COHR INC, 10-K, 1998-06-29

COHR INC
10-K, 1998-06-29
BUSINESS SERVICES, NEC

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

(MARK ONE)

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

FOR THE FISCAL YEAR ENDED MARCH 31, 1998

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

COMMISSION FILE NO. 0-27506

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

COHR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 95-4559155
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION)

21540 PLUMMER STREET
CHATSWORTH, CALIFORNIA 91311-4103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 773-2647

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT:

COMMON STOCK, $0.01 PAR VALUE PER SHARE
(TITLE OF CLASS)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing 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 June 19, 1998 there were outstanding 6,433,189 shares of the
Registrant's Common Stock, $0.01 par value ("Common Stock"), which is the only
class of Common Stock of the Registrant. As of June 19, 1998 the aggregate
market value of the shares of Common Stock held by non-affiliates of the
Registrant, computed based on the closing sale price of $5.1875 per share as
reported by the Nasdaq National Market, was approximately $33,372,168.

DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the 1998 Annual Meeting of Stockholders of the
Registrant which will be filed with the Securities and Exchange Commission.

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COHR INC.

ANNUAL REPORT ON FORM 10-K

FOR FISCAL YEAR ENDED MARCH 31, 1998

<TABLE>
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PAGE NO.
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<S> <C> <C>
PART I
Item 1. Business.......................................................... 3
Item 2. Properties........................................................ 9
Item 3. Legal Proceedings................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............... 9
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters....................................... 10
Item 6. Selected Financial Data........................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 12
Item 8. Financial Statements and Supplementary Data....................... 19
Item 9. Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure.......................................... 19
PART III
Item 10. Directors and Executive Officers of the Registrant................ 20
Item 11. Executive Compensation............................................ 22
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 22
Item 13. Certain Relationships and Related Transactions.................... 22
PART IV
Item 14. Exhibits, Financial Statements, Financial Statement Schedule
and Reports on Form 8-K........................................... 22
</TABLE>

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FORWARD LOOKING STATEMENTS

Statements in this Form 10-K that are not historical facts are hereby
identified as "forward looking statements" for the purpose of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Section 27A of the Securities Act of 1993, as amended (the
"Securities Act"). COHR Inc. ("COHR" or the "Company") cautions readers that
such "forward looking statements," including without limitation, those relating
to the Company's future business prospects, revenues, working capital,
liquidity, capital needs and income, wherever they may appear in this document
or in other statements attributable to the Company, are necessarily estimates
reflecting the best judgment of the Company's senior management and involve a
number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the "forward looking statements." Such
"forward looking statements" should, therefore, be considered in light of
various important factors ("Cautionary Statements"), including those set forth
below and others set forth from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission (the
"SEC").

These "forward looking statements" are found at various places
throughout this document. Additionally, the discussions herein under the
captions "Business--Services and Products," "Business--Competition,"
"Business--Regulatory Matters," "Properties," "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are susceptible to the risks and uncertainties discussed under
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Risk Factors" and elsewhere in this Form 10-K. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "should," "intend,"
"estimate," "anticipate," "believe," or "continue" or the negative thereof or
variations thereon or similar terminology. Moreover, the Company, through its
senior management or persons acting on its behalf, may from time to time make
"forward looking statements" about the matters described herein or other matters
concerning the Company and such statements are subject to the qualifications set
forth herein and in the Cautionary Statements. The Company disclaims any intent
or obligation to update publicly or revise "forward looking statements."

PART I

ITEM 1. BUSINESS

GENERAL

COHR Inc. ("COHR" or the "Company") is a national outsourcing service
company, providing equipment sales and servicing, group purchasing and other
ancillary services to the health care industry. Other services include providing
on-site security, management consulting, employee-benefits insurance brokerage,
medical credentials verification and insurance claims-management software to
hospitals, integrated health systems and alternate site providers. COHR was
founded in 1985 by the Healthcare Association of Southern California (HASC), a
regional trade association comprised of hospitals, health systems, nursing homes
and medical groups. The Company was incorporated in California in 1985 and
reincorporated in Delaware in 1996. The Company completed its initial public
offering in February 1996 and a second public offering in November 1996. The
Company has two lines of business: COHR MasterPlan and Purchase Connection. COHR
MasterPlan is the Company's equipment sales and services division, offering a
full range of equipment maintenance, repair, consulting, refurbishment and sales
services. Purchase Connection is the Company's group purchasing division which
offers access to volume-discount pricing on medical, surgical, laboratory and
dietary supplies, pharmaceuticals and capital equipment. For financial reporting
purposes Purchase Connection also includes the other ancillary services offered
by the Company.

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RECENT DEVELOPMENTS

On February 17, 1998, the Company disclosed that it had restated its
financial statements for the fiscal year ended March 31, 1997 and for the first
two quarters of the fiscal year ended March 31, 1998. All references herein to
the financial statements for such periods refer to such financial statements as
restated. These restatements related primarily to management's determination
that certain equipment and software sales were prematurely recorded and that
certain liabilities and reserves were understated.

In June 1998 the Company announced the appointment of Mr. Raymond List
as President and Chief Executive Officer and Mr. Peter Socha as Executive
Vice President, Operations.

For the fiscal year ended March 31, 1998, the Company reported a net
loss of $27.3 million, including pre-tax special charges of $11.4 million. The
special charges consisted primarily of a $7.1 million write-off of goodwill
related to certain COHR MasterPlan operations which were deemed to be
permanently impaired, costs to close certain MasterPlan operations, severance
costs and the legal and accounting costs incurred in a special review conducted
at the direction of the Board of Directors during the last two quarters of the
fiscal year. See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations and
the Securities and Exchange Commission (the "SEC") has commenced a formal
investigation of the Company. See Item 3 "Legal Proceedings."

In February 1998, the Company had announced the engagement of Lehman
Brothers, as its financial advisor, to evaluate strategic alternatives including
a possible sale of the Company. In June 1998, the Board of Directors determined
that it is not in the best interest of the shareholders to continue to pursue a
sale of the Company at the present time.

SERVICES AND PRODUCTS

COHR MASTERPLAN

Maintenance MasterPlan, COHR MasterPlan's principal product line, is a
comprehensive equipment management plan that offers equipment services at a
fixed cost. In a typical situation, the Company conducts an extensive audit of a
potential client's equipment inventory, existing service contracts,
time-and-materials maintenance histories and key department managers' service
needs. The data generated from the audit, which includes equipment make and
model, its age and expected useful life, maintenance history and location, are
compared to a database of equipment maintenance records. The Company then
presents the client with a comprehensive proposal, which generally includes cost
savings and recommendations for areas of improvement. As part of COHR's pricing
of Maintenance MasterPlan, some clients receive a share of the cost savings
realized when actual maintenance expenses fall below the agreed upon maintenance
budget.

The Company has found that health care facilities find it increasingly
difficult to maintain medical equipment themselves while matching COHR's price
and service levels due to overhead and administrative burdens. The Company
believes that COHR MasterPlan compares favorably to original equipment
manufacturers (or "OEMs") on the basis of price, its quality reputation, the
wide range of manufacturers' products serviced, and its ability to provide the
customer with unbiased technology management consulting. The Company believes
that these factors account for COHR Masterplan's growth from approximately 300
clients in 1993 to over 2,200 today, with an average contract renewal rate of
approximately 95%. Over 500 technicians, customer service and marketing
personnel operate from 24 regional offices nationwide. COHR MasterPlan revenues
increased from $8 million in fiscal year 1993 to almost $82 million in fiscal
year 1998. In fiscal year 1998, revenues for COHR MasterPlan were up 23.7% over
the previous year.

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Through a total of 23 acquisitions since July 1993, the Company has
increased its customer base, added qualified staff and extended the program into
new areas. Specifically, these acquisitions enabled the Company to expand its
imaging business in the East, Southeast and Northwest and its radiology business
in the mid-Atlantic region and the South. In addition, through the acquisition
of a large independent service organization (an "ISO"), the Company entered the
national sterilizer service and refurbishment markets.

The Company's strategy is to increase its market share in existing
markets by soliciting new accounts and by gaining an increasing proportion of
equipment maintenance business in client facilities where some items are still
covered by OEM agreements. The Company will continue to develop its ability to
service high-technology diagnostic and therapeutic equipment, which typically
generates higher margins than the maintenance of less-sophisticated items. The
Company will seek to enhance its capabilities to participate in the rapid growth
of the refurbished equipment market by purchasing, repairing and reselling used
equipment domestically.

PURCHASE CONNECTION

Group purchasing organizations (or "GPOs") provide their members access
to discounted prices on a broad range of products and services by negotiating
discounts with manufacturers and distributors based primarily upon the
purchasing volume of their membership. To increase the purchasing volume of
their membership, GPOs attempt to maximize "compliance"-- the percentage of
purchasing volume an individual facility places through contracts negotiated
with the GPOs' vendors. Unlike distributors, GPOs do not themselves make
purchases, carry an inventory or physically handle product. GPOs derive a
substantial portion of their revenues from commissions (as a percentage of
purchasing volume) from manufacturers and distributors and also receive from
their customers a nominal fee for access to contract pricing. In turn,
manufacturers and distributors benefit from the assured access to the GPOs'
customers at costs significantly below those attributable to traditional direct
sales and marketing, and from the committed volume of product sales.

Many factors have contributed to the growth of Purchase Connection in a
continually evolving health care environment. A national membership of nearly
5,000 facilities accounts for a significant annual volume of contract purchases.
Members have been attracted--and retained--by the bottom-line savings generated
by these purchases, the low cost of membership, the strong support of an
experienced professional staff and the broad range of products available,
including over 400,000 discounted medical, surgical, laboratory and dietary
supplies, pharmaceuticals and capital equipment. Purchase Connection members
also enjoy access to the other value-added services offered by COHR, including
on-site security, management consulting, employee-benefits insurance brokerage,
medical credentials verification and insurance claims-management software.

Management intends to grow Purchase Connection by continuing to expand
its membership base and through efforts to increase customer compliance. These
efforts include encouraging customers to participate in Purchase Connection's
sole-source contracts with vendors and engaging in joint marketing efforts with
participating manufacturers and distributors. The Company plans to expand its
geographic penetration of certain regional markets, particularly in the Midwest
and Southeast, by opening regional sales and customer service sites. Finally,
the Company intends to introduce a number of new cost-effective products and
services to help its members meet their constantly changing operating
challenges.

SALES AND MARKETING

The Company markets its services and products to hospitals, integrated
health systems and alternative site providers through a force of 97 people, as
of March 31, 1998, in sales, marketing and customer service, allocated between
COHR MasterPlan and Purchase Connection. The Company's sales and marketing
personnel use a consultative sales approach to leverage relationships in order
to sell both programs.

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COHR MASTERPLAN

The Company employed 64 sales, marketing and customer service personnel
in its COHR MasterPlan division, who are allocated by region and technical
specialty.

The Company estimates that the sales cycle for the Maintenance
MasterPlan typically takes six months to complete. The sales cycle for other
maintenance contracts is approximately one month. Appointments with customers,
generated by a combination of print advertising response, referrals and cold
calls, involve a presentation of the Company's services to the prospective
customer.

Many customers enrolling in Maintenance Masterplan or other maintenance
contracts for the first time are often obligated under certain OEM maintenance
agreements covering recently purchased high technology equipment. The Company
routinely excludes such obligations from the initial Maintenance MasterPlan
agreement, and, with the data from customer equipment audits at hand,
systematically pursues their later inclusion at competitive prices upon the
expiration of the OEM agreement.

PURCHASE CONNECTION

The Company employed 33 sales, marketing and customer service personnel
in its Purchase Connection division, including regionally located personnel to
provide customers with quality service. The Company generates leads principally
through direct sales efforts, direct mail campaigns targeted to customers of
other GPOs, exhibitions at class-specific trade shows and cross marketing
through other Company services. Given the large territory to be covered,
Purchase Connection has embarked on the development of a telemarketing and
customer service group to increase penetration and membership involvement. The
goal of this group will be to increase customer compliance and increase customer
contact in selected geographic areas.

The Company's other services and products are actively promoted through
field sales personnel who are specialists in their respective disciplines,
targeted mailings, advertising, word of mouth, educational programs and
cross-marketing.

COMPETITION

The Company's primary businesses operate in two separate markets, each
of which is highly competitive. In the equipment services market, the Company's
principal competitors are (i) OEMs, including G.E. Medical Systems, Siemens
Medical Systems, Inc. and Picker International, Inc., (ii) ISOs, of which two of
the largest are divisions of Steris Inc. and ServiceMaster, L.P., and (iii)
in-house servicing departments. In the group purchasing markets, the Company's
principal competitors are several major GPOs, including Novation Supply Company,
Premier, Inc., MedEcon Services, Inc., AmeriNet, Inc., Health Services
Corporation of America, Buy Power and Catholic Materials Management Alliance, as
well as in-house corporate purchasing departments of large integrated systems
and multi-hospital systems, various manufacturers and regional GPOs. Certain of
Purchase Connection's GPO competitors have merged or expanded giving such
competitors significantly greater buying power and market leverage. Some have
also expanded their market to physicians and other non-hospital customers and
broadened their product and service offerings to include activities such as fund
raising, resource management and assistance with capitation contracting. The
Company's competitors in each of the separate markets have sales representatives
competing directly with the Company and many are larger and have greater
financial resources than the Company.

The Company believes that the broad mix of products and services and the
favorable pricing structure that it offers its customers enable it to
differentiate itself from many of its competitors. The Company is unaware of any
other company that offers the combination of equipment services, group
purchasing services and other outsourcing services offered by the Company.

REGULATORY MATTERS

The health care industry is highly regulated and there can be no
assurance that the regulatory environment in which the Company and its customers
operate will not change significantly in the future. The Company is also subject
to laws and regulations relating to business corporations in general. There can
be no assurance that a review of the Company's business or its customers'
businesses by courts or regulatory authorities will not result in a
determination that could adversely affect the operations of the Company or that
the health care regulatory environment will not change so as to restrict the
Company's business.

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Federal Health Care Program Fraud and Abuse. The federal anti-kickback
statute prohibits the offer, payment, solicitation or receipt of any form of
remuneration in return for, or in order to induce, (i) the referral of a person
for the furnishing or arranging for the furnishing of goods, facilities, items
or services reimbursable under most federal health care programs, including
Medicare and Medicaid programs or (ii) the purchase, lease or order or arranging
or recommending purchasing, leasing or ordering of any item or service
reimbursable under most federal health care programs, including Medicare or
Medicaid programs. The Company is not a separate provider of Medicare or state
health program reimbursed services; however, if the Company is deemed to be
paying or receiving prohibited remuneration under the group purchasing
agreements, the financial arrangements under these agreements could be subject
to scrutiny and prosecution under the federal anti-kickback statute, resulting
in civil and criminal penalties. Many states have adopted similar prohibitions
against payments intended to induce referrals of Medicaid or other third party
payer patients or covered services. The applicability of these provisions to
many kinds of business transactions in the health care industry has not yet been
the subject of significant federal or state judicial or regulatory
interpretation.

The Company does not believe its GPO operations violate these
anti-kickback statutes because it believes its primary relationship with its
members, the participation agreement, falls within any "safe harbors" published
by the federal government, applicable to GPO organizations, but there can be no
assurance that a review of the activities of the Company by courts or regulatory
authorities would not result in a restructuring of some or all of these
relationships or a determination that could have a material adverse effect on
the Company's results of operations or financial condition.

Antitrust Laws. In certain circumstances, the federal Robinson-Patman
Act prohibits discriminatory pricing by vendors (i.e., a differential in the net
price to customers) with respect to the sale of commodities, where the
discrimination is likely to adversely affect competition. It also prohibits the
payment of "brokerage" by a vendor to an agent of the purchaser. Certain states
have adopted similar prohibitions against discriminatory pricing and payment of
brokerage or commissions.

While the Company is not a vendor of commodities, it may be viewed as
the agent for its group purchasing customers authorized to negotiate discounted
pricing with vendors. The Robinson-Patman Act provides for buyer liability where
a vendor engages in prohibited discriminatory pricing and the buyer knowingly
induces or receives the discriminatory price. As a consequence, if the discounts
negotiated are deemed to be improper, as a participant in the arrangement, the
Company may be subject to civil damages or injunctive relief under the statute.

The Company believes that the pricing and commission policies of its
vendors comply with applicable statutory standards, but there can be no
assurance that future interpretations of antitrust laws by regulatory
authorities or courts will not require a restructuring of some or all of the
Company's group purchasing relationships with its vendors or result in a
determination that could adversely affect the Company. The Company does not
believe that the commissions it receives from vendors are prohibited by the
statutes because it provides services in exchange for the commissions.

Although exclusive dealing agreements generally are found to be lawful
business arrangements, where such agreements result in a significant degree of
foreclosure of the market place and effectively exclude competitors from a
market, they may be found to be unlawful under the federal Sherman Act or
Clayton Act or similar state laws. The Company does not believe that its sole
source contracts (which may be viewed as exclusive dealing agreements) violate
the Sherman Act, the Clayton Act, or similar state laws. However, there is no
assurance that the review of these contracts by courts or regulatory authorities
will not result in a determination that would adversely affect the operations of
the Company. For example, if the contracts were found to be unlawful and,
therefore, unenforceable, the Company would lose the benefits anticipated to be
derived from them.

Because the Company's group purchasing customers remain separate legal
entities, distinct from each other and from the Company, concerted action
through the GPO such as collective refusals to deal, improper sharing of price
information or other coordinated conduct may lead to allegations of prohibited
anticompetitive conduct. The Company believes that it complies with such state
and federal laws (including the Sherman Act) as may affect group purchasing
organizations, but there is no assurance that the review of the Company's
business by courts or regulatory authorities will not result in a determination
that could materially adversely affect the operations of the Company.

Insurance Laws and Regulations. Laws in all states regulate the business
of selling and marketing insurance products, such as life and health insurance,
fire and casualty insurance and variable annuities. The Company believes it is
in material compliance with applicable laws in the states in which it conducts
such business as are applicable to the Company's insurance products but there
can be no assurance that future interpretations of insurance laws by regulatory
authorities in these states or in the states into which the Company may expand
will not require licensure or a restructuring of some or all of the Company's
insurance operations. In October 1996, the Company became aware that following
its reincorporation in Delaware in January 1996 and until October 1996, it had

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operated its insurance brokerage business in California without the requisite
license. The Company's predecessor was licensed to conduct the insurance
brokerage business in California until January 1996 and the Company received its
own license in October 1996. The Company disclosed to the California Department
of Insurance that it had operated an insurance brokerage business in California
without the requisite license from January 1996 to October 1996 and the facts
relating thereto. The Company was advised that the Department of Insurance would
open an investigation file in accordance with its standard procedures. The
Company believes, based on discussions with regulatory officials, that no
material enforcement action will be taken against the Company. To date, there
has been no action taken by the Department of Insurance. There is no assurance
that the Company may not be subject to penalties or sanctions. Following its
reincorporation and prior to receipt of its own license, the Company had
received aggregate brokerage commissions with respect to policy renewals
totaling $138,455. Under the California Insurance Code, the Company could be
required to disgorge all such commissions. In addition, the California
Department of Insurance could fine the Company an amount up to 30 percent of
such commissions or place restrictions or limitations upon the Company's
license, such as a requirement for filing periodic reports on the Company's
insurance brokerage business for a fixed period of time. The imposition of
limitations upon its insurance brokerage license in California, either
individually or in the aggregate, could have a material adverse effect on the
Company's business.

Other Regulations. The Company is subject to various federal, state, and
local laws and regulations. Various state and federal regulatory agencies, such
as OSHA and the Environmental Protection Agency, have jurisdiction over the
facilities of the Company and its customers, including worker safety, community
"right to know" laws, and laws regarding clean air and water. Under various
federal, state, and local laws, ordinances and regulations, an owner or lessee
of real estate may also be liable for the costs of removal or remediation of
certain hazardous or toxic substances located on or in, or emanating from, such
property, as well as related costs of investigation and property damage. Such
laws often impose such liability without regard to whether the owner or lessee
knew of, or was responsible for the presence of, such hazardous or toxic
substances. Furthermore, legislative or regulatory changes may cause future
increases in the Company's operating costs or otherwise negatively affect
operations. There can be no assurance that the Company will not be materially
adversely affected by existing or future requirements or incur materially
increased operating costs in complying therewith.

BUSINESS SEGMENTS

The Company currently provides services to the health care industry
through two principal business segments: COHR MasterPlan and Purchase
Connection. COHR MasterPlan provides equipment sales and services to hospitals
and other health care providers. Purchase Connection is a group purchasing
organization that negotiates pricing for its membership with manufacturers and
distributors. Refer to Note 13 of the Consolidated Financial Statements, which
disclosure is incorporated herein by reference.

EMPLOYEES

As of March 31, 1998, the Company employed a total of 869 persons,
consisting of 97 in sales, marketing and customer service, 456 equipment
technicians, 140 security guards and 176 in finance, administration and
information systems. Recent cost-reduction initiatives have reduced the total
employee count to 811 as of June 15, 1998. None of the Company's employees are
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good.

The Company uses an in-house training program in order to maintain its
service level. Many of the Company's technicians have been employed by the
Company for over five years.

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ITEM 2. PROPERTIES

The Company's principal executive offices are located in Chatsworth,
California and consist of approximately 76,000 square feet of leased office,
warehouse and workshop space. This facility houses certain of the Company's
senior management, as well as management information systems, finance and human
resources, its Purchase Connection division and the Company's principal
equipment service facility. This lease expires in January 2009 and includes two
options to extend the term of the lease for consecutive periods of sixty months
each. The Company believes that this space is adequate to meet its current uses
and anticipated growth.

