as amended
                              (Incorporated by reference to Exhibit 10.03 of the
                              Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended June 30, 1998).
         10.45             -- Securities Exchange Agreement among the company, Cerberus
                              Partners, L.P., Goldman Sachs Credit Partners, L.P., and
                              Foothill Capital Corporation. (Incorporated by reference
                              to Exhibit 10.01 of the Registrant's Quarterly Report on
                              Form 10-Q for the quarter ended March 31, 1998).(a)
         10.46             -- Form of Letter of Credit required by the Master Agreement
                              by and between the Registrant and its applicable
                              affiliates and Aetna U.S.Healthcare, Inc. and its
                              applicable affiliates (Incorporated by reference to
                              Exhibit 10.02 of the Registrant's Quarterly Report on
                              Form 10-Q for the quarter ended March 31, 1998).
         10.47             -- Addendum amendment to Sabratek Corporation and Coram
                              Healthcare for IV Infusion pumps, IV Disposable Sets and
                              Related Items, dated as of February 26, 1997, as of
                              December 7, 1998.
         10.48             -- Employment Agreement and Agreement between the company
                              and Richard M. Smith, dated as of April 26, 1999 and
                              November 11, 1999, respectively. (Incorporated by
                              reference to Exhibits 10.4 and 10.2, respectively of the
                              Registrant's Quarterly Report on Form 10-Q for the
                              quarter ended September 30, 1999).
         10.49             -- Employment Agreement, between the company and Wendy L.
                              Simpson, dated as of April 26, 1999. (Incorporated by
                              reference to Exhibit 10.5 of the Registrant's Quarterly
                              Report on Form 10-Q for the quarter ended September 30,
                              1999).
         10.50             -- Employment Agreement, between the company and Joseph D.
                              Smith, dated as of April 26, 1999. (Incorporated by
                              reference to Exhibit 10.6 of the Registrant's Quarterly
                              Report on Form 10-Q for the quarter ended September 30,
                              1999).
         10.51             -- Employment Agreement, between the company and Daniel
                              Crowley, dated as of November 30, 1999 together with
                              Amendment No. 1 thereto.*
         10.52             -- Employment Agreement, between the company and Allen
                              Marabito, dated as of November 30, 1999 together with
                              Amendment No. 1 thereto.*
         10.53             -- First Amendment to Prime Vendor Agreement, dated as of
                              January 1, 2000, by and between the company and Cardinal
                              Health.*
         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.*
</TABLE>
<PAGE>   98

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                      EXHIBIT
        -------                                      -------
<C>                        <S>
         23.1              -- Consent of Ernst & Young LLP.*
         27.1              -- Financial Data Schedule.*
         27.2              -- Restated Financial Data Schedules.*
         27.3              -- Second restated Financial Data Schedule.*
</TABLE>

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

(a)  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.

 *  Filed herewith.