The Company also leases service and sales sites in Brea, Murrieta,
Pleasanton, Fresno and Ontario, California; Cuyahoga Falls and Pickerington,
Ohio; Erie County and Pittsburgh; Pennsylvania; Arlington, Washington; Islandia,
New York; Ft. Lauderdale, Florida; Charleston, West Virginia; Fredricksburg and
Richmond, Virginia; Fenton, Missouri; and Windsor, Connecticut.

ITEM 3. LEGAL PROCEEDINGS

The Company, certain of its present and former officers and directors
and others are named as defendants in four purported class action lawsuits which
allege, among other things, false and misleading statements in various public
disclosures in violation of federal and/or state securities laws. Sherleigh
Associates Inc. Profit Sharing Plan v. Cohr, Inc. et al. (Case No. 98-3028 JSL)
was filed in the United States District Court for the Central District of
California on or about April 21, 1998. Zabronsky et al. v. Cohr, Inc. et al.
(Case No. 98-3493 JSL) was filed in the same court on May 6, 1998. Bird v. Cohr,
Inc. et al. (Case No. 98-4177 WMB) was filed in the same court on May 27, 1998.
Leeds v. Malhotra et al. (Case No. BC198490) was filed in the Superior Court of
the State of California, Los Angeles County, on April 16, 1998. The plaintiffs
in each action seek to represent a class of purchasers of the Company's common
stock during various time periods between 1996 and 1998.

The plaintiffs in each of the three federal actions filed in the United
States District Court for the Central District of California assert claims of
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
and of certain regulations promulgated thereunder. The plaintiffs in each of the
three federal actions seek unspecified compensatory damages, interest, attorneys
fees and costs, and injunctive and/or other relief as permitted by law. The
plaintiff in the action filed in California Superior Court asserts claims of
violations of California Corporations Code Sections 25400 and 25500. The
plaintiff in that action seeks unspecified compensatory damages, interest,
attorneys fees and costs, and injunctive and/or other relief as permitted by
law. No class has been certified in any of these actions.

A shareholder of the Company has brought a derivative lawsuit
purportedly on behalf of the Company, alleging breaches of fiduciary duty and
related claims, and naming certain of its present and former officers and
directors as defendants, with the Company as a nominal defendant. This action,
which is entitled Schug v. Chopra et al. (Case No. BC190933) was filed in the
Superior Court for the State of California, Los Angeles County, on May 12, 1998.
The shareholder-plaintiff seeks unspecified compensatory and punitive damages,
disgorgement of profits and gains, attorneys fees and costs, injunctive relief,
and other relief as permitted by law.

The Securities and Exchange Commission (the "SEC") is conducting an
investigation relating to the Company. The Company understands that the
investigation relates to, among other things: (1) the accuracy of the Company's
financial statements and periodic filings with the SEC; (2) the accuracy of the
Company's books and records; (3) the adequacy of the Company's system of
internal accounting controls; and (4) trading of the Company's securities by
certain present or former officers, directors, or employees, or other persons.
The Company intends to cooperate fully with the SEC's investigation.

Management is unable to predict at this time the final outcome of the
matters described above or whether the resolution of such matters will
materially affect the Company's results of operations, cash flows or financial
position.

The Company is also involved from time to time in various legal
proceedings incidental to the normal conduct of its business. Management does
not believe that such proceedings are likely, individually or in the aggregate,
to have a material adverse effect on the Company's business.

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

No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of the fiscal year covered by this report.

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PART II

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

MARKET INFORMATION

The Company's common stock began trading on the Nasdaq National Market
on February 16, 1996 under the symbol "CHRI." The initial public offering price
was $9.00 per share. The Company issued 1,739,000 new shares, pursuant to a
second public offering on November 21, 1996 at an offering price of $20.00 per
share. The high and low closing sales prices (excluding retail markup, markdowns
and commissions) for the period April 1, 1996 to March 31, 1998, by quarter,
were as follows:

<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
First Quarter-- April 1, 1996 to June 30, 1996 30 1/2 15 1/2

Second Quarter-- July 1, 1996 to September 30, 1996 28 16 1/2

Third Quarter-- October 1, 1996 to December 31, 1996 29 19 1/4

Fourth Quarter-- January 1, 1997 to March 31, 1997 28 1/2 22 3/8

First Quarter - April 1, 1997 to June 30, 1997 23 16 3/4

Second Quarter - July 1, 1997 to September 30, 1997 22 1/4 13 7/8

Third Quarter - October 1, 1997 to December 31, 1997 17 10 1/2

Fourth Quarter - January 1, 1998 to March 31, 1998 13 9 1/2
</TABLE>

As of June 19, 1998, there were approximately 6,433,189 shares
outstanding and approximately 80 stockholders of record.

DIVIDEND POLICY

At the present time, the Company intends to retain all earnings for
use in the operation and development of its business and does not expect to
declare or pay any cash dividends on its common stock in the foreseeable future.
Any determination in the future to pay dividends will depend upon the Company's
earnings, financial condition, capital requirements, level of indebtedness, and
other factors deemed relevant by the Company's Board of Directors, including any
contractual or statutory restrictions on the Company's ability to pay dividends.

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<PAGE> 11

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected financial data of the Company. The
selected financial data below as of March 31, 1998 and 1997 and for each of the
three years ended March 31, 1998 should be read in conjunction with the audited
consolidated financial statements, the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this report.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
COHR MasterPlan .......... $ 81,655 $ 66,012 $ 48,160 $ 28,042 $ 12,617
Purchase Connection ...... 20,489 20,209 18,094 15,618 13,026
--------- --------- --------- --------- ---------
Total ............ 102,144 86,221 66,254 43,660 25,643
Gross margin ............... 22,276 28,870 22,748 17,512 14,459
Selling, general and
administrative expenses..... 41,567 25,744 19,248 15,474 12,995
Special charges ............ 11,440
Operating income (loss) .... (30,731) 3,126 3,500 2,038 1,464
Net income (loss) .......... $ (27,338) $ 2,326 $ 2,142 $ 1,368 $ 946
========= ========= ========= ========= =========
Net income (loss) per
common share:
Basic..................... $ (4.25) $ 0.45 $ 0.90 $ 0.65 $ 0.45
Diluted................... $ (4.25) $ 0.42 $ 0.89 $ 0.65 $ 0.45

BALANCE SHEET DATA:
Working capital ............ $ 28,190 $ 49,889 $ 23,470 $ 4,127 $ 4,626
Equipment and improvements,
net......................... 6,804 6,636 3,718 2,727 2,611
Intangible assets, net ..... 2,615 9,237 2,530 1,967 216
Total assets ............... 56,584 85,079 44,472 21,613 15,836
Total long-term debt ....... 498 1,146 276 528
Total shareholders' equity.. $ 37,170 $ 64,508 $ 29,115 $ 7,270 $ 6,138
SUPPLEMENTAL DATA:
Regional service and sales
sites:
COHR MasterPlan .......... 26 31 18 14 7
Purchase Connection ...... 10 8 7 6 2
--------- --------- --------- --------- ---------
Total ............ 36 39 25 20 9
Total employees ............ 869 804 558 428 339
Gross margin percentage .... 21.8% 33.5% 34.3% 40.1% 56.4%
Selling, general and
administrative expense
percentage................ 40.7% 29.9% 29.1% 35.4% 50.7%
Operating income (loss)
percentage.................. (30.1%) 3.6% 5.3% 4.7% 5.7%
</TABLE>

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<PAGE> 12

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

The following discussion and analysis of the Company's consolidated results
of operations and consolidated financial position should be read in conjunction
with the Selected Financial Data and the Company's Consolidated Financial
Statements, including the notes thereto, appearing elsewhere in this Annual
Report.

GENERAL

The Company is a national outsourcing service organization providing
equipment sales and servicing, group purchasing and other ancillary services to
hospitals, integrated health systems and alternate site providers.

In June 1998 the Company announced the appointment of Mr. Raymond List as
President and Chief Executive Officer and Mr. Peter Socha as Executive Vice
President, Operations.

For the fiscal year ended March 31, 1998, the Company reported a net loss
of $27.3 million, including pre-tax special charges of $11.4 million. The
special charges consisted primarily of a $7.1 million write-off of goodwill
related to certain COHR MasterPlan operations which were deemed to be
permanently impaired, costs to close certain MasterPlan operations, severance
costs and the legal and accounting costs incurred in a special review conducted
at the direction of the Board of Directors during the last two quarters of the
fiscal year.

During the fourth quarter of fiscal year 1998 and the first quarter of fiscal
year 1999, the Company initiated a cost-reduction program which included a 7%
reduction in overall personnel, the closing or restructuring of certain
MasterPlan refurbishment and service operations and the closing of certain
under-utilized MasterPlan field offices. The Company will continue to pursue
additional cost-reduction opportunities during the balance of fiscal year 1999.
The goal to improve profitability may include the elimination or repricing of
certain low margin or unprofitable contracts. The Company has also instituted
stronger credit and collection policies and procedures and is adopting new
inventory management procedures to reduce its level of inventory investment.

In connection with the special review conducted over the course of the prior
two quarters as directed by the Board of Directors, the Company's auditors did
note certain conditions that were deemed to be material weaknesses in internal
controls. The Company has initiated actions it deems to be appropriate to
address these conditions.

Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations
and the Securities and Exchange Commission (the "SEC") has commenced a formal
investigation of the Company. See Item 3 "Legal Proceedings."

RESULTS OF OPERATIONS

Fiscal Year Ended March 31, 1998 Versus Fiscal Year Ended March 31, 1997

Revenues. The Company's revenues for the fiscal year ended March 31, 1998
totaled $102.1 million, an increase of $15.9 million or 18.5% over revenues of
$86.2 million for the fiscal year ended March 31, 1997. Substantially all of the
growth in revenues was produced by the COHR MasterPlan segment as a result of
acquisitions completed during fiscal years 1998 and 1997 and the addition of new
accounts.

Direct Operating Expenses. The Company's direct operating expenses for the
fiscal year ended March 31, 1998 totaled $79.9 million, an increase of $22.5
million or 39.3% over the fiscal year 1997 total of $57.4 million. Direct
operating expenses as a percentage of revenues for fiscal year 1998 increased to
78.2% from 66.5% for the fiscal year ended March 31, 1997. This increase
resulted primarily from the fact that the Company derived a greater percentage
of revenues from COHR MasterPlan, which has higher direct operating expenses as
a percentage of revenues than Purchase Connection; the fact that direct
operating expenses in COHR MasterPlan increased at a faster rate than revenues
due to an increased reliance on outsourced service providers; and a $2.5 million
inventory write-down in fiscal year 1998. The Company initiated a cost-reduction
program in the fourth quarter of fiscal year 1998 and has continued that program
in the first quarter of fiscal year 1999 to reduce direct operating expenses as
a percentage of revenues. Cost-reduction initiatives include the elimination of
certain field service positions and the redeployment of others and the shutdown
of unprofitable refurbishment operations in Florida and California.

Gross Margin. The Company's gross margin for the fiscal year ended March 31,
1998 totaled $22.3 million, a decrease of $6.6 million or 22.8% from the fiscal
year ended March 31, 1997 total of $28.9 million. Gross margin as a percentage
of revenues decreased to 21.8% for fiscal year 1998 from 33.5% for fiscal year
1997. The decrease in gross margin percentage resulted from the increase in
direct operating expenses noted above.

Selling, General and Administrative Expenses. The Company's selling, general
and administrative expenses for the fiscal year ended March 31, 1998 totaled
$41.6 million, an increase of $15.8 million or 61.5% over the fiscal year ended
March 31, 1997 total of $25.7 million. As a percentage of revenues, selling,
general and administrative expenses increased during fiscal year 1998 to 40.7%
from 29.9% during the prior fiscal year. Factors contributing to the higher
selling, general and administrative expenses included the

12
<PAGE> 13
increased overhead expenses associated with acquisitions completed during fiscal
years 1998 and 1997, the full-year impact of higher headquarters operating
expenses, a $5.0 million increase in the provision for bad debts in fiscal year
1998 versus the prior fiscal year and an unusually high level of legal,
accounting and consulting services expenses in fiscal year 1998 (in addition to
the legal and accounting costs classified as Special Charges). The Company's
ongoing cost-reduction program noted above has included initiatives to reduce
selling, general and administrative expenses as a percentage of revenues. Those
initiatives have included the elimination of certain corporate and field
administrative and sales positions, the closing of under-utilized field offices,
the shutdown of unprofitable refurbishment operations in Florida and California
and the implementation of strengthened credit and collection policies and
procedures.

Special Charges. The Company recorded special charges of $11.4 million for
the fiscal year ended March 31, 1998. There were no special charges recorded in
the prior fiscal year. Included in the $11.4 million total was the write-down of
goodwill related to certain COHR MasterPlan acquisitions and other assets of
$9.1 million, potential severance and severance related litigation costs of $1.1
million (of which $130,000 has been paid) and legal and accounting costs of $1.2
million associated with the special review conducted at the direction of the
Company's Board of Directors in the last two quarters of fiscal year 1998.

Operating Income (Loss). The Company experienced an operating loss of $30.7
million for the fiscal year ended March 31, 1998 compared to operating income of
$3.1 million for the fiscal year ended March 31, 1997. Operating income or loss
as a percentage of revenues was a negative 30.1% for fiscal year 1998 versus a
positive 3.6% for fiscal year 1997.

Provision for Income Taxes (Tax Benefit). The Company's operating loss for
the fiscal year ended March 31, 1998 resulted in an income tax benefit for the
year of $2.7 million, as compared to an income tax provision of $1.6 million for
the fiscal year ended March 31, 1997. The Company's effective tax benefit rate
for fiscal year 1998 was 9.1% as compared to an effective tax rate of 40.7% for
fiscal year 1997. The effective tax benefit rate in fiscal year 1998 was less
than expected as a result of being unable to: 1) carryback net operating losses
for state income tax purposes and 2) fully utilize the net operating loss for
Federal income tax purposes. As of March 31, 1998, the net operating loss
carryforward was approximately $8 million for federal income tax purposes and
$7.1 million for state income tax purposes.

Net Income (Loss). The Company's net loss for the fiscal year ended March 31,
1998 totaled $27.3 million as compared to net income for the fiscal year ended
March 31, 1997 of $2.3 million. As a percentage of revenues, the net loss for
fiscal year 1998 amounted to a negative 26.7% versus a positive 2.7% of revenues
for fiscal year 1997. The net loss per basic share amounted to $4.25 in fiscal
year 1998 as compared to basic net income per share of $0.45 in fiscal year
1997. The weighted average number of basic shares increased to 6,430,000 from
5,165,000 in fiscal year 1997 due to the full-year impact of the issuance of
1,739,000 shares of common stock in the Company's second public offering.

Reclassifications. Certain reclassifications have been made to prior periods'
consolidated financial statements to conform to the current period's
presentation.

Fiscal Year Ended March 31, 1997 Versus Fiscal Year Ended March 31, 1996

Revenues. The Company's revenues for the fiscal year ended March 31, 1997
totaled $86.2 million, an increase of $20.0 million or 30.1% over revenues of
$66.3 million for the fiscal year ended March 31, 1996. Of the $20.0 million
increase in revenues, approximately $16.0 million was due to revenue growth
related to COHR MasterPlan. During fiscal year 1997, COHR MasterPlan acquired
nine smaller service maintenance companies (12 sites) and opened nine new sites.
The remaining revenue increase was due to internal growth and the opening of new
sites for Purchase Connection. During fiscal year 1997, the Company opened or
acquired a total of 23 new sales and customer service sites. As a result of
these acquisitions, revenues increased by $7.0 million.

Direct Operating Expenses. The Company's direct operating expenses for the
fiscal year ended March 31, 1997 totaled $57.4 million which was an increase of
$13.8 million or 31.8% over the fiscal year ended March 31, 1996 total of $43.5
million. Direct operating expenses as a percentage of revenues increased to
66.5% in fiscal year 1997 from 65.7% in the prior fiscal year. COHR MasterPlan
has higher direct operating expenses as a percentage of revenues than Purchase
Connection and COHR MasterPlan is a more labor intensive business than Purchase
Connection which results in lower gross margins than those realized by Purchase
Connection.

Gross Margin. The Company's gross margin for the year ended March 31, 1997
totaled $28.9 million, an increase of $6.1 million or 26.9% over the year ended
March 31, 1996 total of $22.7 million. Gross margin as a percentage of revenues
decreased to 33.5% for fiscal year 1997 from 34.3% for fiscal year 1996. The
decrease in gross margin percentage was primarily due to an increase in the
percentage of the Company's revenues derived from the lower-margin COHR
MasterPlan.

13
<PAGE> 14

Selling, General and Administrative Expense. The Company's selling, general
and administrative expenses for the year ended March 31, 1997 totaled $25.7
million, an increase of $6.5 million or 33.7% over the year ended March 31, 1996
total of $19.2 million. As a percentage of revenues, selling, general and
administrative expenses increased during fiscal year 1997 to 29.9% from 29.1%
during fiscal year 1996. The actual increase in expenses reflected the increase
in costs necessary to support the Company's rapid growth.

Operating Income. The Company's operating income for the year ended March 31,
1997 totaled $3.1 million, a decrease of $0.4 million from the year ended March
31, 1996 total of $3.5 million. Operating income for the year ended March 31,
1997 as a percentage of revenues decreased to 3.6% from 5.3% for the year ended
March 31, 1996. This was primarily the result of an increase in direct operating
expenses as a percentage of revenues.

Provision for Income Taxes. The Company's provision for income taxes for the
year ended March 31, 1997 totaled $1.6 million, an increase of $0.1 million from
the year ended March 31, 1996 total of $1.5 million, due to the increase in
pre-tax income for the year ended March 31, 1997. The Company's effective tax
rate of 40.7% was lower than the prior year's rate of 40.9% due to interest
income being earned free of income taxes in fiscal year 1997 compared to taxable
interest being earned in fiscal year 1996.

Net Income. The Company's net income for the year ended March 31, 1997
totaled $2.3 million, an increase of $0.2 million over the total for the year
ended March 31, 1996 of $2.1 million. As a percentage of revenues, net income
decreased to 2.7% in fiscal year 1997 from 3.2% in fiscal year 1996, due
primarily to increased direct operating expenses as a percentage of revenues.
Net income per basic share decreased to $0.45 cents in fiscal year 1997 from
$0.90 in fiscal year 1996 primarily as a result of the effect of the issuance of
2,450,000 new shares of common stock in February 1996 and 1,739,000 new shares
of common stock in a second public offering in November 1996.

Reclassifications. Certain reclassifications have been made to prior periods'
consolidated financial statements to conform to the fiscal year 1998
presentation.

LIQUIDITY AND CAPITAL RESOURCES

In November and December 1996, the Company sold 1,739,000 shares of its
common stock, $0.01 par value, at $20.00 per share pursuant to a second public
offering, realizing $33.2 million in net proceeds after fees and other selling
expenses. In fiscal years 1998 and 1997, the Company utilized $1.3 million and
$8.3 million, respectively, for acquisitions.

The Company had working capital of $28.2 million, $49.9 million and $23.5
million as of March 31, 1998, 1997 and 1996, respectively. The Company had cash,
cash equivalents and investments of $14.0 million, $28.9 million, and $19.3
million at those same respective dates.

Net cash used in operating activities was $8.6 million, $11.3 million and
$1.9 for fiscal years 1998, 1997 and 1996, respectively. The cash used in
operations in fiscal year 1998 was primarily caused by the operating loss. In
fiscal years 1997 and 1996, cash used in operations was primarily to support
changes in accounts receivable, inventories, accounts payable and current income
tax liabilities. A significant portion of the Company's growth has been funded
from the proceeds of the public offerings and exercise of options.

Net cash provided by investing activities was $2.5 million for fiscal year
1998, compared to net cash used in investing activities of $16.9 million and
$2.8 million for fiscal years 1997 and 1996, respectively. The principal uses of
this cash were for acquisitions and investments. Capital expenditures during
these periods amounted to $2.2 million, $2.6 million and $1.4 million,
respectively.

Cash provided by financing activities was from the issuance of new stock and
amounted to $33.1 million in fiscal year 1997 and $20.0 million in fiscal year
1996. Cash used in financing activities were principally for the repayment of
notes payable and long-term debt of $2.8 million, $1.3 million and $0.1 million
for the fiscal years ended March 31, 1998, 1997 and 1996, respectively, and
payment of dividends to its stockholders of approximately $0.2 million for the
fiscal year ended March 31, 1996. The Company has not paid dividends since its
initial public offering in February 1996.

The Company is subject to various commitments and contingencies. See Item 3
"Legal Proceedings," Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risk Factors" below, and Note 9 to
Consolidated Financial Statements.

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<PAGE> 15
RISK FACTORS

The Company's business is subject to a number of risks, some of which
are beyond the Company's control. The Company has identified below important
factors that could cause actual results to differ materially from those
projected in any forward looking statements the Company may make from time to
time.

Recent Developments -- General

The Company suffered certain setbacks during the last fiscal year,
including: (i) a restatement of its financial statements for the fiscal year
ended March 31, 1997 and the first two quarters of the fiscal year ended March
31, 1998 and the identification by the Company's auditors of certain conditions
that were deemed to be material weaknesses in internal controls, (ii) the
replacement of the Company's prior senior management, including its Chief
Executive Officer and Chief Financial Officer and the removal of its Chief
Operating Officer and Senior Vice President, COHR MasterPlan, (iii) the
incurrence of significant special charges and operating losses for the fiscal
year ended March 31, 1998, (iv) the filing of various lawsuits against the
Company, including shareholder class action lawsuits alleging violation of the
federal and/or state securities law and the commencement of an SEC formal
investigation of the Company, and (v) a steep drop in the price of the Company's
Common Stock. The Company is not able to predict what effect these recent
developments may have on its operating results, relationships with customers,
employees or future stock prices.

Management Stability and Recruiting

In its Form 10-K for the fiscal year ended March 31, 1997, the Company
disclosed that it will depend in large part on the performance of a number of
key employees, including Paul Chopra, its then Chairman of the Board and Chief
Executive Officer (CEO). The Company replaced (i) Mr. Chopra in November of 1997
with an interim CEO who was replaced with a new CEO in June 1998, and (ii) its
Chief Financial Officer (CFO) in February 1998 and removed its Chief Operating
Officer (COO) and Senior Vice President, COHR MasterPlan in June 1998. The
Company believes that it has secured qualified replacements where needed but
these individuals are not as familiar with the operations of the Company as
their predecessors. The Company's success continues to depend to a significant
degree upon continued contributions of its key management, sales and operational
personnel and the Company's ability to retain and continue to attract highly
skilled personnel. The loss of key management personnel, including the recently
retained management team, could have a material adverse effect on the Company's
business. Uncertainty about the Company's future and significant changes in
senior management may limit the Company's ability to attract and retain
personnel for critical positions. The failure of the Company to attract and
retain key personnel would have a material adverse effect on the Company's
business, operating results and financial condition.

Ability to Achieve Improved Operating Results

The Company has initiated significant cost reduction measures in an
effort to improve the Company's earnings. These measures include a 7% reduction
in total personnel, closing of certain under-utilized field offices,
restructuring certain unprofitable operating units, revision of inventory
management procedures and strengthening credit and collection policies. The
Company will continue to face certain challenges in implementing these measures
and improving the Company's operating results including (1) shifting its
strategic focus from acquiring compatible businesses to running its existing
businesses efficiently and profitably, (2) managing existing customers'
perceptions of the Company's continued viability, (3) refocusing on the high
levels of customer service required to develop new customers and retain existing
customers, (4) securing current employees, particularly in light of declines in
the market value of the Company's common stock (the value of which often plays a
role in compensation of employees), and (5) reducing costs and increasing
efficiencies. There can be no assurance that the Company will successfully meet
these or other operating challenges or that the Company's operating plans
ultimately will be successful. No assurances can be give that the Company will
achieve profitable operations in the near term.

15
<PAGE> 16

Legal Proceedings

Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations and
the Securities Exchange Commission (the "SEC") has commenced a formal
investigation of the Company. See Item 3 "Legal Proceedings." The Company is not
able to predict at this time the final outcome of such matters or whether the
resolution of such matters will materially affect the Company's results of
operations, cash flow or financial position.

Risks Associated with Former Acquisition Strategy

A principal component of the Company's business strategy, particularly
in its equipment services division, had been to grow by acquiring new sites to
augment its presence in markets it already served and in new geographic markets.
The sites acquired by the Company to date typically operated at a break even or
small loss basis prior to acquisition. There can be no assurance that the
Company's efforts to improve profitability of acquired businesses by increasing
revenues and eliminating duplicative administrative costs will be successful.

Need for Additional Financing

At present, the Company does not have a credit facility or line of
credit. The Company believes that its cash on hand and anticipated cash flows
will be sufficient to meet the Company's operating needs for the next fiscal
year. There can be no assurance that additional financing, if and when required,
will be available on terms acceptable to the Company or at all.

Risks Associated With Management of Data and Year 2000 Issues

The Company's business is dependent upon its ongoing ability to obtain,
process, analyze and manage data and to maintain and upgrade its data processing
capabilities. Interruption of data processing capabilities for any extended
length of time, the failure to upgrade data services, difficulties in converting
data and information systems after acquisitions, loss of stored data,
programming errors or other computer programs could have a material adverse
effect on the Company's business. As the year 2000 approaches, an issue ("Year
2000 Issue") affecting all companies has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. In brief, many existing applications in the marketplace and some
proprietary database applications developed by the Company were designed to use
a two-digit date position to represent the year (e.g., "98" is stored on the
systems and represents the year 1998). The Company has initiated an assessment
of its own computer systems and other data-sensitive electronic systems, such as
security systems. The financial and general ledger systems of the Company are
substantially compliant already; the costs to upgrade these systems is not
expected to be material. The Company has also commenced to communicate with
suppliers, customers, financial institutions and others with whom it conducts
business to assess whether the systems of these other companies with which the
Company interfaces or on which the Company relies, will be upgraded on a timely
basis or that such systems will not have an adverse effect on the Company's
systems. The Company does not believe that it will incur a material financial
impact from the risk, or from assessing the risk, arising from the Year 2000
Issues. However, there can be no assurance that the Company's initial assessment
of this risk will be accurate or that the Year 2000 Issue will not materially
affect future financial results or future financial conditions.

Another area of potential risk is with certain medical equipment which
belongs to the Company's customers but which is maintained or serviced by the
Company and has microprocessors with date functionality which could malfunction
in the year 2000. Among other steps, the Company has initiated formal
communications with all of its customers and with all of the major suppliers of
medical equipment to ensure that these third parties are also working to
remediate their own Year 2000 Issues, if applicable. However, the Company is
unable to determine whether the Year 2000 Issue related to customers' medical
equipment which is serviced or maintained by the Company will materially affect
future financial results or future financial conditions.

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<PAGE> 17

Competition

The marketing of equipment services and group purchasing services to
health care institutions is highly competitive. Many of the Company's
competitors are larger, have greater financial and marketing resources than the
Company, and have not faced the challenges confronting the Company related to
its operations. (See "Business-Competition," "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Risk Factors -
Ability to Achieve Improved Operating Results.") Some of the Company's
competitors are nonprofit cooperatives that enjoy tax advantages unavailable to
the Company. The Company could encounter additional competition because many of
the services and products it sells are easily obtainable by others from various
sources of supply and such competitors could consolidate into regional or
national networks. Significant increases in competition encountered by the
Company in the future may limit the Company's ability to expand its business or
maintain its current customer base, which could have a material adverse effect
on the Company's business.

Risks of Reduced Customer Base Associated with Consolidation of the Health Care
Industry

As consolidation among health care institutions, particularly hospitals
and integrated health systems, continues, the Company's customer base may be
reduced either because customers may be consolidated with or acquired by other
entities or because purchasing decisions for products and services may shift to
individuals with whom the Company has not had prior selling relationships. There
can be no assurance that the Company will be able to maintain relationships with
its customers following such an acquisition or consolidation. Any significant
reduction in the Company's customer base could have a material adverse effect on
the Company's business.

Costs Associated with Regulation of the Health Care Industry

The Company focuses its business on providing services to health care
institutions, particularly hospitals. The health care industry is subject to
extensive government regulation, licensure and prescribed operating procedures.
The acceptance of the Company's services and products by its customers will
depend, to a very significant degree, upon whether such services and products
will be in compliance with applicable regulations or will assist health care
institutions in complying with such regulations. While the Company monitors such
regulations and designs its services and products accordingly, a substantial
change in the level of regulation or the substance of particular regulations
could have a material adverse effect on the Company's business. See "Business -
Regulatory Matters."

Liability Risks Associated with Governmental Regulations and Environmental
Hazards

The health care industry is highly regulated and there are numerous
federal and state laws, which regulate the relationships between health care
providers and the persons, or entities, which sell goods or services to health
care providers. These laws include the fraud and abuse provisions of the
Medicare and Medicaid statutes, certain federal antitrust laws such as the
Robinson-Patman Act, the Sherman Act and the Clayton Act, regulations regarding
the sale and marketing of insurance products, such as life and health insurance,
fire and casualty insurance and variable annuities, and laws and regulations
regarding worker safety, community "right to know" and clean air and water.
Although the Company believes it has been and is currently in substantial
compliance with the applicable standards pursuant to such laws and regulations,
there can be no assurance that the Company will not be materially adversely
affected by existing or future requirements or incur materially increased
operating costs in complying therewith. There can be no assurance that review of
the Company's business by courts or regulatory authorities will not result in a
determination that could adversely affect the Company's business or that the
health care regulatory environment will not change so as to restrict the
Company's existing operations or their expansion.

Dependence upon Relationships with Third Party Vendors; Consolidation of Vendors

The Company offers equipment servicing and group purchasing services for
over 400,000 different products distributed or manufactured by approximately
5,558 vendors and is dependent on these vendors for the manufacture and supply
of product. Presently, the Company relies on vendors for (i) technical and
selling support, (ii) favorable purchasing and delivery terms, (iii) promotional
materials, and (iv) replacement parts. The Company's dependence on third party
suppliers includes several potential risks, including limited control over
pricing, product and service availability and quality, and delivery schedules.
The Company's inability to maintain good relations with these vendors could have
a material adverse effect on the Company's business. Certain of the vendors,
including in the drug wholesaling and distributing industry, are also
consolidating which may reduce the number of options available to the Company
and/or the largest of such vendors may also attempt to deal directly with
customers as opposed to through GPOs such as Purchase Connection or only with
certain select GPOs not including Purchase Connection. See "Business - Services
and Products."

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<PAGE> 18
\
Impact of External Reporting to the Company of Purchasing Volume

In fiscal 1998, commissions from manufacturers and distributors,
together with access fees from customers, accounted for approximately two-thirds
of the revenues of the Purchase Connection segment, which includes the Company's
group purchasing organization. Commissions are received from manufacturers and
distributors in exchange for delivering volume purchases to those manufacturers
and distributors. In the group purchasing industry, it is difficult for group
purchasing organizations ("GPOs") to determine accurately the volume of
purchases made by their customers from manufacturers and distributors because
orders are placed directly by customers with manufacturers and distributors.
Accordingly, it is difficult for GPOs to verify that the amount of commissions
received from manufacturers and distributors accurately reflects purchases made
by the GPOs' customers. In order to verify the amount of commissions to which it
is entitled, the Company currently relies on manufacturers and distributors to
report accurately purchases made by the Company's customers, and the Company's
ability to audit such information based upon customer records is therefore
limited. Although the Company has developed Power Connection, an on-line or
stand-alone electronic catalog that will enable the Company to better monitor
manufacturer and distributor reporting, few of the Company's group purchasing
customers currently use Power Connection, and there can be no assurance that the
Company will be successful in making Power Connection available to all of its
customers on a cost-effective basis. Lost commissions to the Company due to
inaccurate reporting of volume purchases made by its customers could have a
material adverse effect on the Company's business. See "Business - Services and
Products."

Risks Related to Fixed Price Contracts

In the Company's equipment servicing business, the Company offers
contracts for services at a fixed price. In the event that the cost to the
Company of performing services under a fixed price contract exceeds the quoted
fixed price, the Company would bear any such excess cost. In the event that the
Company's costs of performing services exceeds the fixed price it is to receive
under a significant number of fixed price contracts, the Company's business and
results of operations may be materially adversely affected.

Liability Risks and Insurance Coverage

Although the Company is not a manufacturer, the servicing, maintenance
and sale of medical equipment entails risks of product liability. Additionally,
the Company may be subject to lawsuits alleging negligence or related legal
theories in connection with its security services and consulting services,
including environmental, safety and professional consulting services. The
Company maintains liability insurance coverage, however, there can be no
assurance that claims or judgments in excess of the Company's coverage limits,
or outside the scope of the coverage where applicable, will not have a material
adverse effect upon the Company's business or results of operations.

Dependence on Third Party Reimbursement

The cost of a significant portion of medical care in the United States
is funded by government and private insurance programs, such as Medicare,
Medicaid and corporate health insurance plans. In recent years,
government-imposed limits on reimbursement of hospitals and other health care
providers have significantly impacted spending budgets in certain markets within
the medical supply and equipment industry. Private third-party reimbursement
plans are also developing increasingly sophisticated methods of controlling
health care costs through redesign of benefits and exploration of more
cost-effective methods of delivering health care. Accordingly, there can be no
assurance that the Company's customers will continue to have sufficient
spendable funds for purchase and use of the Company's services and products. A
material reduction in the purchasing of such services and products could
adversely affect the Company's business.

Volatility of Stock Price

The Company believes factors, such as announcements with respect to the
restatement of prior period financial statements, the civil lawsuits against the
Company, the management turnover, the SEC investigation and the variations in
financial results, have caused, and could continue to cause, the market price of
the Company's common stock to fluctuate substantially. Any adverse announcement
with respect to such matters or any shortfall in revenue or earnings from levels
expected by securities analysts could have an immediate and material adverse
effect on the trading price of the Company's common stock in any given period.
As a result, the market for the Company's common stock may experience material
adverse price and volume fluctuations.

Inflation

The Company believes that its operations have not been materially
adversely affected by inflation.

18
<PAGE> 19

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information with respect to this item is set forth in the "Index to
Consolidated Financial Statements." at page 23.

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

None

19
<PAGE> 20

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Election of
Directors - Current Board of Directors," to be filed with the Commission within
120 days after the close of the Company's fiscal year.

EXECUTIVE OFFICERS

The Company assembled a new management team in June 1998 when it elected
Mr. Raymond List as President and Chief Executive Officer and Mr. Peter Socha as
Executive Vice President, Operations. Mr. Daniel Clark, who was named Executive
Vice President, Finance and Chief Financial Officer in February of 1998, will
remain in that position.

The names, titles and ages of the executive officers of the Company are
as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Raymond List 54 President, Chief Executive Officer

Daniel Clark 46 Executive Vice President, Finance and Chief Financial Officer

Peter Socha 39 Executive Vice President, Operations

David Manigault 39 Senior Vice President, Secretary

Aviva Truesdell 51 Senior Vice President of Business Services

David Roesler 45 Senior Vice President of Operations, Purchase Connection

Bernie Bartoszek 46 Senior Vice President of Sales and Marketing, COHR MasterPlan

Ed Gravell 43 Senior Vice President of Sales and Customer Service, Purchase Connection

Joe Strange 49 Senior Vice President of Management Consulting Services
</TABLE>

Mr. List was appointed President and Chief Executive Officer and elected
a Director on June 1, 1998. In 1995, Mr. List became Managing General Partner of
Fairfax Partners, an investment and management firm. From 1994 to 1995, he was
affiliated with American Venture Investments and Fairfax Partners. For the
previous twenty years, Mr. List served in various senior management positions,
including Chairman and President, with ICF Kaiser Engineers.

Mr. Clark has served as Chief Financial Officer since February 1998 and
as Executive Vice President, Finance since January 1998. From December 1997 to
January 1998, he served as a financial consultant to the Company. Before joining
the Company, Mr. Clark served for eleven years with PepsiCo, Inc., most recently
as Chief Financial Officer of California Pizza Kitchen, Inc.

20
<PAGE> 21
Mr. Socha was appointed Executive Vice President, Operations on June 1,
1998. From 1997 to 1998, Mr. Socha served as President and Chief Executive
Officer of MedEcon Services, Inc. From 1994 to 1997, he served in senior
management positions with Sirrom Capital Corporation. From 1992 to 1994, Mr.
Socha served as President and Chief Operating Officer of Stewart Foods, Inc.

Mr. Manigault has served as Senior Vice President since January 1998,
Executive Vice President of the Company from November 1995 to January 1998, its
Chief Information Officer since 1984, and its Secretary since November 1996. He
has served as Past Chairman since 1996 and Chairman in 1995 to 1996 of the
Healthcare EDI Coalition, a trade group that establishes EDI pathways based on
ANSI X-12 standards.

Ms. Truesdell has served as Senior Vice President of Business Services
since October 1991. From January 1986 to September 1991, Ms. Truesdell served as
Vice President of Administration Services. From November 1984 to December 1985,
Ms. Truesdell served as Director, Administration Services.

Mr. Roesler has served as Senior Vice President of Operations, Purchase
Connection since April 1997. From February 1996 to March 1997, Mr. Roesler
served as Senior Vice President, Medical/Surgical/Laboratory and Capital
Equipment programs of Purchase Connection. From 1980 to January 1996, Mr.
Roesler served as Director and Vice President of National Accounts at the
Eastman Kodak Company.

Mr. Bartoszek has served as Senior Vice President of Sales and
Marketing, COHR MasterPlan since April 1996. From December 1995 to March 1996,
Mr. Bartoszek served as Senior Vice President of Sales and Operations, COHR
MasterPlan. From May 1995 to November 1995, Mr. Bartoszek served as Vice
President of Sales and Operations, COHR MasterPlan. From November 1993 to April
1995, Mr. Bartoszek served as Executive Vice President at Kinetic Biomedical
Services. From 1987 to October 1993, Mr. Bartoszek served in various managerial
capacities at AMSCO.

Mr. Gravell has served as Senior Vice President of Sales and Customer
Service, Purchase Connection since July 1995. From March 1993 to June 1995, Mr.
Gravell served as Vice President in the Medical/Surgical/Laboratory program of
Purchase Connection. From November 1990 to February 1993, Mr. Gravell served as
Director of Laboratory Services at Little Company of Mary Hospital.

Mr. Strange has served as Senior Vice President of Management Consulting
Services since June 1996. From April 1993 to May 1996, Mr. Strange served as
Vice President of Management Consulting Services. From August 1992 to March
1993, Mr. Strange served as Director, Regulatory Consulting Services.

Certain other persons who served as executive officers during the fiscal
year ended March 31, 1998 but who are no longer executive officers or with the
Company include: Paul Chopra, former President and Chief Executive Officer,
Sandy Morford, former President and Chief Operating Officer, Haresh Satiani,
former Senior Vice President of Operations, COHR Masterplan, Umesh Malhotra,
former Chief Financial Officer and Treasurer, and David Langness, former Senior
Vice President of Corporate Communications.

Mr. Chopra has held various executive positions including Chief
Executive Officer with the Company from 1987 through November 1997 and currently
serves as a Director.

Mr. Morford served as Chief Operating Officer of the Company from
November 1996 to June 1998. He served as President from November 1996 until
November 1997. Prior to his departure in June 1998, Mr. Morford was employed by
COHR for nineteen years.

Mr. Satiani served as Senior Vice President of Operations, COHR
MasterPlan from April 1994 to June 1998. From November 1991 to March 1994, Mr.
Satiani served as Vice President of Operations, COHR MasterPlan.

21
<PAGE> 22

Mr. Malhotra served as Chief Financial Officer and Assistant Secretary
from 1995 to February 1998 and, additionally, as Treasurer of the Company from
1996 to February 1998. From 1991 to 1995, he served as the Company's Controller
and Vice President of Finance.

Mr. Langness served as Senior Vice President of Corporate Communications
from February 1996 to January 1998. From April 1986 to January 1996, Mr.
Langness served as Vice President, Communications for HASC.

Mr. Stephen Gamble served as the Company's interim Chief Executive
Officer from November 1997 to June 1998. He continues to be a Director of the
Company.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Remuneration," to
be filed with the Commission within 120 days after the close of the Company's
fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Voting Securities"
and "Election of Directors," to be filed with the Commission within 120 days
after the close of the Company's fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to this item is incorporated by reference from
the Company's definitive Proxy Statement, under the caption "Election of
Directors - Certain Relationships and Related Transactions," to be filed with
the Commission within 120 days after the close of the Company's fiscal year.

PART IV

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

(a) 1. FINANCIAL STATEMENTS

The documents described in the "Index to Consolidated Financial
Statements and Financial Statement Schedule" are included in this report
starting at page 23.

2. FINANCIAL STATEMENT SCHEDULE

The financial statement schedule described in the "Index to Consolidated
Financial Statements and Financial Statement Schedule" is included in
this report starting on page 41.

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and
therefore have been omitted.

3. EXHIBITS

Exhibits included or incorporated herein:

See Exhibit Index

4. REPORTS ON FORM 8-K

The Company filed the following current report on Form 8-K during the
quarter ended March 31, 1998:

<TABLE>
<CAPTION>
Date of Report Item Reported
--------------- -------------
<S> <C>
January 2, 1998 Other Events
Engagement of Lehman Brothers as financial
advisor and estimate of special charges

</TABLE>

22
<PAGE> 23

COHR INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................. 24

CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at March 31, 1998 and 1997................. 25

Consolidated Statements of Operations for Each of the Years Ended
March 31, 1998, 1997 and 1996............................................ 26

Consolidated Statements of Changes in Shareholders' Equity for Each of
the Years Ended March 31, 1998, 1997 and 1996............................ 27

Consolidated Statements of Cash Flows for Each of the Years Ended
March 31, 1998, 1997 and 1996............................................ 28

Notes to Consolidated Financial Statements............................. 29

Schedule V-- Valuation and Qualifying Accounts for Each of the Years
Ended March 31, 1998, 1997 and 1996...................................... 41
</TABLE>

23
<PAGE> 24

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders of
COHR Inc. and Subsidiaries
Chatsworth, California:

We have audited the accompanying consolidated balance sheets of COHR Inc. and
subsidiaries (the "Company") as of March 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended March 31, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14(a)2.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements and financial statement
schedule based on our audits.

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

In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of March 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1998 in conformity with generally accepted accounting principles.
Also, in our opinion, such 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.

/s/ Deloitte & Touche LLP

Los Angeles, California
June 11, 1998

24
<PAGE> 25

COHR INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
(DOLLARS IN THOUSANDS)

ASSETS (Note 9)

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 14,026 $ 22,948
Investments ......................................... 6,000
Accounts receivable, net of allowance for doubtful
accounts of $4,232 (1998) and $1,490 (1997)....... 16,946 27,006
Inventory ........................................... 6,891 9,126
Prepaid expenses and other .......................... 716 1,263
Income tax refund receivable (Note 7) ............... 8,391 1,348
Deferred income tax asset (Note 7) .................. 1,124
----------- -----------
Total current assets ........................ 46,970 68,815
EQUIPMENT AND IMPROVEMENTS, net (Note 5) .............. 6,804 6,636
INTANGIBLE ASSETS, net of accumulated amortization of
$261 (1998) and $665 (1997) ........................... 2,615 9,237
OTHER ASSETS .......................................... 195 391
----------- -----------
TOTAL ....................................... $ 56,584 $ 85,079
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Notes 6 and 8) ....................... $ 40 $ 1,342
Accounts payable..................................... 6,183 5,668
Accrued expenses .................................... 11,174 4,669
Deferred revenue .................................... 734 6,394
Current portion of long-term debt (Notes 6 and 8) ... 649 853
----------- -----------
Total current liabilities ................... 18,780 18,926
LONG-TERM DEBT (Notes 6 and 8)......................... 498 1,146
OTHER LONG-TERM LIABILITIES ........................... 136
DEFERRED INCOME TAX LIABILITY (Note 7) ................ 499
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
SHAREHOLDERS' EQUITY (Notes 11 and 12):
Preferred stock, $.01 par value; 2,000,000 shares
authorized; no shares issued and outstanding ........
Common stock, $.01 par value; 20,000,000 shares
authorized; 6,433,189 (1998)
and 6,391,000 (1997) shares issued and outstanding .. 887 887
Additional paid-in capital .......................... 55,153 55,153
Retained earnings (accumulated deficit) ............. (18,870) 8,468
----------- -----------
Total shareholders' equity .................. 37,170 64,508
----------- -----------
TOTAL ....................................... $ 56,584 $ 85,079
=========== ===========
</TABLE>

See notes to consolidated financial statements.

25
<PAGE> 26

COHR INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUES ................................................ $ 102,144 $ 86,221 $ 66,254
DIRECT OPERATING EXPENSES ............................... 79,868 57,351 43,506
--------- --------- ---------
GROSS MARGIN ............................................ 22,276 28,870 22,748
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 4) ... 41,567 25,744 19,248
SPECIAL CHARGES (Note 3) ................................ 11,440 0 0
--------- --------- ---------
OPERATING INCOME (LOSS) ................................. (30,731) 3,126 3,500
INTEREST INCOME ......................................... 882 889 155
INTEREST EXPENSE ........................................ (208) (95) (30)
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT) ............ (30,057) 3,920 3,625
INCOME TAX PROVISION (BENEFIT) (Note 7) ................ (2,719) 1,594 1,483
--------- --------- ---------
NET INCOME (LOSS) ....................................... $ (27,338) $ 2,326 $ 2,142
========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE (Note 1):
BASIC ................................................. $ (4.25) $ 0.45 $ 0.90
========= ========= =========
DILUTED ............................................... $ (4.25) $ 0.42 $ 0.89
========= ========= =========
</TABLE>

See notes to consolidated financial statements.

26
<PAGE> 27

COHR INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR EACH OF THE YEARS ENDED MARCH 31, 1998,
1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT NUMBER OF SHARES)

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON STOCK PAID-IN (ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1995 ....................... 2,112,000 $ 844 $ 2,179 $ 4,247 $ 7,270
Net proceeds from sale of common stock
through initial public offering (Note
11)........................................ 2,450,000 25 19,925 19,950
Dividend paid to shareholders (Pre-IPO) .... (247) (247)
Net income ................................. 2,142 2,142
--------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1996 ...................... 4,562,000 869 22,104 6,142 29,115
Net proceeds from sale of common stock
through second public offering
(Note 11) ................................. 1,739,000 17 32,240 32,257
Stock options exercised .................... 90,000 1 809 810
Net income ................................. 2,326 2,326
--------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1997 ...................... 6,391,000 887 55,153 8,468 64,508
Shares issued upon exercise of
warrants .................................. 42,189
Net loss ................................... (27,338) (27,338)
--------- --------- --------- --------- ---------
BALANCE, MARCH 31, 1998 ...................... 6,433,189 $ 887 $ 55,153 $ (18,870) $ 37,170
========= ========= ========= ========= =========
</TABLE>

See notes to consolidated financial statements.

27
<PAGE> 28

COHR INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) ..................................................... ($27,338) $ 2,326 $ 2,142
-------- -------- --------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization ....................................... 2,179 1,364 838
Provision for losses on accounts receivable ......................... 5,614 600 205
Reduction of (provision for) deferred income taxes .................. 1,124 (267) 49
Write-down of goodwill .............................................. 7,142
Loss on asset write-downs ........................................... 1,623
Increase (decrease) in other long-term liabilities .................. 136 (180) (592)
Changes in assets and liabilities, net of effect of
acquisitions of certain assets and restructuring:
Accounts receivable, net .......................................... 4,446 (11,275) (4,890)
Inventory ......................................................... 1,902 (2,631) (1,078)
Prepaid expense and other ......................................... 547 (379) (174)
Other assets ...................................................... 196 (184) (41)
Income tax refund receivable ...................................... (7,542) (1,348)
Accounts payable .................................................. 515 (1,634) 589
Accrued expenses .................................................. 6,517 543 1,234
Deferred revenue .................................................. (5,660) 1,808 344
Other ............................................................. (529)
-------- -------- --------
Total adjustments .............................................. 18,739 (13,583) (4,045)
-------- -------- --------
Net cash used in operating activities .......................... (8,599) (11,257) (1,903)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................................. (2,179) (2,557) (1,427)
Payments for business acquisitions .................................... (1,295) (8,298) (1,387)
Proceeds from sale of investments .................................... 6,000
Purchase of investments ............................................... (6,000)
-------- -------- --------
Net cash provided by (used in) investing activities ............ 2,526 (16,855) (2,814)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends to shareholders .................................. (247)
Repayment and current maturities of long-term debt and notes
payable ................................................................. (2,849) (1,321) (125)
Issuance of common stock .............................................. 32,257 19,950
Exercise of stock options ............................................. 810
-------- -------- --------
Net cash provided by (used in) financing activities ............ (2,849) 31,746 19,578
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................... (8,922) 3,634 14,861
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......................... 22,948 19,314 4,453
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................ $ 14,026 $ 22,948 $ 19,314
======== ======== ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Income taxes ..................................................... $ 3,707 $ 3,054 $ 1,843
======== ======== ========
Interest ......................................................... $ 208 $ 25 $ 37
======== ======== ========

DETAILS OF BUSINESSES OR ASSETS ACQUIRED AT FAIR VALUE ARE AS FOLLOWS
(Note 6):
Current assets ........................................................ $ 494 $ 5,727 $ 409
Equipment ............................................................. 196 1,426 235
Goodwill and other intangibles ........................................ 1,782 7,092 893
-------- -------- --------
2,472 14,245 1,537
Liabilities assumed ................................................... 3,288
Debt issued for acquisitions .......................................... 1,177 2,659 150
-------- -------- --------
NET CASH PAID FOR BUSINESS ACQUISITIONS ............................... $ 1,295 $ 8,298 $ 1,387
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

28
<PAGE> 29

COHR INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR
EACH OF THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Description -- COHR Inc. and subsidiaries (the "Company") provide
fee-for-service products and services to hospitals and other health care
providers (see Note 13 for information relating to the Company's business
segments).

The Company was formerly a majority owned subsidiary of Healthcare
Association of Southern California ("HASC"). Effective February 16, 1996, the
Company became a publicly held company, at which time HASC became a minority
shareholder (see Note 11).

Basis of Presentation -- The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All intercompany
accounts and transactions have been eliminated.

Use of Estimates -- The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts in the consolidated
financial statements and accompanying notes. Actual results could differ from
the estimates.

Cash and Cash Equivalents -- The Company considers all highly liquid
investments purchased with initial maturities of generally three months or less
to be cash equivalents. The Company actively evaluates the creditworthiness of
the financial institutions and instruments in which it invests.

Inventory -- Inventory, consisting primarily of medical equipment repair
parts, is stated at the lower of cost or market, cost being determined on the
first-in, first-out basis.

Equipment and Improvements -- Equipment and improvements are stated at cost,
net of accumulated depreciation and amortization. Depreciation of furniture and
equipment and amortization of improvements are provided for using the
straight-line method over the estimated useful lives of the respective assets,
as follows:

<TABLE>
<S> <C>
Computer equipment and software.........5 to 10 years
Office furniture, equipment and
automobiles...........................3 to 7 years.
Technical equipment.....................10 years
Leasehold improvements..................Shorter of lease term or useful life
</TABLE>

Intangible Assets -- Goodwill and other purchased intangible assets are
stated at cost and amortized on a straight-line basis over 15 years. The
projection of undiscounted future cash flows of the operations is evaluated at
each reporting period in assessing the recoverability of goodwill and other
purchased intangibles.

Revenue Recognition -- The COHR MasterPlan is a program whereby the Company
contracts with hospitals on an annual basis to manage the hospitals' equipment
maintenance and repairs. Revenues on those contracts are recognized over the
contract period. Losses, if any, on maintenance contracts are recorded when
known. Group purchasing revenue is recognized in the period earned. Revenue on
equipment sales is recognized when risk of ownership is transferred to the
buyer, which is typically upon delivery.

Deferred Revenue -- In the quarter ended March 31, 1998, the Company changed
its billing practice under the MasterPlan program. Prior to this change,
billings were made 45 days in advance thereby creating a deferred revenue
balance. The new practice does not bill MasterPlan customers in advance.

29
<PAGE> 30

Income Taxes -- The asset and liability approach is applied in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recorded to reflect the future tax consequences of events that have been
recognized in the Company's financial statements but have not yet been
recognized for tax purposes. Such deferred income tax asset and liability
computations are based on enacted tax laws and rates applicable to years in
which the differences are expected to affect taxable income. A valuation
allowance is established, when necessary, to reduce deferred income tax assets
to the amount expected to be realized. The provision for income taxes is the tax
payable or refundable for the year adjusted for the change during the year in
deferred income taxes.

Stock Option Plans -- SFAS No. 123, "Accounting for Stock-Based
Compensation," encourages but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value. The Company has
chosen to continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.

Fair Value of Financial Instruments -- The fair values of cash and cash
equivalents, accounts receivable and accounts payable approximate their carrying
values due to the short-term nature of such items. The fair values of notes
payable and long-term debt are deemed not to be materially different from their
carrying values.

Impairment of Long-Lived Assets -- The Company regularly reviews long-lived
assets and intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount to the asset may not be
recoverable (see Notes 2 and 3).

Current Accounting Pronouncements -- During 1997, the Financial Accounting
Standards Board issued SFAS No. 130 "Reporting Comprehensive Income," which
requires that an enterprise report, by major components and as a single total,
the change in its net assets during the period from non-owner sources; SFAS No.
131 "Disclosures About Segments of an Enterprise and Related Information," which
establishes annual and interim reporting standards for an enterprise's business
segments and related disclosures about its products, services, geographic areas,
and major customers; and SFAS No. 132 "Employers Disclosures About Pensions and
Other Postretirement Benefits," which revises and standardizes pension and other
benefit plan disclosures. Adoption of the statements will not impact the
Company's consolidated financial position, results of operations or cash flows.
These statements are effective for fiscal years beginning after December 15,
1997.

Concentration of Credit Risk -- The Company provides services to hospitals
and other health care providers throughout the United States. The Company's
trade accounts receivable is exposed to credit risk; however, such risk is
minimized due to the large numbers and geographic dispersion of the customer
base. The Company monitors the creditworthiness of its customers and provides
allowances for doubtful accounts when appropriate.

The Company actively evaluates the creditworthiness of the financial
institutions and instruments in which it invests. The Company's investment
policy is to invest its excess cash in a diversified portfolio of high quality,
highly liquid instruments with initial maturities of one year or less.

Research and Development -- Research and development costs are expensed as
incurred. Such costs amounted to $480 (1998), $1,059 (1997) and $990 (1996).

Net Income (Loss) per Common Share -- During fiscal 1998, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." This statement requires presentation of both basic and diluted Earnings
Per Share (EPS) and restatement of all prior-period EPS data presented. Basic
earnings (loss) per common share are computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per share
reflect the incremental shares issuable upon the assumed exercise stock options
unless the effect of such inclusion is anti-dilutive.

30
<PAGE> 31

Basic and diluted income (loss) per share are calculated as follows:

<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
-----------------------------------
1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Net income (loss) ..................... $(27,338) $ 2,326 $ 2,142
Common share information (in thousands)
Average common shares outstanding
for basic income per share ....... 6,430 5,165 2,391
Dilutive effect of stock options .... 333 11
-------- -------- --------
Shares for diluted income per share . 6,430 5,498 2,402
======== ======== ========
Net income (loss) per common share:
Basic ............................... $ (4.25) $ .45 $ .90
======== ======== ========
Diluted ............................. $ (4.25) $ .42 $ .89
======== ======== ========
</TABLE>

The computation of diluted earnings per share for fiscal 1998 did not include
stock options for which 408,000 shares were antidilutive. These options expire
through 2008.

Reclassifications -- Certain reclassifications have been made to the prior
period's consolidated financial statements to conform to the current period's
presentation.

2. RESULTS OF OPERATIONS AND MANAGEMENT'S PLANS

The Company incurred a net loss of approximately $27.3 million in fiscal
1998. This loss reduced liquid assets (cash, cash equivalents and short-term
investments) by $14.9 million and working capital by $21.7 million from the
previous year end.

The Company has instituted plans to restructure its operations and improve
future cash flows. To implement these plans, the Company announced the
appointment of a new management team, effective June 2, 1998. The key elements
of these plans include the following:

o Establishing near-term cost reduction and cash management programs, and

o Reorganizing the operations in the equipment maintenance segment including
closing individual operating units, reducing staff levels and consolidating
various operational and administrative structures.

Although management believes that the implementation of these actions will
improve the Company's operating results, there can be no assurance that the
Company's operating plans will be ultimately successful.

31
<PAGE> 32

3. SPECIAL CHARGES

Special charges for the fiscal year ended March 31, 1998 consist of the
following items:

<TABLE>
<S> <C>
Write down of goodwill.................................... $ 7,142
Write down of other assets related to operations
abandoned or to be closed............................ 1,999
Severance costs........................................... 1,130
Legal and accounting costs................................ 1,169
-------
Total................................................ $11,440
=======
</TABLE>

During the third quarter of fiscal 1998, the Company recorded a charge of
approximately $2.6 million to write-off the goodwill relating to an acquisition
in its equipment maintenance operation. Under the provisions of Statement of
Financial Accounting Standards (SFAS), No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Company
concluded that the value of that asset had been permanently impaired and was
therefore written off.

During the fourth quarter of fiscal 1998, the Board of Directors authorized a
restructuring plan to reduce costs, close unprofitable operations, and divest
the Company of under-performing assets. As a result of these actions, management
has concluded that the value of goodwill attributable to certain other equipment
maintenance operations has been permanently impaired under SFAS 121 and,
therefore, an additional charge of approximately $4.5 million was recorded to
reduce these intangible assets to their estimated fair value. The evaluation of
fair value was made using both undiscounted future cash flows and the estimated
selling price of such assets. In addition, certain other tangible assets,
relating to operations closed or abandoned, have been written down to their net
realizable value. At March 31, 1998, remaining goodwill consists of $1.4 million
attributable to profitable equipment maintenance operations and $1.2 million
attributable to group purchase operations.

Severance costs represents potential severance and severance related
litigation costs for those officers and employees who were terminated or removed
from office by the Company as of March 31, 1998. Subsequent to fiscal year end
the Company has made cash payments of $130.

Legal and accounting costs represents the costs incurred by the Company
during the third and fourth quarters of fiscal 1998 resulting from a special
review of the Company's operations conducted at the direction of the Board of
Directors.

4. RELATED-PARTY TRANSACTIONS

The Company had related-party transactions resulting from the allocation of
expenses (including rent, travel and insurance) to HASC of $57 (1998), $218
(1997) and $2,427 (1996). The Company also received management fees of $311
(1998), $311 (1997), and $299 (1996) for various management and accounting
services performed for HASC under a management agreement (including accounting,
payroll and personnel costs) expiring in 1999. Expenses allocated to the Company
from HASC are included in selling, general and administrative expenses in the
accompanying statements of income. Occupancy costs are allocated based upon
square footage utilized by the respective entities. Accounting, payroll and
personnel costs are allocated based upon the identification of tasks performed
for the individual companies.

At March 31, 1998 and 1997, the Company had approximately $3.3 million and
$3.2 million in cash equivalents held at a financial institution of which a
member of the Board of Directors of the Company is a partner.

32
<PAGE> 33

5. EQUIPMENT AND IMPROVEMENTS

Equipment and improvements consist of:

<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1998 1997
------- -------
<S> <C> <C>
Computer equipment and software .................. $ 4,701 $ 3,857
Office furniture and equipment ................... 2,879 2,794
Technical equipment .............................. 3,698 3,213
Leasehold improvements ........................... 905 836
Automobiles ...................................... 37 40
------- -------
12,220 10,740
Less accumulated depreciation and amortization... 5,416 4,104
------- -------
$ 6,804 $ 6,636
======= =======
</TABLE>

6. BUSINESS ACQUISITIONS

During fiscal 1998 and 1997, the Company acquired the businesses of several
small entities similar to that of the Company through a purchase of certain
assets and service contract rights and an assumption of certain liabilities. In
addition, the Company assumed the operating leases on the facilities of some of
these entities. The individual impact of each acquired operations on the Company
was not significant. The following is a summary of the assets acquired and
liabilities assumed at estimated fair market value:

<TABLE>
<CAPTION>
MARCH 31,
-------- --------
1998 1997
-------- --------
<S> <C> <C>
Accounts receivable ........................ $ $ 2,454
Inventory .................................. 494 3,009
Prepaid expenses and other ................. 350
Equipment and improvements ................. 196 1,340
Goodwill ................................... 1,782 7,092
-------- --------
2,472 14,245
-------- --------
Accounts payable and accrued
liabilities ................................ (1,693)
Loan payable ............................... (229)
Long-term debt ............................. (1,366)
-------- --------
(3,288)
-------- --------
Net assets of businesses
acquired ................................... $ 2,472 $ 10,957
======== ========
</TABLE>

The purchases of these businesses and intangible assets were made through
initial cash payments of approximately $1,295 (1998) and $8,298 (1997) and the
issuance of $1,177 (1998) and $2,659 (1997) in notes payable (see Note 8).

7. INCOME TAXES

The provision for (benefit from) income taxes includes the following:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal ............................. ($2,719) $ 1,438 $ 1,117
State ............................... 422 317
------- ------- -------
(2,719) 1,860 1,434
------- ------- -------
Deferred:
Federal ............................. (176) 25
State ............................... (90) 24
------- ------- -------
(266) 49
------- ------- -------
Total provision for (benefit
from) income taxes ................ $(2,719) $ 1,594 $ 1,483
======= ======= =======
</TABLE>

33
<PAGE> 34

Deferred income taxes for fiscal 1998 and 1997 reflect the impact of
temporary differences between the financial statement and tax bases of assets
and liabilities. The tax effects of the temporary differences that create
deferred tax assets and liabilities at March 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets (liabilities) -- current:
Compensation-related accruals ............ $ 413 $ 431
Balance sheet reserves and other ......... 145 500
State income taxes ....................... (228) 99
Accrued severance pay .................... 670 94
Other deferred revenue ................... (104)
Bad debt reserves ........................ 1,633
Inventory reserves ...................... 509
------- -------
Net deferred tax assets--current ...... 3,038 1,124
Deferred tax assets (liabilities)--non-current:
Depreciation and amortization ............ 1,541 (499)
Net operating losses ..................... 3,499
State deferred tax ....................... (109)
Valuation allowance ...................... (7,969)
------- -------
Total net deferred tax assets ......... $ 0 $ 625
======= =======
</TABLE>

The differences between Federal income tax computed at the statutory rate and
the actual tax provisions are shown as follows:

<TABLE>
<CAPTION>
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Provision (benefit) at statutory rate ........ (34.0%) 34.0% 34.0%
State income tax, net of Federal benefit ..... (5.2) 5.6 6.6
Permanent differences ........................ 3.5 1.1 0.3
Valuation allowance .......................... 26.6
----- ---- ----
Effective tax rate ........................... (9.1%) 40.7% 40.9%
===== ==== ====
</TABLE>

As of March 31, 1998, the Company had net operating loss carryforwards of
approximately $8,048 for Federal income tax reporting purposes and $7,149 for
state income tax reporting purposes. These loss carryforwards expire in 2013 and
2003, respectively.

34
<PAGE> 35

8. LONG-TERM DEBT AND NOTES PAYABLE

Long-term debt at March 31, 1998 and 1997 consists of the following:

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Notes payable (unsecured) bearing interest at 7%,
due May 1, 1997 and 1998 ............................ $ 250 $ 1,000
Noninterest-bearing notes payable (unsecured),
due in five annual installments of $30 commencing
July 27, 1997 ....................................... 120 150
Capital lease obligations with interest rates
ranging from 11.9% to 16.0%, payable over
42 months from the start of the lease .............. 307 597
Noninterest-bearing note payable (unsecured),
due in annual installments over five years; commenced
February, 1998 ...................................... 450
Other ................................................ 20 252
------- -------
1,147 1,999
Less current portion ................................. (649) (853)
------- -------
Long-term debt ....................................... $ 498 $ 1,146
======= =======
</TABLE>

Notes payable comprise amounts due for acquisitions of certain companies and
notes acquired as a result of acquisitions. The notes bear interest ranging from
0% to prime plus 1% and are all payable within one year from date of issue. The
imputed interest expense on the non interest-bearing notes is not material to
results of operations.

The expected future installments under long-term debt, for the years ending
March 31, are as follows:

9. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain equipment under noncancelable
operating leases. Certain of these leases include renewal provisions at the
option of the Company. Rent expense amounted to $1,827 (1998), $1,515 (1997) and
$1,052 (1996).

Aggregate minimum lease commitments under noncancelable operating lease
agreements, exclusive of adjustments for taxes and other expenses, for the years
ending March 31, are as follows:

<TABLE>
<S> <C>
1999................... $ 1,919
2000................... 1,579
2001................... 1,132
2002................... 982
2003................... 903
Thereafter............. 4,792
-------
$11,307
=======
</TABLE>

A lease for the Company's primary facility commenced August 1996 and expires
in January 2009. The lease is for a 76,000 square foot facility in Chatsworth,
California, which houses the corporate offices, operations for group purchasing
and operations for the equipment maintenance division. The other leases contain
renewal options, and management expects that, in the normal course of business,
such leases will be renewed or replaced by other leases upon expiration.

The Company is also involved from time to time in various legal proceedings
incident to the normal conduct of its business. Based upon communication with
legal counsel, in the opinion of management, the disposition of all such
proceedings will not have a material adverse affect on the Company's financial
position, results of its operations or liquidity.

A number of class action lawsuits have been recently filed in various courts
against the Company, certain of its present and former Officers and Directors
and others. No discovery on these cases has begun. In addition, the Company was
recently informed that it is subject to a formal investigation by the Securities
Exchange Commission. Management is unable to predict at this time the final
outcome of these matters or whether the resolution of these matters will
materially affect the Company's results of operations, cash flows or financial
position.

35
<PAGE> 36

10. PENSION AND PROFIT SHARING PLANS

The Company maintains profit sharing and salary deferral plans qualified
under Sections 401(a) and 401(k), respectively, of the Internal Revenue Code. As
of January 1, 1996, the employees of the Company were transferred from the
multi-employer plans to new plans, which are solely for the benefit of the
employees of the Company. The provisions of the new plans are identical to the
prior plans. These plans cover all employees who meet the eligibility
requirements of the plans. The total expenses charged to operations relating to
these plans were $1,293 (1998), $1,004 (1997) and $627 (1996).

11. SHAREHOLDERS' EQUITY

Preferred Stock -- On January 16, 1996, the Company was reincorporated in the
state of Delaware, and in connection therewith, the shareholders and the Board
of Directors of the Company adopted and approved the authorization of 2,000,000
shares of preferred stock at a par value of $0.01 per share.

Common Stock --On February 16, 1996, the Company closed its initial public
offering of its common stock. Of the 3,000,000 shares sold at $9 per share in
the offering, 2,000,000 were sold by the Company, and 1,000,000 were sold by
HASC and Hospital Council Coordinated Programs, Inc. (the "Selling
Shareholders"). The Company did not receive any proceeds from the sale of shares
by the Selling Shareholders. On March 6, 1996, the underwriters purchased
450,000 common shares at $9 per share to cover over-allotment. The proceeds to
the Company from the sale of 2,450,000 shares amounted to $19,950, which was net
of underwriters discounts and offering expenses of approximately $2,100.

On November 27, 1996, the Company completed a second public offering of its
common stock. Of the 1,760,000 shares sold at $20 per share in the offering,
1,500,000 were sold by the Company and 260,000 were sold by HASC and Hospital
Council Coordinated Programs, Inc. The Company did not receive any proceeds from
the sale of shares by the Selling Shareholders. The remaining 852,000 shares
held by the Selling Shareholders at the date of the secondary were not eligible
for sale until February 16, 1998. On December 18, 1996, the underwriters
purchased 239,000 common shares at $20 per share to cover over-allotment.
Certain officers sold a total of 25,000 stock options at the same time. The
proceeds to the Company from the sale of 1,739,000 shares amounted to $32,257,
which was net of underwriters discounts and offering expenses of approximately
$2,400. At March 31, 1998, the Company had 75,000 warrants outstanding to
purchase the Company's common stock at $10.80 per share. These warrants were
issued to the underwriter in connection with the second public offering.

12. STOCK OPTION PLANS

1995 Stock Option Plan -- The Board of Directors and shareholders of the
Company have adopted and approved a 1995 stock option plan (the "1995 Plan")
pursuant to which certain officers, directors and other key employees of the
Company are eligible to receive nonqualified options to purchase the Company's
common stock. The maximum number of shares of common stock that may be issued
pursuant to options granted under the 1995 Plan is 600,000. As of March 31,
1998, there were outstanding options to purchase 453,000 shares of common stock
(net of cancellations and sales by optionees). The weighted average exercise
price of the foregoing options is at $12.41 per share, which represents the fair
market value on the date of the grant.

The 1995 Plan is administered by a committee of the Board composed solely of
two or more non-employee directors (the "Committee") or the Board of Directors
may approve the grant options.

Under the 1995 Plan, key employees and nonemployee directors are eligible to
be granted options under the 1995 Plan if so selected by the Committee in its
absolute discretion. The number of shares subject to an option and the term and
conditions, including the purchase price per share of common stock subject to
each options, shall be set by the Committee; provided, however, that the
exercise price shall not be less than the fair market value of the common stock
as of the date the option is granted. No options granted under the 1995 Plan may
be exercised after the expiration of ten years from the date it was granted.
Options granted to key employees vest in accordance with the following schedule:
(i) 25% upon the date of grant, (ii) 50% upon the first anniversary of the date
of grant, (iii) 75% upon the second anniversary of the date of grant, and (iv)
100% upon the third anniversary of the date of grant. Options granted to
nonemployee directors are at all times 100% vested.

Options granted under the 1995 Plan are generally nontransferable. In the
event of certain mergers, consolidations, a sale of all or substantially all of
the assets of the Company or a liquidation involving the Company, all granted or
awarded options will immediately vest in the optionee. At the time of the second
public offering in November 1996, each options holder was automatically vested
in 50% of the nonvested portion of any options previously awarded. The 1995 Plan
may be terminated at any time by the Board.

At March 31, 1998, 1997 and 1996, 328,813, 377,813 and 142,500 options,
respectively, were exercisable under the 1995 Plan.

36
<PAGE> 37
1996 Stock Option Plan -- On November 7, 1996 the Board of Directors of the
Company adopted the 1996 Stock Option Plan (the "1996 Plan"), pursuant to which
certain officers, non-employee directors and other key employees of the Company
are eligible to receive nonqualified options to purchase the Company's common
stock. The 1996 Plan is administered by a committee of the Board composed solely
of two or more non-employee directors (the "Committee") or the Board of
Directors may approve the grant options. The maximum number of shares of common
stock that may be issued pursuant to options granted under the 1996 Plan is
300,000. The weighted average exercise price of the foregoing options is at
$15.46 per share, which represents the fair market value on the date of the
grant.

Under the 1996 Plan, officers, other managerial employees ("Key Employees")
and nonemployee directors are eligible to be granted options if so selected by
the Committee or the Board of Directors in its absolute discretion. The number
of shares subject to an option and the term and conditions, including the
purchase price per share of common stock subject to each option, shall be set by
the Committee; provided, however, that the exercise price shall not be less than
the fair market value of the common stock as of the date the option is granted.
Unless otherwise determined by the Committee, options issued to Key Employees
vest 25% upon the date of grant and on each of the first, second and third
anniversary dates of the grant. Unless otherwise determined by the Committee,
options issued to non-employee directors are at all times 100% vested. No option
granted under the 1996 Plan may be exercised after the expiration of ten years
from the date it was granted.

37
<PAGE> 38

Options granted under the 1996 Plan are generally nontransferable. In
the event of certain mergers, consolidations, a sale of all or substantially all
of the assets of the Company or a liquidation involving the Company, all granted
options will immediately vest in the optionee. The 1996 Plan may be terminated
at any time by the Board.

At March 31, 1998, 186,250 options were exercisable under the 1996 Plan.

Information regarding these option plans for the years ended March 31, 1998,
1997 and 1996 is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------------------------- -------------------------- -------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES
------- ---------------- ------- --------------- -------
<S> <C> <C> <C> <C> <C>
Options outstanding, beginning of
year.............................. 492,500 12.15 465,000 9.00
Options granted................. 265,000 15.46 125,000 21.43 465,000
Options exercised............... --- (90,000) 9.00
Options forfeited............... (39,500) 10.12 (7,500) 9.00
------- ------- -------
Options outstanding, end of year.. 718,000 13.48 492,500 12.15 465,000
================ ===============
Options price range, end of year.. $10.87 to $19.63 $9.00 to $26.00
Option price range for exercised
shares............................ $9.00
Options price range for forfeited $ 9.00 to $17.83 $9.00
shares............................
Options available for grant,
end of year.................... 45,000 310,000 135,000
======= ======= =======
Weighted-average fair value of
options granted during the year... $15.46 $24.56
</TABLE>

The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted-average assumptions:

The following table summarizes information about fixed-price stock options
outstanding at March 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
OUTSTANDING REMAINING WEIGHTED EXERCISABLE WEIGHTED-AVERAGE
RANGE EXERCISE PRICES AT 3/31/98 CONTRACTUAL LIFE EXERCISE PRICE AT 3/31/98 EXERCISE PRICE
- --------------------- ----------- ---------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$9.00 .............. 333,000 8 years $ 9.00 258,500 $ 9.00
$11.69 to $26.00 ... 385,000 10 years $17.30 256,563 $16.27
</TABLE>

The fair value at date of grant for stock options granted during the years
ended March 31, 1998, 1997 and 1996 was $10.00, $17.20 and $18.23,
respectively.

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1998 1997
----- -----
<S> <C> <C>
Expected life years 9.69 10
Interest rate ..... 5.67% 6.85%
Volatility ........ 62.85% 25.50%
</TABLE>

Stock-based compensation costs would not have affected the pre-tax loss for
the year ended March 31, 1998 and reduced the pre-tax income by $248 ($149 after
tax or $0.03 per share) for the year ended March 31, 1997.

38
<PAGE> 39

13. BUSINESS SEGMENTS

The Company currently provides services to the health care industry through
two principal business segments. The COHR MasterPlan provides equipment
sales and maintenance to hospitals and other health care providers. The
Purchase Connection is a group purchasing organization that negotiates pricing
for its membership with manufacturers and distributors. General corporate
expenses are classified as Corporate. Identifiable assets are those used in the
Company's operations in each segment as estimated by management based upon
factors such as revenue generated, number of personnel and space occupied by
each segment. Information concerning the Company's business segments in fiscal
1998, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
EQUIPMENT PURCHASING
SERVICES SERVICES CORPORATE TOTAL
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998
Revenues ....................... $ 81,655 $ 20,489 $ 102,144
Operating income (loss) ........ (16,370) 6,275 $ (20,636) (30,731)
Identifiable assets ............ 35,082 5,659 15,843 56,584
Depreciation and amortization... 1,111 327 741 2,179
Capital expenditures ........... 1,090 43 1,046 2,179

1997
Revenues ....................... $ 66,012 $ 20,209 $ 86,221
Operating income (loss) ........ 2,549 6,650 $ (6,073) 3,126
Identifiable assets ............ 45,135 4,896 35,048 85,079
Depreciation and amortization... 876 325 163 1,364
Capital expenditures ........... 1,698 214 645 2,557

1996
Revenues ....................... $ 48,160 $ 18,094 $ 66,254
Operating income (loss) ........ 2,409 6,941 $ (5,850) 3,500
Identifiable assets ............ 19,523 3,771 21,178 44,472
Depreciation and amortization... 558 214 66 838
Capital expenditures ........... 1,182 193 52 1,427
</TABLE>

14. QUARTERLY INFORMATION 1998 AND 1997 (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR 1998
-----------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1997 1998
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues ............. $ 24,811 $ 25,964 $ 24,422 $ 26,947
Gross margin ............. 7,663 7,962 3,815 2,836
Operating loss ........... (855) (832) (9,453) (19,591)
Net loss ................. $ (355) $ (399) $(10,655) $(15,929)
======== ======== ======== ========
Net loss per share:
Basic .................. $ (0.06) $ (0.06) $ (1.66) $ (2.48)
======== ======== ======== ========
Dilutive ............... $ (0.06) $ (0.06) $ (1.66) $ (2.48)
======== ======== ======== ========
</TABLE>

39
<PAGE> 40

For the fourth quarter ended March 31, 1998, the Company reported a net
loss of $15.9 million, including pre-tax special charges of $7.3 million. The
loss before special charges include write down of $2.5 million in inventory,
$1.0 million additional bad debt provisions and continuing losses at the
Company's MasterPlan operations. As discussed in Note 3, special charges
recorded in the fourth quarter included additional goodwill and other asset
write-offs and continuing legal and accounting costs incurred during the fourth
quarter relating to a special review of the Company's operations conducted at
the direction of the Board of Directors.

<TABLE>
<CAPTION>
QUARTER ENDED FISCAL YEAR 1997
--------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1996 1996 1997
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues ................ $ 20,465 $ 21,205 $ 20,153 $ 24,398
Gross margin ................ 7,346 7,848 6,620 7,056
Operating income (loss) ..... 1,328 1,725 762 (689)
Net income (loss) ........... $ 931 $ 1,064 $ 574 $ (243)
======== ======== ======== ========
Net income (loss) per share:
Basic ..................... $ 0.20 $ 0.23 $ 0.11 $ (0.04)
======== ======== ======== ========
Dilutive .................. $ 0.20 $ 0.22 $ 0.10 $ (0.04)
======== ======== ======== ========
</TABLE>

40
<PAGE> 41

SCHEDULE V

COHR, INC.

VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) OF PERIOD
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year Ended March 31, 1996 .... $ (773) $ (205) $ 143 $ (835)
Year Ended March 31, 1997 .... $ (835) $ (600) $ (68) $ 13 $(1,490)
Year Ended March 31, 1998 .... $(1,490) $(5,614) $ 2,872 $(4,232)
</TABLE>

(1) Represents accounts receivable written off against the allowance for
doubtful accounts.

41
<PAGE> 42

SIGNATURES

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

Dated: June 29, 1998

By:
-------------------------------------
President and Chief Executive Officer

Pursuant to the requirement 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 indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE

<S> <C> <C>
- --------------------------------------------- President, Chief June 29, 1998
Raymond List Executive Officer and Director
(Principal Executive Officer)

- --------------------------------------------- Executive Vice June 29, 1998
Daniel F. Clark President, Finance and
Chief Financial Officer
(Principal Accounting and
Financial Officer)

- --------------------------------------------- Director June 29, 1998
Lynn P. Reitnouer

- --------------------------------------------- Director June 29, 1998
Stephen W. Gamble

Director June 29, 1998
- ---------------------------------------------
Louis A. Simpson

- --------------------------------------------- Director June 29, 1998
Ronnie J. Messenger

- --------------------------------------------- Director June 29, 1998
Frederick C. Meyer

- --------------------------------------------- Director June 29, 1998
James D. Barber
</TABLE>

42
<PAGE> 43

COHR INC. AND SUBSIDIARIES

INDEX TO EXHIBITS

ITEM (14)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3.1* Certificate of Incorporation of Registrant

3.2* By-laws of Registrant

4.1* Form of Warrant to be issued to the Representatives of the Underwriters

4.2* Form of Registration Rights Agreement between Registrant, Healthcare
Association of Southern California ("HASC") and Hospital Council
Coordinated Programs, Inc.

4.3* Specimen Stock Certificate

10.1* Form of Indemnity Agreement entered into between Registrant and executive
officers and directors

10.2* Employment Agreement between Registrant and Paul Chopra, effective
January 1, 1996 10.4* Form of 1995 Stock Option Plan of Registrant and
Form of Nonstatutory Option Grant Under the Plan

10.8** Office Lease between TCEP II properties and Registrant dated May 8,
1996

10.9*** 1996 Stock Option Plan of Registrant, as amended and restated on June
17, 1997

10.10 Form of Nonstatutory Option Grant Under the 1996 Stock Option Plan of
Registrant

10.11 Employment Agreement between Registrant and David Roesler

10.12 Employment Agreement between Registrant and Ed Gravell

10.13 Employment Agreement between Registrant and Aviva Truesdell

10.14 Employment Agreement between Registrant and Joe Strange

10.15 Employment Agreement between Registrant and Daniel Clark

27.1 Financial Data Schedule

99.1 Press Release dated June 2, 1998

99.2 Press Release dated June 11, 1998
</TABLE>

- ----------

* Incorporated by reference from Registrant's Statement on Form S-1,
Registration No. 33-80635.

** Incorporated by reference from Registrant's Annual Report for the fiscal
year ended March 31, 1996 on Form 10-K.

*** Incorporated by reference from Registrant's Quarterly Report for the fiscal
quarter ended June 30, 1997 on Form 10-Q.

<PAGE> 1
EXHIBIT 10.10

STOCK OPTION AGREEMENT

KEY EMPLOYEE

This Stock Option Agreement ("Agreement") is made and entered into as of
the Date of Grant indicated below by and between COHR Inc., a Delaware
corporation (the "Company"), and the person named below as Optionee.

RECITALS

A. Optionee is an employee of the Company.

B. The Company has adopted the 1996 Stock Option Plan of COHR Inc. (the
"Plan") for the benefit of officers and managerial employees and nonemployee
members of the Company's Board of Directors.

C. The Compensation Committee of the Board of Directors of the Company
(the "Committee") has approved the grant to Optionee of an option to purchase
shares of the common stock, $.01 par value, of the Company (the "Common Stock")
under the Plan and in accordance with the other terms and conditions set forth
herein.

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. Grant of Option; Certain Terms and Conditions. The Company hereby
grants to Optionee, and Optionee hereby accepts, as of the Date of Grant, an
option to purchase the number of shares of Common Stock indicated below (the
"Option Shares") at the Exercise Price per share indicated below, which option
shall expire at 5:00 p.m., Pacific Time, on the Expiration Date indicated below,
or such earlier date as provided herein, and shall be subject to all of the
terms and conditions set forth in this Agreement (the "Option"). The Option
shall become exercisable to purchase the Option Shares as indicated below:

-1-

<PAGE> 2
Optionee:

Date of Grant:

Number of Option Shares:

Exercise Price per share:

Vesting Schedule (subject to Section 2 below):

Date of Grant: 25% vested

First Anniversary of Date of Grant: 50% vested

Second Anniversary of Date of Grant: 75% vested

Third Anniversary of Date of Grant: 100% vested

Expiration Date:

The Option is not intended to qualify as an incentive stock option under Section
422 of the Internal Revenue Code of 1986.

2. Accelerated Vesting.

(a) Public Offering. In the event of an underwritten public
offering of Common Stock on or after January 1, 1997 by the Company or by a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Company,
Optionee shall automatically become 50% vested in the nonvested portion of the
Option Shares, determined as of the date of the underwritten public offering. In
such event, the remaining nonvested portion of the Option shall thereafter vest
as follows:

(i) If the underwritten public offering occurs prior to the
first anniversary of the Date of Grant, then:

-2-

<PAGE> 3

<TABLE>
<CAPTION>
Anniversary of
Date of Grant Percentage Vested
------------- -----------------
<S> <C>
First Anniversary 33 1/3%
Second Anniversary 66 2/3%
Third Anniversary 100%
</TABLE>

(ii) If the underwritten public offering occurs after the first
anniversary but prior to the second anniversary of the Date of Grant,
then:

<TABLE>
<CAPTION>
Anniversary of
Date of Grant Percentage Vested
------------- -----------------
<S> <C>
Second Anniversary 50%
Third Anniversary 100%
</TABLE>

(iii) If the underwritten public offering occurs after the
second anniversary but prior to the third anniversary of the Date of
Grant, then:

<TABLE>
<CAPTION>
Anniversary of
Date of Grant Percentage Vested
------------- -----------------
<S> <C>
Third Anniversary 100%
</TABLE>

(b) Change in Control. In the event of a Change in Control (as defined
in the Plan) prior to the third anniversary of the Date of Grant, Optionee shall
automatically become 100% vested in the Option Shares.

3. Termination of Option.

(a) Expiration Date. Except as otherwise provided herein, the Option
shall terminate on the Expiration Date.

(b) Death of Optionee. In the event of Optionee's death, the Option (to
the extent it was exercisable immediately preceding Optionee's death) may be
exercised within 12 months of Optionee's death, but not later than the
Expiration Date.

(c) Disability. If Optionee's employment is terminated due to Optionee's
permanent and total disability, as determined by the Committee, the Option (to
the extent it was

-3-

<PAGE> 4
exercisable as of termination of Optionee's employment) may be exercised within
12 months of Optionee's termination, but not later than the Expiration Date.

(d) Other Employment Terminations. If Optionee's employment is
terminated for any reason other than death or Optionee's permanent and total
disability, the Option (to the extent it was exercisable as of termination of
Optionee's employment) may be exercised within 3 months of Optionee's
termination, but not later than the Expiration Date.

4. Adjustments. In the event that the outstanding shares of Common Stock
are changed into or exchanged for cash or for a different number or kind of
shares or other securities of the Company, or of another corporation, by reason
of reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, stock dividend or combination of shares (other than for shares
or securities of another corporation or by reason of reorganization), then the
Committee shall make appropriate and equitable adjustments in the number and
kind of shares that may thereafter be acquired upon the exercise of the Option
and the Exercise Price per share; provided, however, that any such adjustments
in the Option shall be made without changing the aggregate Exercise Price of the
then unexercised portion of the Option.

5. Exercise. Subject to Section 3 of this Agreement, the Option shall be
exercisable during Optionee's lifetime only by Optionee or by his or her
guardian or legal representative, and after Optionee's death only by the
Optionee's Beneficiary. Optionee may designate his or her Beneficiary or
Beneficiaries or change such designation by delivery of a written Beneficiary
designation to the Company. The Option may only be exercised by the delivery to
the Company of a written notice of such exercise, accompanied by payment in full
of the aggregate Exercise Price by any one or more of the following means:

(a) Certified or cashier's check payable to the Company.

(b) By the delivery to the Company of a certificate or certificates
representing shares of Common Stock, duly endorsed or accompanied by duly
executed stock powers, which

-4-

<PAGE> 5
delivery effectively transfers to the Company good and valid title to such
shares, free and clear of any pledge, commitment, lien, claim or other
encumbrance, such shares to be valued on the basis of the aggregate Fair Market
Value (as defined in the Plan) on the date the Option is exercised, provided
that the Company is not then prohibited from purchasing or acquiring such shares
of Common Stock and provided that Optionee has either owned such shares of
Common Stock for at least 6 months (or such longer period as is determined by
the Company to be required by applicable accounting standards to avoid a charge
to the Company's earnings) or Optionee purchased such shares on the open market.

(c) Subject to the timing requirements of Section 5.5 of the Plan,
pursuant to procedures previously approved by the Company, through the sale of
the shares of Common Stock acquired on exercise of this Option through a
broker-dealer to whom you have submitted an irrevocable notice of exercise and
irrevocable instructions to deliver promptly to the Company the amount of sale
proceeds sufficient to pay for such shares, together with, if requested by the
Company, the amount of federal, state, local or foreign withholding taxes
payable by you by reason of such exercise.

6. Tax Withholding. The Company shall be entitled to require payment or
deduction from other compensation payable to Optionee of any sums required by
federal, state or local tax law to be withheld with respect to the Option in
accordance with the provisions of Section 7.6 of the Plan. Optionee may elect
the withholding ("Share Withholding") by the Company of a portion of the shares
of Common Stock otherwise deliverable to Optionee upon the exercise of the
Option to satisfy the Company's withholding obligation. Optionee's Share
Withholding election is subject to the terms and conditions in Section 7.6 of
the Plan, including the Committee's discretion to revoke Optionee's right to
elect Share Withholding at any time before such election.

7. Notices. All notices and other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be deemed
given if delivered

-5-

<PAGE> 6
personally, or five days after mailing by certified or registered mail, postage
prepaid, return receipt requested, to the Company, at 21540 Plummer Street,
Chatsworth, California 91311-4103, Attention: Chief Financial Officer, or to
Optionee at the address set forth beneath his or her signature on the signature
page hereto, or at such other addresses as they may designate by written notice
in the manner aforesaid.

8. Stock Exchange Requirements; Applicable Laws. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered until: (a) such shares have been admitted
to listing upon official notice of issuance on such stock exchange upon which
shares of that class are then listed, (b) the completion of any registration or
other qualification of such shares which the Committee shall, in its absolute
discretion, deem necessary or advisable, (c) any approval or other clearance
from any state or federal governmental regulatory body which the Committee
shall, in its absolute discretion, deem necessary or advisable has been obtained
and (d) the lapse of a reasonable time period following the exercise of the
Option as the Committee may establish from time to time.

9. Nontransferability. Neither the Option nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.

10. Plan. The Option is being awarded pursuant to the Plan, as in effect
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time, provided, however, that no
such amendment shall deprive Optionee, without his or her consent, of the Option
or any of Optionee's rights under this Agreement. The interpretation and
construction by the Committee of the Plan, this Agreement and such rules and
regulations as may be adopted by the Committee for the purpose of administering
the Plan shall be final and binding upon Optionee. Until the Option shall be
exercised or be forfeited or otherwise terminated, the Company

-6-

<PAGE> 7
shall, upon written request therefor, send a copy of the Plan in its current
form, to the holder of record of the Option.

11. Stockholder Rights. No person or entity shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of any Option Shares
until the Option shall have been duly exercised to purchase such Option Shares
in accordance with the provisions of this Agreement.

12. Employment Rights. No provision of this Agreement or of the Option
granted hereunder shall: (a) confer upon Optionee any right to continue in the
employ of the Company, or any of its subsidiaries or other affiliates, (b)
affect the right of the Company, and each of its subsidiaries or other
affiliates, to terminate the employment of Optionee, with or without cause, or
(c) confer upon Optionee any right to participate in any employee welfare or
benefit plan or other program of the Company, or any of its subsidiaries or
other affiliates, other than the Plan. Optionee hereby acknowledges and agrees
that the Company, and each of its subsidiaries or other affiliates, may
terminate the employment of Optionee at any time and for any reason, or for no
reason, unless Optionee and the Company, or such subsidiary or other affiliate,
are parties to a written employment agreement that expressly provides otherwise.

13. Amendments. This Agreement may be amended only by a writing executed
by the Company and Optionee which specifically states that it is amending this
Agreement; provided that this Agreement is subject to the power of the Board of
Directors of the Company to amend the Plan as provided therein.

14. Governing Law. This Agreement and the Option granted hereunder shall
be governed by and construed and enforced in accordance with the laws of the
State of California.

15. Severability. If any part of this Agreement is declared by any court
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any part of this Agreement not declared
to be unlawful or invalid. Any part so declared

-7-

<PAGE> 8
unlawful or invalid shall, if possible, be construed in a manner which gives
effect to the terms of such part to the fullest extent possible while remaining
lawful and valid.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this
Agreement as of the Date of Grant.

COHR INC., a Delaware corporation

By:

Title:

BY SIGNING BELOW, OPTIONEE ACKNOWLEDGES RECEIPT OF A
COPY OF THE PLAN, REPRESENTS THAT HE OR SHE IS FAMILIAR
WITH THE TERMS AND PROVISIONS THEREOF AND HEREBY ACCEPTS
THIS OPTION SUBJECT TO ALL OF THE TERMS AND PROVISIONS
THEREOF. OPTIONEE FURTHER ACKNOWLEDGES THAT HE OR SHE
HAS REVIEWED THE PLAN AND THIS AGREEMENT IN THEIR
ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF
COUNSEL PRIOR TO EXECUTING THIS AGREEMENT AND FULLY
UNDERSTANDS ALL PROVISIONS OF THIS AGREEMENT. OPTIONEE
HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL
INTERPRETATIONS OF THE BOARD OF DIRECTORS OR OF THE
COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN.

OPTIONEE

_____________________________________________
Signature

_____________________________________________
Street Address

_____________________________________________
City, State and Zip Code

_____________________________________________
Social Security Number

-8-

<PAGE> 9
STOCK OPTION AGREEMENT

NONEMPLOYEE DIRECTOR

RECITALS

A. Optionee is a member of the Board of Directors of the Company
("Board") and is not an employee of the Company ("Nonemployee Director").

B. The Company has adopted the 1996 Stock Option Plan of COHR Inc. (the
"Plan") for the benefit of officers and managerial employees and Nonemployee
Directors.

C. The Compensation Committee of the Board of Directors of the Company
(the "Committee") has approved the grant to Optionee of an option to purchase
shares of common stock, $.01 par value, of the Company (the "Common Stock")
under the Plan and in accordance with the other terms and conditions set forth
herein.

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. Grant of Option: Certain Terms and Conditions. The Company hereby
grants to Optionee, and Optionee hereby accepts, as of the Date of Grant, an
option to purchase the number of shares of Common Stock indicated below (the
"Option Shares") at the Exercise Price per share indicated below, which option
shall expire at 5:00 p.m., Pacific Time, on the Expiration Date indicated below,
or such earlier date as provided herein, and shall be subject to all of the
terms and conditions set forth in this Agreement (the "Option"). The Option
shall become exercisable to purchase the Option Shares as indicated below:

<PAGE> 10

Optionee:

Date of Grant:

Number of Option Shares:

Exercise Price per share:

Vesting Schedule: 100% vested

Expiration Date:

The Option is not intended to qualify as an incentive stock option under Section
422 of the Internal Revenue Code of 1986.

2. Termination of Option.

(a) Expiration Date. Except as otherwise provided herein, the Option
shall terminate on the Expiration Date.

(b) Termination as Director. If Optionee's service as a member of
the Board terminates for any reason, whether such termination is due to
Optionee's resignation, removal, failure to be reelected upon the expiration of
his or her term, or otherwise, then:

(1) If such termination is due to Optionee's resignation, the
Option, and all rights of the Optionee with respect thereto, shall terminate on
the Expiration Date or, if earlier, the date of the Optionee's resignation as a
member of the Board.

(2) If such termination is due to reasons other than Optionee's
resignation, the Option, and all rights of the Optionee with respect thereto,
shall terminate on the Expiration Date or, if earlier, 90 days following the
date Optionee ceases to be a member of the Board.

3. Adjustments. In the event that the outstanding shares of Common Stock
are changed into or exchanged for cash or for a different number or kind of
shares or other securities of the Company, or of another corporation, by reason
of reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, stock dividend or combination of shares (other than

-2-
<PAGE> 11

for shares or securities of another corporation or by reason of reorganization),
then the Committee shall make appropriate and equitable adjustments in the
number and kind of shares that may thereafter be acquired upon the exercise of
the Option and the Exercise Price per share; provided, however, that any such
adjustments in the Option shall be made without changing the aggregate Exercise
Price of the then unexercised portion of the Option.

4. Exercise. Subject to Section 2 of this Agreement, the Option shall be
exercisable during Optionee's lifetime only by Optionee or by his or her
guardian or legal representative, and after Optionee's death only by the
Optionee's Beneficiary. Optionee may designate a Beneficiary or Beneficiaries or
change such designation by delivery of a written Beneficiary designation to the
Company. The Option may only be exercised by the delivery to the Company of a
written notice of such exercise accompanied by payment in full of the aggregate
Exercise Price by any one or more of the following means:

(a) Certified or cashier's check payable to the Company.

(b) By the delivery to the Company of a certificate or certificates
representing shares of Common Stock, duly endorsed or accompanied by duly
executed stock powers, which delivery effectively transfers to the Company good
and valid title to such shares, free and clear of any pledge, commitment, lien,
claim or other encumbrance, such shares to be valued on the basis of the
aggregate Fair Market Value (as defined in the Plan) on the date the Option is
exercised, provided that the Company is not then prohibited from purchasing or
acquiring such shares of Common Stock and provided that Optionee has either
owned such shares of Common Stock for at least 6 months (or such longer period
as is determined by the Company to be required by applicable accounting
standards to avoid a charge to the Company's earnings) or Optionee purchased
such shares on the open market.

(c) Subject to the timing requirements of Section 5.5 of the Plan,
pursuant to procedures previously approved by the Company, through the sale of
the shares of Common Stock

-3-
<PAGE> 12

acquired on exercise of this Option through a broker-dealer to whom you have
submitted an irrevocable notice of exercise and irrevocable instructions to
deliver promptly to the Company the amount of sale proceeds sufficient to pay
for such shares, together with, if requested by the Company, the amount of
federal, state, local or foreign withholding taxes payable by you by reason of
such exercise.

5. Tax Withholding. The Company shall be entitled to require payment or
deduction from other compensation payable to Optionee of any sums required by
federal, state or local tax law to be withheld with respect to the Option in
accordance with the provisions of Section 7.6 of the Plan Optionee may elect the
withholding ("Share Withholding") by the Company of a portion of the shares of
Common Stock otherwise deliverable to Optionee upon the exercise of the Option
to satisfy the Company's withholding obligation. Optionee's Share Withholding
election is subject to the terms and conditions in Section 7.6 of the Plan,
including the Committee's discretion to revoke Optionee's right to elect Share
Withholding at any time before such election.

6. Notices. All notices and other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be deemed
given if delivered personally, or five days after mailing by certified or
registered mail, postage prepaid, return receipt requested, to the Company, at
21540 Plummer Street, Chatsworth, California 91311-4103, Attention: Chief
Financial Officer, or to Optionee at the address set forth beneath his or her
signature on the signature page hereto, or at such other addresses as they may
designate by written notice in the manner aforesaid.

7. Stock Exchange Requirements: Applicable Laws. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered until: (a) such shares have not been
admitted to listing upon official notice of issuance on each stock exchange upon
which shares of that class are then listed, (b) the completion of any
registration or other qualification

-4-
<PAGE> 13

of such shares which the Committee shall, in its absolute discretion, deem
necessary or advisable, (c) any approval or other clearance from any state or
federal governmental regulatory body which the Committee shall, in its absolute
discretion, deem necessary or advisable has been obtained and (d) the lapse of a
reasonable time period following the exercise of the Option as the Committee may
establish from time to time.

8. Nontransferability. Neither the Option nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.

9. Plan. The Option is being awarded pursuant to the Plan, as in effect
on the Date of Grant, and is subject to all the terms and conditions of the
Plan, as the same may be amended from time to time, provided, however, that no
such amendment shall deprive Optionee, without his or her consent, of the Option
or any of Optionee's rights under this Agreement. The interpretation and
construction by the Committee of the Plan, this Agreement, and such rules and
regulations as may be adopted by the Committee for the purpose of administering
the Plan shall be final and binding upon the Optionee. Until the Option shall be
exercised or be terminated, the Company shall, upon written request therefor,
send a copy of the Plan, in its current form, to the holder of record of the
Option.

10. Stockholder Rights. No person or entity shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of any Option Shares
until the Option shall have been duly exercised to purchase such Option Shares
in accordance with the provisions of this Agreement.

11. Director Rights. No provision of this Agreement or of the Option
granted hereunder shall confer upon Optionee any right to continue in the
service of the Company as a member of the Board and Optionee hereby acknowledges
and agrees that his election to and membership of the Board shall continue to be
governed by and subject to the Company's Articles of

-5-
<PAGE> 14

Incorporation and Bylaws, as well as applicable state statutes, regulations, and
other laws pertaining thereto.

12. Amendments. This Agreement may be amended only by a writing executed
by the Company and Optionee which specifically states that it is amending this
Agreement; provided that this Agreement is subject to the power of the Board of
Directors of the Company to amend the Plan as provided therein.

13. Governing Law. This Agreement and the Option granted hereunder shall
be governed by and construed and enforced in accordance with the laws of the
Sate of California.

14. Severability. If any part of this Agreement is declared by any court
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any part of this Agreement not declared
to be unlawful or invalid. Any part so declared unlawful or invalid shall, if
possible, be construed in a manner which gives effect to the terms of such part
to the fullest extent possible while remaining lawful and valid.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed this
Agreement as of the Date of Grant.

COHR INC., a Delaware corporation

By:________________________________

Title:_____________________________

-6-
<PAGE> 15
BY SIGNING BELOW, OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE
PLAN, REPRESENTS THAT HE OR SHE IS FAMILIAR WITH THE TERMS AND
PROVISIONS THEREOF AND HEREBY ACCEPTS THIS OPTION SUBJECT TO ALL
OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE FURTHER
ACKNOWLEDGES THAT HE OR SHE HAS REVIEWED THE PLAN AND THIS
AGREEMENT IN THEIR ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE
ADVICE OF COUNSEL PRIOR TO EXECUTING THIS AGREEMENT AND FULLY
UNDERSTANDS ALL PROVISIONS OF THIS AGREEMENT. OPTIONEE HEREBY
AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL INTERPRETATIONS
OF THE BOARD OF DIRECTORS OR OF THE COMMITTEE UPON ANY QUESTIONS
ARISING UNDER THE PLAN.

OPTIONEE

___________________________________
Signature

___________________________________
Street Address

___________________________________
City, State and Zip Code

___________________________________
Social Security Number

-7-

<PAGE> 1
EXHIBIT 10.11

EMPLOYMENT AGREEMENT

THIS AGREEMENT ("Agreement"), dated as of March 1, 1998, is made and
entered into by and between COHR, INC., a Delaware corporation ("Company"), and
David A. Roesler, an individual ("Executive").

RECITAL

Employee is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.

AGREEMENT

NOW, THEREFORE, Company and Executive agree as follows:

1. This Agreement shall be in effect from March 1, 1998 to and including
May 31, 1999, unless renewed or terminated earlier as provided herein. The term
of this Agreement will automatically extend for additional one (1) year periods,
unless a written notice of non-renewal is given by either party not less than
thirty (30) days prior to the expiration date provided in the preceding
sentence. Executive is and will continue to be employed by Company in the
position held by Executive as of the effective date of this Agreement and
pursuant to its terms. Executive's job description as of the effective date
hereof is attached hereto as Exhibit A. During his employment hereunder,
Executive shall continue to devote all of his attention and business during
normal business hours to the performance of this Agreement and shall, without
the Company's prior written consent in each instance, refrain from rendering
services of any kind to others for compensation or which would materially
interfere with the performance with his duties under this Agreement.

a. Company shall pay a base salary to Executive for the term
hereof at the minimum rate of One Hundred Sixty Thousand Dollars
($160,000) per year, payable in semi-monthly installments.
Between March 1, 1998 and June 30, 1998, Executive agrees to
defer payment of Ten Thousand Dollars ($10,000.00) in base
salary. On July 1, 1998, Company shall pay Executive said
$10,000.00 in one lump sum.

b. In addition to his base salary, Executive may be eligible, to
be considered for an annual bonus based on such criteria as may
be agreed upon by the parties hereto.

c. All compensation provided pursuant to this Paragraph 2 shall
be subject to customary income tax withholding and such other
employee deductions as are required by law with respect to
compensation paid to an employee.

d. In addition to the base compensation and bonus provided in
this Agreement, Executive shall throughout the term hereof
(prior to death) be entitled

<PAGE> 2
to and shall receive all other benefits generally available to
other executives of the Company of the same level and length of
service as Executive. Executive shall be entitled to paid
vacation in accordance with the policy of the Company generally
applicable to other executives of Company with similar length of
service.

3. Company and Executive have agreed that concurrently with the payment
to Executive of any compensation upon termination of employment as provided in
Section 5 hereinbelow, and as a material part of the consideration for making
such payments, Company and Executive shall execute and deliver to each other a
complete mutual release and discharge of any and all rights, claims, actions and
right to arbitration which Executive or the Company, their respective successors
and assigns, have against each other arising out of Executive's employment or
the termination of Executive's employment; provided however that the Company is
not releasing, and shall not release, Executive from any rights, claims or
actions arising from any act or omission which would have constituted grounds
for termination of this Agreement if then known by the Company and, provided
further, that neither party is releasing, nor shall release, the other party
from any rights, claims or actions arising out of or related to the Exclusivity
Agreement (as defined in Paragraph 8 hereinbelow).

4. Executive's employment may be terminated before May 31, 1999 in the
event one of the following occurs during the term of this Agreement or any
extension thereof:

a. Executive is given written notice of the termination of this
Agreement and Executive's employment, other than for cause (as
defined hereinbelow);

b. Executive is permanently relocated without his consent to
outside of the greater Los Angeles area and Executive resigns
within three (3) months of notification of such relocation;

c. Executive's responsibilities and salary are materially
reduced and Executive resigns within three (3) months of such
reduction;

d. Executive voluntarily resigns his employment; or

e. Executive is terminated for cause.

For purposes of this Paragraph 4 and Paragraph 6 hereinbelow, a
termination "for cause" occurs if Executive is terminated for any of the
following reasons: (i) theft, dishonesty, or falsification of any employment or
Company records; (ii) knowing and improper disclosure of Company's confidential
or proprietary information; (iii) any act or failure to act by Executive which
has a material detrimental effect on Company's reputation or business, is beyond
the course and scope of the Executive's duties, is not in the best interests of
the Company or is a breach of the Executive's fiduciary duties to Company,
unless Executive's act or failure to act is compelled by applicable statute or
regulation; (iv) Executive commits an act or becomes involved in any situation
or occurrence degrading to Executive in society or bringing Executive into
public disrepute, contempt, scandal or ridicule; (v) habitual neglect of duties
or wanton negligence by Executive in the performance of duties; (vi) violation
of (A) a material Company policy or procedure or (B) any law or regulation
(except for minor offenses unrelated to work or qualifications for work, such as
traffic or parking violations or like matters); (vii) material

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<PAGE> 3
wrongdoing or misconduct; or (viii) any material breach of this Agreement which
breach is not cured within thirty (30) days following receipt by Executive of
written notice of such breach from Company.

5. Subject to Paragraphs 3 and 6 hereof, Executive shall receive the
following compensation and benefits if his employment terminates pursuant to
Paragraph 3(a)(b) or (c) above:

a. Executive shall be paid thirteen (13) months base salary at
the rate of $160,000 per year, or the base pay rate in effect at
the time of termination, whichever is the greater; payable
monthly in thirteen (13) equal payments commencing on the first
day of each month following the effective date of such
termination or resignation. Such payments shall be subject to
Federal and State Income Tax withholding, social security and
SDI withholding, and such other employee deductions as are
required by federal, state or local law or authorized in writing
by the Executive. The amount of continued base salary provided
for in this paragraph shall not be reduced, offset or subject to
recovery by reason of any compensation earned by executive with
a subsequent employer or from self employment.

b. During the same thirteen (13) month period, the Company shall
also continue at its expense, Executive's medical/dental
insurance coverage at the same coverage level in effect at the
time of such termination or resignation. Should Executive be
provided dental coverage or PPO or PPO-equivalent health
coverage by a subsequent employer, the dental coverage or
medical insurance coverage provided at Company's expense (i.e.,
whichever is so provided by the subsequent employer) shall be
terminated.

In addition, in the event Executive in accordance with Company policy is
entitled at the time of his termination to the use of a Company leased
automobile (or, as the case may be, to receive an automobile allowance),
Executive shall retain the right to use such automobile (or, as the case may be,
to receive an automobile allowance) for one month after the date of termination
of this Agreement, provided Executive shall be responsible for any damage to
said leased automobile occurring during said leased one month period of time
which is not covered by insurance. At the end of such one month period,
Executive shall return such leased automobile to Company at Company's principal
executive offices.

6. Neither Company nor its successor in interest shall be required to
make any payments under Paragraph 5 above in the event Executive is terminated
for cause, retires, or voluntary resigns. Such payments shall be made to
Executive's estate in accordance with Paragraph 5 in the event Executive dies or
to Executive in the event Executive becomes disabled as disability is defined in
the next sentence. For the purposes of this Agreement, "disability" shall mean
if at the end of any calendar month, Executive is and has, for three (3) full
consecutive months out of any twelve (12) month period continuously been unable
due to mental of physical illness or injury to perform his duties under this
Agreement in his normal or regular manner.

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<PAGE> 4
7. Except as required for the purposes of proxy disclosure, NASDAQ rules
or applicable laws or regulations, the parties each represent and agree that
they will keep the terms, contents and existence of this Agreement completely
confidential, and will not hereafter disclose any information concerning this
Agreement, including any negotiations leading to this Agreement, to anyone
except as required by law or to individuals who reasonably must be informed of
its terms and who will be advised of and bound by this confidentiality clause.
Notwithstanding the foregoing, either party may disclose this Agreement or its
terms or contents in any arbitration pursuant to Paragraph 14 hereof. Any
failure by any party, their attorneys, agents or representatives to maintain the
confidentiality of the negotiations leading to this Agreement or the fact of, or
the terms of this Agreement shall constitute a material breach of this
Agreement.

8. Executive acknowledges that he is a fiduciary of the Company and as
such is subject to duties to the Company, its Board of Directors and
Stockholders, including but not limited to the obligation to discharge his
duties (1) in good faith, (2) with the care of an ordinarily prudent person in a
like position would exercise under similar circumstances, and (3) in a manner he
reasonably believes to be in the best interests of the corporation. Consistent
with this fiduciary duty, and not by way of limitation in this regard, Executive
agrees to cooperate with and/or assist the Company's Board of Directors and its
consultants or advisors in exploring, preparing for or implementing such
strategic alternatives (including assisting with a possible sale of all or a
portion of the Company) as the Board may determine to pursue.

9. The Company and Executive acknowledge a letter form of agreement,
dated February 20, 1998 (the "Exclusivity Agreement"), amongst WellSpring
Capital Management, LLC, a Delaware limited partnership ("WellSpring"), and
Executive and other current members of Company management. A copy of the
Exclusivity Agreement is attached hereto as Exhibit C. Executive agrees the
Exclusivity Agreement will not interfere with his ability or willingness to
discharge his responsibilities as an employee and executive officer of the
Company, regardless of whether the Company is sold or not. Further, Executive
agrees to fully cooperate with the Company's Board of Directors, its counsel and
financial advisers in dealing with such persons interested in submitting a
proposal to acquire the Company as the Board of Directors or President may so
direct. In entering into this Agreement, neither party to this Agreement waives
any rights or claims it may have with respect to the other by virtue of the
Exclusivity Agreement.

10. Executive and Company agree that Executive's employment with Company
creates a relationship of confidence and trust between the Company and Executive
with respect to any information: (a) applicable to the business of the Company,
or (b) applicable to the business of any client or customer of the Company,
which may be made known to Executive by the Company or by any client of the
Company, or learned by Executive in such context during the period of
Executive's employment. All of such information has commercial value in the
business in which Company is engaged and is hereinafter referred to as
"Proprietary Information." Executive and the Company agree that all Proprietary
Information is the sole property of the Company, its assigns and its customers;
the Company, its assigns and its customers shall be the sole owner of all
patents, copyrights, trade secrets and other rights in connection therewith.
Executive hereby assigns to the Company any rights he may have or acquire in
such Proprietary Information. At all times, both during Executive's employment
by the Company and after its termination, Executive will keep in confidence and
trust all

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<PAGE> 5
Proprietary Information and will not use or disclose any Proprietary Information
or anything directly relating to it without the written consent of the Company,
except as may be necessary in the ordinary course of performing Executive's
duties as an employee of the Company. Notwithstanding the foregoing, it is
understood that at all such times, Executive is free to use information which is
generally known in the trade industry not as a result of a breach of this
Agreement and Executive's own skill, knowledge, know-how and experience to
whatever extent and whatever way Executive may wish.

11. Executive acknowledges that as an executive of the Company, he has
been instrumental in the business of the Company and its success. Accordingly,
Executive agrees that until the effective date of termination of his employment
hereunder he will not, directly or indirectly, within the following California
counties: Alameda, Fresno, Los Angeles, Orange, Riverside, San Bernardino,
Ventura, Santa Barbara and San Joaquin, or any other location in the State of
California or the United States where the Company is transacting business either
during the term of this Agreement or at the effective date of the termination or
expiration of Executive's employment hereunder, as the case may be, engage or
participate or make financial investments in or become employed by or render
advisory or other services to or for any person, firm or corporation or, in
connection with any business activity other than that of the Company and its
subsidiary or affiliated companies, directly or indirectly in competition with
any of the business operation or activities of the Company and its subsidiary or
affiliated companies, whether such companies are presently existing or hereafter
acquired or formed. Nothing herein contained however, shall restrict Executive
from making any investments in any company whose stock is listed on the National
Securities Exchange or actively traded in the over-the-counter market, so long
as such investment does not give him the right to control or influence the
policy decisions of any such business or enterprise which is or might be
directly or indirectly in competition with any of the business operations or
activities of the Company or any of its subsidiary of affiliated companies.

12. For a period of one (1) year from and after the effective date of
termination or expiration of Executive's employment with Company, whether
pursuant to the terms of this Agreement or otherwise, Executive shall not:

a. Directly or indirectly solicit any executive or managerial
employee of Company to discontinue working for or representing
Company for the purpose of working for or representing any
subsequent employer of Executive which is a competitor of
Company;

b. Directly or indirectly solicit any person, firm or
corporation who or which at any time during the term hereof was
a customer of the Company to become a customer of a competitor
of the Company for the same or similar products or services it
purchased from the Company; or

c. Authorize or knowingly approve the taking of such actions as
described in (a) or (b) hereof by other persons on behalf of any
such competitor or assist any such person, firm or corporation
in taking such action.

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<PAGE> 6
13. Executive acknowledges that he has been advised to seek an attorney
for advice regarding the effect of this Agreement prior to signing it.

14. If any claim is brought under this Agreement, or any dispute of any
nature whatsoever arises regarding the termination of this Agreement or the
termination of Executive's employment, the Company and Executive agree that such
claim or dispute shall be resolved in an arbitration proceeding conducted under
the auspices of the American Arbitration Association, Los Angeles, California
and in accordance with its Employment Dispute Resolution rules. The arbitrator
agreed to under such rules shall be empowered to resolve the dispute through
consideration of the facts, the terms of this Agreement, and any statute, law,
regulation, or defense asserted by either party. The arbitrator shall be
experienced in employment law and his/her decision shall be in writing and
contain findings of fact and conclusions of law. If so authorized by the
arbitrator, the prevailing party shall be entitled to recover from the
non-prevailing party such damages as the arbitrator determines appropriate based
upon the legal theories asserted by either party in such arbitration and
reasonable expenses, including without limitation reasonable attorneys' fees.

15. If any of the above provisions are found null, void, or inoperative,
for any reason, the remaining provisions will remain in full force and effect.

16. This Agreement may be executed by facsimile and in identical
counterparts. The Agreement will be binding on the parties once it has been
fully executed. Thereafter, the parties will exchange hard copies and all the
counterparts together shall constitute a single agreement, and it shall not be
necessary to introduce more than one fully executed counterpart to enforce this
Agreement.

17. Any notice to the Company required or permitted hereunder shall be
given in writing to the secretary of Company either by personal service or by
registered mail postage prepaid addressed to Company at its then principal place
of business. Any such notice to Executive shall be given in like manner and mail
shall be addressed to the Executive at his home address then shown in the files
of Company. Notice mailed as provided hereinabove will be deemed received three
(3) business days after the notice is deposited in the United States mail,
postage prepaid.

18. This Agreement may be extended for an additional period and subject
to additional or different terms by written agreement of the parties.

IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date above written.

"Company" "Executive"

COHR, INC.

By:_______________________________ ______________________________
Stephen W. Gamble, Interim CEO David A. Roesler

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<PAGE> 7
EXHIBIT A

[Attach Executive Job Description]

-7-

<PAGE> 1
EXHIBIT 10.12

EMPLOYMENT AGREEMENT

THIS AGREEMENT ("Agreement"), dated as of March 1, 1998, is made and
entered into by and between COHR, INC., a Delaware corporation ("Company"), and
Ed Gravell, an individual ("Executive").

RECITAL

Employee is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.

AGREEMENT

NOW, THEREFORE, Company and Executive agree as follows:

b. In addition to his base salary, Executive may be eligible, to
be considered for an annual bonus based on such criteria as may
be agreed upon by the parties hereto.

d. In addition to the base compensation and bonus provided in
this Agreement, Executive shall throughout the term hereof
(prior to death) be entitled

4. Executive's employment may be terminated before May 31, 1999 in the
event one of the following occurs during the term of this Agreement or any
extension thereof:

a. Executive is given written notice of the termination of this
Agreement and Executive's employment, other than for cause (as
defined hereinbelow);

b. Executive is permanently relocated without his consent to
outside of the greater Los Angeles area and Executive resigns
within three (3) months of notification of such relocation;

c. Executive's responsibilities and salary are materially
reduced and Executive resigns within three (3) months of such
reduction;

d. Executive voluntarily resigns his employment; or

e. Executive is terminated for cause.

-2-

5. Subject to Paragraphs 3 and 6 hereof, Executive shall receive the
following compensation and benefits if his employment terminates pursuant to
Paragraph 3(a)(b) or (c) above:

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-4-

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<PAGE> 6
13. Executive acknowledges that he has been advised to seek an attorney
for advice regarding the effect of this Agreement prior to signing it.

15. If any of the above provisions are found null, void, or inoperative,
for any reason, the remaining provisions will remain in full force and effect.

18. This Agreement may be extended for an additional period and subject
to additional or different terms by written agreement of the parties.

IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date above written.

"Company" "Executive"

COHR, INC.

By:_______________________________ _____________________________
Stephen W. Gamble, Interim CEO Ed Gravell

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<PAGE> 7
EXHIBIT A

[Attach Executive Job Description]

-7-

<PAGE> 1
EXHIBIT 10.13

EMPLOYMENT AGREEMENT

THIS AGREEMENT ("Agreement"), dated as of March 1, 1998, is made and
entered into by and between COHR, INC., a Delaware corporation ("Company"), and
Aviva Truesdell, an individual ("Executive").

RECITAL

Employee is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.

AGREEMENT

NOW, THEREFORE, Company and Executive agree as follows:

1. This Agreement shall be in effect from the date of execution to and
including February 28, 1999, unless renewed or terminated earlier as provided
herein. The term of this Agreement will automatically extend for an additional
one (1) year period, unless a written notice of non-renewal is given by either
party no less than thirty (30) days prior to the expiration date provided in the
preceding sentence. Executive is and will continue to be employed by Company in
the position held by Executive as of the effective date of this Agreement and
pursuant to its terms. Executive's job description as of the effective date
hereof is attached hereto as Exhibit A. During her employment hereunder,
Executive shall continue to devote all of her attention and business during
normal business hours to the performance of this Agreement and shall, without
the Company's prior written consent in each instance, refrain from rendering
services of any kind to others for compensation or which would materially
interfere with the performance with her duties under this Agreement.

a. Company shall pay a base salary to Executive for the term
hereof at the minimum rate of One Hundred Forty Four Thousand
Dollars ($144,000) per year, payable in semi-monthly
installments. In addition to her base salary, Executive may be
eligible, in accordance with Company policy and in the
discretion of the board of directors, to be considered for an
annual bonus based on such criteria as may be established by the
compensation committee.

b. All compensation provided pursuant to this Paragraph 2 shall
be subject to customary income tax withholding and such other
employee deductions as are required by law with respect to
compensation paid to an employee.

c. In addition to the base compensation and bonus provided in
this Agreement, Executive shall throughout the term hereof
(prior to death) be entitled to and shall receive all other
benefits generally available to other executives of the Company
of the same level and length of service as Executive. Executive
shall be entitled to paid vacation in accordance with the policy
of the Company generally applicable to other executives of
Company with similar length of service.

<PAGE> 2
3. As a material part of the consideration for entering into this
Agreement, Company and Executive have agreed that concurrently with the payment
to Executive of any compensation upon termination of employment as provided
herein, Company and Executive shall execute and deliver to each other a complete
mutual release and discharge of any and all rights, claims, actions and right to
arbitration which Executive or the Company, their respective successors and
assigns, have against each other arising out of Executive's employment or the
termination of Executive's employment; provided however that the Company is not
releasing, and shall not release, Executive from any rights, claims or actions
arising from any act or omission which would have constituted grounds for
termination of this Agreement if then known by the Company.

4. Except as provided in Paragraph 5 below, in the event of the
occurrence of one of the following prior to February 28, 1999 - i.e., either
(a), (b) or (c) below:

a. Executive is given written notice of the termination of this
Agreement and Executive's employment, other than for cause (as defined herein
below);

b. Executive is permanently relocated without her consent to
outside of the greater Los Angeles area and Executive resigns within three (3)
months of notification of such relocation; or

c. Executive's responsibilities and salary are materially reduced
and Executive resigns within three (3) months of such reduction,

then Company shall, subject to Paragraphs 3 and 5 hereof, for the months
remaining under this Agreement following such termination or resignation, BUT IN
NO EVENT FOR LESS THAN TWELVE (12) MONTHS following the effective date of such
termination or resignation, (i) pay to Executive each month an amount equal to
one-twelfth (1/12) of Executive's then annual base salary, except that such
payment shall be subject to Federal and State Income Tax withholding, social
security and SDI withholding, and such other employee deductions as are required
by Federal, State or local law or authorized by the Executive in good faith, and
(ii) continue, at the expense of Company, health benefit coverage, at the same
coverage level in effect at the time of such termination or resignation,
provided, to the extent that Executive shall receive or be entitled to any
health benefit coverage from any subsequent employment, the health benefit
coverage provided at Company's expense shall be terminated. The amount of any
continued payment of base salary provided for in this paragraph shall not be
reduced, offset or subject to recovery by reason of any compensation earned by
Executive with a subsequent employer.

For purposes of Paragraphs 4 and 5 hereof, a termination "for cause"
occurs if Executive is terminated for any of the following reasons: (i) theft,
dishonesty, or falsification of any employment or Company records; (ii) knowing
and improper disclosure of Company's confidential or proprietary information;
(iii) any act or failure to act by Executive which has a material detrimental
effect on Company's reputation or business, is beyond the course and scope of
the Executive's duties, is not in the best interests of the Company or is a
breach of the Executive's fiduciary duties to Company; (iv) Executive commits an
act or becomes involved in any situation or occurrence degrading to Executive in
society or bringing Executive into public disrepute, contempt, scandal or
ridicule; (v) habitual neglect of duties or wanton negligence by

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<PAGE> 3
Executive in the performance of duties; (vi) violation of (A) a material Company
policy or procedure or (B) any law or regulation (except for minor offenses
unrelated to work or qualifications for work, such as traffic or parking
violations or like matters); (vii) material wrongdoing or misconduct; or (viii)
any material breach of this Agreement which breach is not cured within thirty
(30) days following written notice of such breach from Company.

In addition, in the event Executive in accordance with Company policy is
entitled at the time of her termination to the use of a Company leased
automobile, Executive shall retain the right to use such automobile for one
month after the date of termination of this Agreement, provided Executive shall
be responsible for any damage to said automobile occurring during said one month
period of time which is not covered by insurance. At the end of such one month
period, Executive shall return such leased automobile to Company at Company's
principal executive offices.

5. Neither Company nor its successor in interest shall be required to
make any payments under Paragraph 4 above in the event Executive is terminated
for cause, retires, or voluntarily resigns. Such payments shall be made to
Executive's estate in accordance with Paragraph 4 in the event Executive dies or
to Executive in the event Executive becomes disabled as disability is defined in
the next sentence. For the purposes of this Agreement, "disability" shall mean
if at the end of any calendar month, Executive is and has, for three (3) full
consecutive months out of any twelve (12) month period continuously been unable
due to mental of physical illness or injury to perform her duties under this
Agreement in her normal or regular manner.

6. Except as required for the purposes of proxy disclosure, NASDAQ rules
or applicable laws or regulations, the parties each represent and agree that
they will keep the terms, contents and existence of this Agreement completely
confidential, and will not hereafter disclose any information concerning this
Agreement, including any negotiations leading to this Agreement, to anyone
except as required by law or to individuals who reasonably must be informed of
its terms and who will be advised of and bound by this confidentiality clause.
Notwithstanding the foregoing, either party may disclose this Agreement or its
terms or contents in any arbitration pursuant to Paragraph 9 hereof. Any failure
by any party, their attorneys, agents or representatives to maintain the
confidentiality of the negotiations leading to this Agreement or the fact of, or
the terms of this Agreement shall constitute a material breach of this
Agreement.

7. Fiduciary Duties. Executive acknowledges that she is a fiduciary of
the Company and as such is subject to duties to the Company, its Board of
Directors and Stockholders, including but not limited to the obligation to
discharge her duties (1) in good faith, (2) with the care of an ordinarily
prudent person in a like position would exercise under similar circumstances,
and (3) in a manner she reasonably believes to be in the best interests of the
corporation. Consistent with this fiduciary duty, and not by way of limitation
in this regard, Executive agrees to cooperate with and/or assist the Company's
Board of Directors and its consultants or advisors in exploring, preparing for
or implementing such strategic alternatives (including assisting with a possible
sale of all or a portion of the Company) as the Board may determine to pursue.

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<PAGE> 4
8. Confidential Information. Executive and Company agree that
Executive's employment with Company creates a relationship of confidence and
trust between the Company and Executive with respect to any information: (a)
applicable to the business of the Company, or (b) applicable to the business of
any client or customer of the Company, which may be made known to Executive by
the Company or by any client of the Company, or learned by Executive in such
context during the period of Executive's employment. All of such information has
commercial value in the business in which Company is engaged and is hereinafter
referred to as "Proprietary Information." Executive and the Company agree that
all Proprietary Information is the sole property of the Company, its assigns and
its customers; the Company, its assigns and its customers shall be the sole
owner of all patents, copyrights, trade secrets and other rights in connection
therewith. Executive hereby assigns to the Company any rights she may have or
acquire in such Proprietary Information. At all times, both during Executive's
employment by the Company and after its termination, Executive will keep in
confidence and trust all Proprietary Information and will not use or disclose
any Proprietary Information or anything directly relating to it without the
written consent of the Company, except as may be necessary in the ordinary
course of performing Executive's duties as an employee of the Company.
Notwithstanding the foregoing, it is understood that at all such times,
Executive is free to use information which is generally known in the trade
industry not as a result of a breach of this Agreement and Executive's own
skill, knowledge, know-how and experience to whatever extent and whatever way
Executive may wish.

9. Non Compete. Executive acknowledges that as an executive of the
Company, she has been instrumental in the business of the Company and its
success. Accordingly, Executive agrees that during the term of her employment
hereunder she will not, directly or indirectly, within the following California
counties: Alameda, Fresno, Los Angeles, Orange, Riverside, San Bernardino,
Ventura, Santa Barbara and San Joaquin, or any other location in the State of
California or the United States where the Company is transacting business either
during the term of this Agreement or at the time of the termination of
Executive's employment hereunder, as the case may be, engage or participate or
make financial investments in or become employed by or render advisory or other
services to or for any person, firm or corporation or, in connection with any
business activity other than that of the Company and its subsidiary or
affiliated companies, directly or indirectly in competition with any of the
business operation or activities of the Company and its subsidiary or affiliated
companies, whether such companies are presently existing or hereafter acquired
or formed. Nothing herein contained however, shall restrict Executive from
making any investments in any company whose stock is listed on the National
Securities Exchange or actively traded in the over-the-counter market, so long
as such investment does not give her the right to control or influence the
policy decisions of any such business or enterprise which is or might be
directly or indirectly in competition with any of the business operations or
activities of the Company or any of its subsidiary of affiliated companies.

10. For a period of one (1) year from and after the termination or
expiration of Executive's employment with Company, whether pursuant to the terms
of this Agreement or otherwise, Executive shall not:

a. Directly or indirectly solicit any executive or managerial
employee of Company to discontinue working for or representing
Company for the purpose of

-4-

<PAGE> 5
working for or representing any subsequent employer of Executive
which is a competitor of Company; or b. Authorize or knowingly
approve the taking of such actions by other persons on behalf of
any such competitor or assist any such person, firm or
corporation in taking such action.

11. Executive acknowledges that she has been advised to seek an attorney
for advice regarding the effect of this Agreement prior to signing it.

12. If any claim is brought under this Agreement, or any dispute of any
nature whatsoever arises regarding the termination of this Agreement or the
termination of Executive's employment, the Company and Executive agree that such
claim or dispute shall be resolved in an arbitration proceeding conducted under
the auspices of the American Arbitration Association, Los Angeles, California
and in accordance with its Employment Dispute Resolution rules. The arbitrator
agreed to under such rules shall be empowered to resolve the dispute through
consideration of the facts, the terms of this Agreement, and any statute, law,
regulation, or defense asserted by either party, and the arbitrator's decision
shall be final and binding. If so authorized by the arbitrator, the prevailing
party shall be entitled to recover from the non-prevailing party reasonable
expenses, including without limitation reasonable attorneys' fees.

13. If any of the above provisions are found null, void, or inoperative,
for any reason, the remaining provisions will remain in full force and effect.

14. This Agreement may be executed by facsimile and in identical
counterparts. The Agreement will be binding on the parties once it has been
fully executed. Thereafter, the parties will exchange hard copies and all the
counterparts together shall constitute a single agreement, and it shall not be
necessary to introduce more than one fully executed counterpart to enforce this
Agreement.

15. Any notice to the Company required or permitted hereunder shall be
given in writing to the secretary of Company either by personal service or by
registered mail postage prepaid addressed to Company at its then principal place
of business. Any such notice to Executive shall be given in like manner and mail
shall be addressed to the Executive at her home address then shown in the files
of Company.

16. This Agreement may be extended for an additional period and subject
to additional or different terms by written agreement of the parties.

[SIGNATURES APPEAR ON PAGE 6]

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<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date above written.

"Company" "Executive"

COHR, INC.

By:_______________________________ ______________________________
Stephen W. Gamble, Interim CEO Aviva Truesdell

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<PAGE> 7
EXHIBIT A

[Attach Executive Job Description]

-7-

<PAGE> 1
EXHIBIT 10.14

EMPLOYMENT AGREEMENT

THIS AGREEMENT ("Agreement"), dated as of March 1, 1998, is made and
entered into by and between COHR, INC., a Delaware corporation ("Company"), and
Joe Strange, an individual ("Executive").

RECITAL

Employee is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.

AGREEMENT

NOW, THEREFORE, Company and Executive agree as follows:

1. This Agreement shall be in effect from the date of execution to and
including February 28, 1999, unless renewed or terminated earlier as provided
herein. The term of this Agreement will automatically extend for an additional
one (1) year period, unless a written notice of non-renewal is given by either
party no less than thirty (30) days prior to the expiration date provided in the
preceding sentence. Executive is and will continue to be employed by Company in
the position held by Executive as of the effective date of this Agreement and
pursuant to its terms. Executive's job description as of the effective date
hereof is attached hereto as Exhibit A. During his employment hereunder,
Executive shall continue to devote all of his attention and business during
normal business hours to the performance of this Agreement and shall, without
the Company's prior written consent in each instance, refrain from rendering
services of any kind to others for compensation or which would materially
interfere with the performance with his duties under this Agreement.

a. Company shall pay a base salary to Executive for the term
hereof at the minimum rate of One Hundred Six Thousand Five
Hundred Dollars ($106,500) per year, payable in semi-monthly
installments. In addition to his base salary, Executive may be
eligible, in accordance with Company policy and in the
discretion of the board of directors, to be considered for an
annual bonus based on such criteria as may be established by the
compensation committee.

4. Except as provided in Paragraph 5 below, in the event of the
occurrence of one of the following prior to February 28, 1999 - i.e., either
(a), (b) or (c) below:

a. Executive is given written notice of the termination of this
Agreement and Executive's employment, other than for cause (as defined herein
below);

b. Executive is permanently relocated without his consent to
outside of the greater Los Angeles area and Executive resigns within three (3)
months of notification of such relocation; or

c. Executive's responsibilities and salary are materially reduced
and Executive resigns within three (3) months of such reduction,

then Company shall, subject to Paragraphs 3 and 5 hereof, for the months
remaining under this Agreement following such termination or resignation, BUT IN
NO EVENT FOR LESS THAN NINE (9) MONTHS following the effective date of such
termination or resignation, (i) pay to Executive each month an amount equal to
one-twelfth (1/12) of Executive's then annual base salary, except that such
payment shall be subject to Federal and State Income Tax withholding, social
security and SDI withholding, and such other employee deductions as are required
by Federal, State or local law or authorized by the Executive in good faith, and
(ii) continue, at the expense of Company, health benefit coverage, at the same
coverage level in effect at the time of such termination or resignation,
provided, to the extent that Executive shall receive or be entitled to any
health benefit coverage from any subsequent employment, the health benefit
coverage provided at Company's expense shall be terminated. The amount of any
continued payment of base salary provided for in this paragraph shall not be
reduced, offset or subject to recovery by reason of any compensation earned by
Executive with a subsequent employer.

-2-

In addition, in the event Executive in accordance with Company policy is
entitled at the time of his termination to the use of a Company leased
automobile, Executive shall retain the right to use such automobile for one
month after the date of termination of this Agreement, provided Executive shall
be responsible for any damage to said automobile occurring during said one month
period of time which is not covered by insurance. At the end of such one month
period, Executive shall return such leased automobile to Company at Company's
principal executive offices.

5. Neither Company nor its successor in interest shall be required to
make any payments under Paragraph 4 above in the event Executive is terminated
for cause, retires, or voluntarily resigns. Such payments shall be made to
Executive's estate in accordance with Paragraph 4 in the event Executive dies or
to Executive in the event Executive becomes disabled as disability is defined in
the next sentence. For the purposes of this Agreement, "disability" shall mean
if at the end of any calendar month, Executive is and has, for three (3) full
consecutive months out of any twelve (12) month period continuously been unable
due to mental of physical illness or injury to perform his duties under this
Agreement in his normal or regular manner.

7. Fiduciary Duties. Executive acknowledges that he is a fiduciary of
the Company and as such is subject to duties to the Company, its Board of
Directors and Stockholders, including but not limited to the obligation to
discharge his duties (1) in good faith, (2) with the care of an ordinarily
prudent person in a like position would exercise under similar circumstances,
and (3) in a manner he reasonably believes to be in the best interests of the
corporation. Consistent with this fiduciary duty, and not by way of limitation
in this regard, Executive agrees to cooperate with and/or assist the Company's
Board of Directors and its consultants or advisors in exploring, preparing for
or implementing such strategic alternatives (including assisting with a possible
sale of all or a portion of the Company) as the Board may determine to pursue.

-3-

<PAGE> 4
8. Confidential Information. Executive and Company agree that
Executive's employment with Company creates a relationship of confidence and
trust between the Company and Executive with respect to any information: (a)
applicable to the business of the Company, or (b) applicable to the business of
any client or customer of the Company, which may be made known to Executive by
the Company or by any client of the Company, or learned by Executive in such
context during the period of Executive's employment. All of such information has
commercial value in the business in which Company is engaged and is hereinafter
referred to as "Proprietary Information." Executive and the Company agree that
all Proprietary Information is the sole property of the Company, its assigns and
its customers; the Company, its assigns and its customers shall be the sole
owner of all patents, copyrights, trade secrets and other rights in connection
therewith. Executive hereby assigns to the Company any rights he may have or
acquire in such Proprietary Information. At all times, both during Executive's
employment by the Company and after its termination, Executive will keep in
confidence and trust all Proprietary Information and will not use or disclose
any Proprietary Information or anything directly relating to it without the
written consent of the Company, except as may be necessary in the ordinary
course of performing Executive's duties as an employee of the Company.
Notwithstanding the foregoing, it is understood that at all such times,
Executive is free to use information which is generally known in the trade
industry not as a result of a breach of this Agreement and Executive's own
skill, knowledge, know-how and experience to whatever extent and whatever way
Executive may wish.

9. Non Compete. Executive acknowledges that as an executive of the
Company, he has been instrumental in the business of the Company and its
success. Accordingly, Executive agrees that during the term of his employment
hereunder he will not, directly or indirectly, within the following California
counties: Alameda, Fresno, Los Angeles, Orange, Riverside, San Bernardino,
Ventura, Santa Barbara and San Joaquin, or any other location in the State of
California or the United States where the Company is transacting business either
during the term of this Agreement or at the time of the termination of
Executive's employment hereunder, as the case may be, engage or participate or
make financial investments in or become employed by or render advisory or other
services to or for any person, firm or corporation or, in connection with any
business activity other than that of the Company and its subsidiary or
affiliated companies, directly or indirectly in competition with any of the
business operation or activities of the Company and its subsidiary or affiliated
companies, whether such companies are presently existing or hereafter acquired
or formed. Nothing herein contained however, shall restrict Executive from
making any investments in any company whose stock is listed on the National
Securities Exchange or actively traded in the over-the-counter market, so long
as such investment does not give him the right to control or influence the
policy decisions of any such business or enterprise which is or might be
directly or indirectly in competition with any of the business operations or
activities of the Company or any of its subsidiary of affiliated companies.

a. Directly or indirectly solicit any executive or managerial
employee of Company to discontinue working for or representing
Company for the purpose of

-4-

<PAGE> 5
working for or representing any subsequent employer of Executive
which is a competitor of Company; or

b. Authorize or knowingly approve the taking of such actions by
other persons on behalf of any such competitor or assist any
such person, firm or corporation in taking such action.

11. Executive acknowledges that he has been advised to seek an attorney
for advice regarding the effect of this Agreement prior to signing it.

13. If any of the above provisions are found null, void, or inoperative,
for any reason, the remaining provisions will remain in full force and effect.

15. Any notice to the Company required or permitted hereunder shall be
given in writing to the secretary of Company either by personal service or by
registered mail postage prepaid addressed to Company at its then principal place
of business. Any such notice to Executive shall be given in like manner and mail
shall be addressed to the Executive at his home address then shown in the files
of Company.

16. This Agreement may be extended for an additional period and subject
to additional or different terms by written agreement of the parties.

[SIGNATURES APPEAR ON PAGE 6]

-5-

<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date above written.

"Company" "Executive"

COHR, INC.

By:_______________________________ ______________________________
Stephen W. Gamble, Interim CEO Joe Strange

-6-

<PAGE> 7
EXHIBIT A

[Attach Executive Job Description]

-7-

<PAGE> 1
EXHIBIT 10.15

EMPLOYMENT AGREEMENT

THIS AGREEMENT ("Agreement"), dated as of March 1, 1998, is made and
entered into by and between COHR, INC., a Delaware corporation ("Company"), and
Daniel F. Clark, an individual ("Executive").

RECITAL

Employee is a key executive of the Company and an integral part of its
management. This Agreement is being entered into in connection with the
Company's continued employment of Executive.

AGREEMENT

NOW, THEREFORE, Company and Executive agree as follows:

1. This Agreement shall be in effect from the date of execution to and
including February 28, 1999, unless renewed or terminated earlier as provided
herein. The term of this Agreement will automatically extend for an additional
one (1) year period, unless a written notice of non-renewal is given by either
party no less than thirty (30) days prior to the expiration date provided in the
preceding sentence. Executive is and will continue to be employed by Company in
the position held by Executive as of the effective date of this Agreement and
pursuant to its terms. Executive's job description as of the effective date
hereof is attached hereto as Exhibit A. During his employment hereunder,
Executive shall continue to devote all of his attention and business during
normal business hours to the performance of this Agreement and shall, without
the Company's prior written consent in each instance, refrain from rendering
services of any kind to others for compensation or which would materially
interfere with the performance with his duties under this Agreement.

a. Company shall pay a base salary to Executive for the term
hereof at the minimum rate of Two Hundred Seventy-Five Thousand
Dollars ($275,000) per year, payable in semi-monthly
installments. In addition to his base salary, Executive may be
eligible, in accordance with Company policy and in the
discretion of the board of directors, to be considered for an
annual bonus based on such criteria as may be established by the
compensation committee.

4. Except as provided in Paragraph 5 below, in the event of the
occurrence of one of the following prior to February 28, 1999 - i.e., either
(a), (b) or (c) below:

a. Executive is given written notice of the termination of this
Agreement and Executive's employment, other than for cause (as defined herein
below);

b. Executive is permanently relocated without his consent to
outside of the greater Los Angeles area and Executive resigns within three (3)
months of notification of such relocation; or

c. Executive's responsibilities and salary are materially reduced
and Executive resigns within three (3) months of such reduction,

then Company shall, subject to Paragraphs 3 and 5 hereof, for the months
remaining under this Agreement following such termination or resignation, BUT IN
NO EVENT FOR LESS THAN SIX (6) MONTHS following the effective date of such
termination or resignation, (i) pay to Executive each month an amount equal to
one-twelfth (1/12) of Executive's then annual base salary, except that such
payment shall be subject to Federal and State Income Tax withholding, social
security and SDI withholding, and such other employee deductions as are required
by Federal, State or local law or authorized by the Executive in good faith, and
(ii) continue, at the expense of Company, health benefit coverage, at the same
coverage level in effect at the time of such termination or resignation,
provided, to the extent that Executive shall receive or be entitled to any
health benefit coverage from any subsequent employment, the health benefit
coverage provided at Company's expense shall be terminated. The amount of any
continued payment of base salary provided for in this paragraph shall not be
reduced, offset or subject to recovery by reason of any compensation earned by
Executive with a subsequent employer.

-2-

5. Neither Company nor its successor in interest shall be required to
make any payments under Paragraph 4 above in the event Executive is terminated
for cause, retires, or voluntary resign. Such payments shall be made to
Executive's estate in accordance with Paragraph 4 in the event Executive dies or
to Executive in the event Executive becomes disabled as disability is defined in
the next sentence. For the purposes of this Agreement, "disability" shall mean
if at the end of any calendar month, Executive is and has, for three (3) full
consecutive months out of any twelve (12) month period continuously been unable
due to mental of physical illness or injury to perform his duties under this
Agreement in his normal or regular manner.

8. Confidential Information. Executive and Company agree that
Executive's employment with Company creates a relationship of confidence and
trust between the Company and Executive with respect to any information: (a)
applicable to the business of the Company, or (b) applicable to the business of
any client or customer of the Company, which may be made known to Executive by
the Company or by any client of the Company, or learned by Executive in such
context during the period of Executive's employment. All of such information has
commercial value in the business in which Company is engaged and is hereinafter
referred to as "Proprietary Information." Executive and the Company agree that
all Proprietary Information is

-3-

<PAGE> 4
the sole property of the Company, its assigns and its customers; the Company,
its assigns and its customers shall be the sole owner of all patents,
copyrights, trade secrets and other rights in connection therewith. Executive
hereby assigns to the Company any rights he may have or acquire in such
Proprietary Information. At all times, both during Executive's employment by the
Company and after its termination, Executive will keep in confidence and trust
all Proprietary Information and will not use or disclose any Proprietary
Information or anything directly relating to it without the written consent of
the Company, except as may be necessary in the ordinary course of performing
Executive's duties as an employee of the Company. Notwithstanding the foregoing,
it is understood that at all such times, Executive is free to use information
which is generally known in the trade industry not as a result of a breach of
this Agreement and Executive's own skill, knowledge, know-how and experience to
whatever extent and whatever way Executive may wish.

b. Authorize or knowingly approve the taking of such actions by
other persons on behalf of any such competitor or assist any
such person, firm or corporation in taking such action.

-4-

<PAGE> 5
11. Executive acknowledges that he has been advised to seek an attorney
for advice regarding the effect of this Agreement prior to signing it.

13. If any of the above provisions are found null, void, or inoperative,
for any reason, the remaining provisions will remain in full force and effect.

15. Any notice to the Company required or permitted hereunder shall be
given in writing to the secretary of Company either by personal service or by
registered mail postage prepaid addressed to Company at its then principal place
of business. Any such notice to Executive shall be given in like manner and mail
shall be addressed to the Executive at his home address then shown in the files
of Company.

16. This Agreement may be extended for an additional period and subject
to additional or different terms by written agreement of the parties.

IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date above written.

"Company" "Executive"

COHR, INC.

By:_______________________________ ______________________________
Stephen W. Gamble, Interim CEO Daniel F. Clark

-5-

<PAGE> 6
EXHIBIT A

[Attach Executive Job Description]

-6-

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) COHR
INC., FINANCIAL STATEMENTS FOR THE YEAR ENDED 3/31/98 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) 10-K.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 14,026
<SECURITIES> 0
<RECEIVABLES> 16,946
<ALLOWANCES> 4,232
<INVENTORY> 6,891
<CURRENT-ASSETS> 46,970
<PP&E> 6,804
<DEPRECIATION> 5,416
<TOTAL-ASSETS> 56,584
<CURRENT-LIABILITIES> 18,780
<BONDS> 498
0
0
<COMMON> 887
<OTHER-SE> 36,283
<TOTAL-LIABILITY-AND-EQUITY> 56,584
<SALES> 102,144
<TOTAL-REVENUES> 102,144
<CGS> 79,868
<TOTAL-COSTS> 35,953
<OTHER-EXPENSES> 11,440
<LOSS-PROVISION> 5,614
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> (30,057)
<INCOME-TAX> (2,719)
<INCOME-CONTINUING> (27,338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,338)
<EPS-PRIMARY> (4.25)<F1>
<EPS-DILUTED> (4.25)
<FN>
<F1>For Purposes of This Exhibit, Primary means Basic.
</FN>

</TABLE>

<PAGE> 1
EXHIBIT 99.1

Tuesday, June 2, 1998
COMPANY PRESS RELEASE
Source: COHR Inc.

COHR ANNOUNCES APPOINTMENT OF NEW MANAGEMENT TEAM

Chatsworth, CA. - COHR Inc. (NASDAQ-CHRI) today announced effective immediately
that Raymond E. List has been appointed President, Chief Executive Officer and
elected a Director. Mr. List, 54, currently serves as Managing General Partner
of Fairfax Partners, an investment and management firm with offices in
California and Virginia. Mr. List previously served as Chairman and President of
ICF Kaiser Engineers, a technical, scientific and consulting services company.

COHR also announced that Peter T. Socha has been appointed Executive Vice
President. Mr. Socha, 39, previously served as President and Chief Executive
Officer of MedEcon Services, Inc., a healthcare services company. Mr. Socha's
other experience includes senior positions with Sirrom Capital Corporation, a
financial services company headquartered in Nashville, TN.

The new senior management team will also include Daniel F. Clark, Executive Vice
President and Chief Financial Officer, who joined the company in December 1997.
David Roesler and Ed Gravell will continue in their senior management roles with
the Purchase Connection division of the company. Interim President/CEO Steve
Gamble remains a director and will assist new management in its transition.

COHR also announced that, in connection with the appointment of the new
management team, Sandy Morford, formerly Chief Operating Officer, and Haresh
Satiani, formerly Senior Vice President - MasterPlan, have left the company.

The Board also announced that, prior to these changes, Mike Matsuura for
personal and family health reasons had resigned from the Board.

Lynn Reitnouer, Chairman of the Board, stated that "the changes in management
will provide opportunities and benefits for the Company and its shareholders,
customers, and employees, and we believe that this new management team will
enable COHR to position itself effectively for the future. The Board will
continue the process to consider strategic alternatives to maximize shareholder
value."

COHR Inc., a leading national healthcare outsourcing and contract service
organization, serves hospitals, integrated health systems and alternate site
providers with a wide range of essential services and supplies.

<PAGE> 1

EXHIBIT 99.2

Thursday, June 11, 1998 Contact: Rusty Page
COMPANY PRESS RELEASE 1-704-333-3305

Source: COHR Inc.

COHR INC. ANNOUNCES FOURTH QUARTER AND FISCAL YEAR-END RESULTS

CHATSWORTH, CA -- COHR Inc. (NASDAQ-CHRI) today announced financial results for
the fourth quarter and year-end for fiscal 1998.

For the fourth quarter ended March 31, 1998, the company reported a net loss of
$15.9 million or $2.48 per basic share versus a net loss of $239 thousand or
$.04 per basic share for the restated fourth quarter of 1997. Revenues rose 10.4
percent to $26.9 million in this year's fourth quarter from $24.4 million in the
same quarter one year ago.

Included in the fourth-quarter loss were special charges of $7.3 million,
consisting primarily of an additional $4.6 million write-off of goodwill
associated with certain COHR MasterPlan operations, estimated one-time costs to
close certain unprofitable MasterPlan locations and additional legal and
accounting costs related to a special review of the Company's operations
conducted at the direction of the Board of Directors during the last two
quarters of the fiscal year. Also included in the fourth-quarter loss was a
charge of approximately $2.5 million for excess and obsolete inventory resulting
from the adoption of new inventory management procedures.

For the fiscal year ended March 31, 1998, the company reported revenues of
$102.1 million, an increase of 18.5 percent over the prior year. The full-year
net loss amounted to $27.3 million or $4.25 per basic share, compared to net
income of $2.3 million or $.45 per basic share for the restated fiscal year
ended March 31, 1997. Included in the full-year loss were special charges of
$11.4 million, consisting primarily of a $7.1 million write-off of goodwill
related to certain MasterPlan operations which have been deemed to be
permanently impaired, costs to close certain MasterPlan operations, severance
costs and the legal and accounting costs incurred in the aforementioned special
investigation.

As of March 31, 1998, the company had cash and short-term investments of $14.0
million as compared to $28.9 million as of March 31, 1997.

Lynn P. Reitnouer, Chairman of the Board of COHR Inc. stated, "The company has
initiated major cost-reduction efforts that include: a seven percent reduction
in total personnel, closing of certain under-utilized field offices, the
restructuring of certain unprofitable operating units, revision of inventory
management procedures and strengthened credit and collection policies."
Reitnouer continued, "These cost-reduction actions, in tandem with our recently
announced executive management team, should give our shareholders optimism and
confidence that the people at COHR are working hard to return the company to
profitability. The revenue growth in the fourth quarter and for the year
indicate that this is a good business to be in. Our customers like what we do
for them and want us to continue to provide services to them. COHR will go
forward with a focus on cost control, revenue growth and restoration of
profitability. Our new CEO, Raymond List, has years of turnaround and
business-building experience

<PAGE> 2

and Peter Socha, Executive Vice President for Operations, and Dan Clark,
Executive Vice President for Finance and CFO, round out a top-notch and highly
motivated leadership team."

This press release includes statements regarding anticipated future developments
that are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Because such statements involve risks and
uncertainties, the company's actual future results could differ materially from
historical results and from those set forth in the forward-looking statements.
Some of the factors that could cause actual results to differ materially include
the ability to realize the anticipated cost savings noted above, the ability of
the company to return the company's operations to profitability, competitive
conditions, the effect of the company's restatement of financial statements and
the recent results of operations on relationships with customers and employees,
and other factors identified in the company's documents filed with the
Securities and Exchange Commission.

- ---------------------------------
COHR INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS ENDED MARCH 31, 1998 AND MARCH 31, 1997 (RESTATED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1997
1998 (AS RESTATED)
--------- ------------
<S> <C> <C>
REVENUES $ 102,144 $86,221
========= =======

SPECIAL CHARGES $ 11,440 ---
========= =======

INCOME (LOSS) BEFORE INCOME TAXES $ (30,057) $ 3,920
========= =======

PROVISION FOR (BENEFIT FROM) INCOME TAXES $ ( 2,719) $ 1,594
========= =======

NET INCOME (LOSS) $ (27,338) $ 2,326
========= =======

NET INCOME (LOSS) PER SHARE - BASIC $ ( 4.25) $ 0.45
========= =======

NUMBER OF SHARES USED TO COMPUTE
NET INCOME (LOSS) PER SHARE - BASIC 6,430 5,165
========= =======
</TABLE>